Economic woes cause travelers to postpone, cancel trips

— -- The plunging stock market, big bank failures, falling home values and other scary economic news could signal trouble for travel.

Gripped by fear of what may happen next and feeling less rich, some travelers are postponing, scaling back or canceling trips of all kinds. They're rethinking simple holiday trips and family fetes in the Caribbean — and analysts say it could be more than a year before travel rebounds.

"There really isn't any good news, even when you look quite hard to find some," says travel industry researcher Bjorn Hanson, an associate professor at NYU's hospitality school.

Even foreign travelers, who have been a bright spot for places such as New York and California, are starting to scale back visits, he says. They may be reacting to the strength gained by the dollar against the euro in recent months — and to the growing financial crisis here.

According to Hanson, "international travelers are saying, 'Is now really a time we want to go to America? America's probably not in the greatest mood right now. Why not wait until things settle down?' "

Feeling a lot less affluent

The industry still isn't clear about to what extent travel will slow, or how long it will last.

One reason experts doubt travel will rebound quickly has to do with the way many people were financing their travels before the housing market collapsed. Jan Freitag, vice president of industry tracker Smith Travel Research, says many people were financing their travels by accessing the equity built up in their homes, which appreciated dramatically in recent years.

"Post-9/11, people were able to refinance their homes and pull out more money and more money, so they were able to spend a little bit more on vacations. They felt 'My home's worth more. I feel rich,' " he says. "Now, that home-equity ATM is shut down."

Today, housing values have plummeted in many parts of the USA and lenders are pulling back on credit.

Motel 6 CEO Olivier Poirot expects that it will be "at least 18 months before we see any improvement."

The chain — with rooms that start at about $30 a night — saw demand start to weaken in January because of the housing market meltdown and the rise in gas prices, he says. Demand is still soft, Poirot says, although it's stronger among midweek business travelers than among weekend leisure travelers.

"There's no question that people are very concerned about their job security and financial income, and they'd be reluctant to travel if they can avoid it," Poirot says.

George Adams, a travel agent in Houston, says he and his partner shelved plans for two vacations this year because of the roller-coaster stock market. They're also driving, rather than flying, to Phoenix to spend Christmas with family after comparing costs.

"We are afraid to spend the money right now," Adams says.

LeeAnne Clark of Thousand Oaks, Calif., is reconsidering the annual, upscale jaunt she takes with her mother, Betty Pantuso of Phoenix. Clark already booked two tickets on a 13-day Carnival cruise to Sardinia with a stop in Egypt for next October. Cost: $3,000 per person, excluding airfare. Earlier this year, she took her mother to Bali and Hong Kong. Clark says she'll decide whether to cancel the trip later this year. She deposited just $100 on the trip so far.

"I'm going to wait until the election. It depends on who wins," Clark says.

But Matthew Palese, a public defender in Baltimore who has seen his retirement savings dwindle, says he's going to cancel a $7,000 resort vacation in May in the Dominican Republic for his family of six. Canceling will mean losing $3,000, because they had to pay about half the full sum, he says. They had saved for years so they could celebrate their two daughters' graduations from medical school and college.

"My best friend, his wife and their children were going, too. We were going to be 12 people," Palese says. "But we got on the phone a few days ago and said, 'Look, this is crazy.' We decided we'd eat the deposits and try to do something else. It's too precarious."

Are there deals ahead?

Whether consumers who are still willing to spend money on travel this fall and winter can nab some deals remains to be seen.

Smith Travel is advising hotels to stick to their rates and entice customers with other things — such as free breakfast — to prevent them from getting hooked on the bargain rates they found after 9/11, Freitag says.

Vail Resorts, which operates some of Colorado's most deluxe ski resorts, is taking another approach.

With advance sales of winter ski passes — a strong indicator of total season pass sales — down as much as 10% from last year's levels at some resorts, and bookings at Vail-affiliated hotels down almost 18%, Vail is introducing value-oriented deals to boost business, says Vail CEO Robert Katz.

For instance, Vail's now offering a $579 season pass that allows holders to ski at six mountains with no blackout dates, as well as a $50 credit to offset airline baggage check-in fees for people who book four-day vacations.

"There's no question that we want to respond and help customers dealing with the economic conditions," Katz says.

Perhaps most telling is Travelocity's fall hotel sale, which has a record 4,000 hotels participating, says Tracy Weber, the site's chief operating officer.

She says customers are responding: By cutting rates, the 4,000 hotels participating in the sale have so far sold 52% more room nights than last year, she says.

"It does make a difference when they have compelling offers in the marketplace," Weber says. "They can grow even when the entire industry is not growing."

Roger Yu contributed to this report.

Travelers, has the gloomy economic news caused you to cut back on travel? Tell us how it's affected you by posting a comment below.