Swine flu fears may hammer travel industry

For an ailing global travel industry, swine flu couldn't have erupted at a worse time.

"It has the potential to paralyze travel," says Roger Dow, president and CEO of the U.S. Travel Association, which represents all segments of the U.S. travel and tourism industry. "Certainly if it gets out of hand," it will be catastrophic.

There are signs the situation is speedily getting out of hand. The U.S. government Monday urged Americans to cancel travel to Mexico if not essential, began setting up border checks and said a travel advisory would stay in effect as long as flu was detected. The European Union's top health official cautioned people not to travel to areas where the flu has hit. Other nations began taking precautions, such as checking passengers for signs of fever.

"This is kind of the one-two-three-four-five punch," says Jan Freitag, a vice president at the hotel-tracking firm Smith Travel Research. "You have a global recession; business travel has been severely curtailed; leisure travel is curtailed because people are not sure they're going to have jobs; you have a lot of new hotel supply in the pipeline; and oops, now we have the European Union suggesting that travel to the United States is a mistake."

Androulla Vassiliou, the European Union's health commissioner, initially suggested avoiding all non-essential travel to Mexico and the United States. She later softened her warning, stressing she was speaking only for herself, not the entire 27-nation EU, and that it was an advisory, not a ban, that applied only to hot spots.

Still, her comments added to fears that the outbreak would hit an ailing industry on the verge of the summer travel season.

They also revived memories of the 2002-03 outbreak of the severe acute respiratory syndrome epidemic in Asia. SARS prompted a plunge in air travel and cost the global economy $33 billion in 2003, the International Air Transport Association estimated then.

Airline stocks slid Monday, with shares of Continental cal falling $2.17, or 16.4%, to close at $11.08. Continental does much business with Mexico. Shares of AMR amr, parent of American, fell 72 cents, or 13.3%, to $4.70.

Hotels had a bad day, too. Marriott mar fell $1.13 (5.1%) to $21.17. American depositary receipts of InterContinental Hotels Group ihg fell 55 cents, or 5.6%, to $9.35. Both have big investments in Mexico.

European airlines also traded lower on reports of the flu's spread. British Airways and Lufthansa were off 8% to 9%, investment bank Avondale Partners said. Ryanair and EasyJet fell 3% to 4%.

Vassiliou's comments were "uncalled for, and (they) could have a dramatic effect on our summer tourism season.," says Joe McInerney, president and CEO of the American Hotel & Lodging Association. "We're expecting a good share of (international) summer travelers."

The travel industry already is reeling under the weight of worldwide recession.

Before flu broke out, the global airline industry was on track to lose $4.7 billion this year, the IATA projected. In the USA, hotel occupancy was down 10.9% from a year ago, and rates were down 7.7%, Smith Travel Research's Freitag says.

Watching for infected travelers

Across the globe, people were on the lookout for flu-like signs among travelers who could spread the virus. Countries — including the U.S. — were taking precautions.

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