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76–303CC 2001

THE STATE OF THE U.S. TOURISM INDUSTRY

HEARING

BEFORE THE

SUBCOMMITTEE ON

COMMERCE, TRADE, AND CONSUMER PROTECTION

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

OCTOBER 17, 2001

Serial No. 107–66

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

2

COMMITTEE ON ENERGY AND COMMERCE

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

TOM DAVIS, Virginia

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

DAVID V. MARVENTANO, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

CLIFF STEARNS, Florida, Chairman

NATHAN DEAL, Georgia

Vice Chairman

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

ED BRYANT, Tennessee

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

GREG WALDEN, Oregon

LEE TERRY, Nebraska

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

EDOLPHUS TOWNS, New York

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

3

C O N T E N T S

Page

Testimony of:

Abercrombie, Hon. Neil, a Representative in Congress from the State

of Hawaii ....................................................................................................... 18

Berkley, Hon. Shelley, a Representative in Congress from the State of

Nevada ........................................................................................................... 15

Conlin, Linda M., Assistant Secretary, Trade Development, Department

of Commerce .................................................................................................. 41

Crye, J. Michael, President, International Cruise Lines Council ................. 65

Jones, Terrell B., President and CEO, Travelocity.com ................................ 71

Keller, Hon. Ric, a Representative in Congress from the State of Florida .. 22

Lounsberry, Fred, Senior Vice President of Sales, Universal Studios

Recreation Group .......................................................................................... 63

Marriott, J.W., Jr., Chairman and CEO, Marriott International, Inc ......... 53

Nicholas, Cristyne L., President and CEO, NYC & Company ...................... 56

Norman, William S., President and CEO, Travel Industry Association ...... 45

Underwood, Hon. Robert A., a Delegate in Congress from the Territory

of Guam ......................................................................................................... 24

Warren, Robert, Senior Vice President, General Counsel and Secretary,

Air Transport Association of America, Inc .................................................. 50

Material submitted for the record by:

Bono, Hon. Mary, a Representative in Congress from the State of California, prepared statement of ...................................................................... 83

International Association of Amusement Parks and Attractions, prepared

statement of ................................................................................................... 84

(III)

(1)

THE STATE OF THE U.S. TOURISM INDUSTRY

WEDNESDAY, OCTOBER 17, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON COMMERCE, TRADE, AND

CONSUMER PROTECTION,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room

2322, Rayburn House Office Building, Hon Cliff Stearns (chairman)

presiding.

Members present: Representatives Stearns, Shimkus, Shadegg,

Pitts, Terry, Bass, Tauzin (ex officio), Towns, John, and Deutsch.

Staff present: Brian McCullough, majority counsel; Ramsen

Betfarhad, majority counsel/policy coordinator; Kelly Zerzan, majority counsel; Shannon Vildostegui, majority cunsel; Will Carty, legislative clerk; Jon Tripp, deputy communication director; and Bruce

Gwinn, minority professional staff.

Mr. STEARNS. Good morning. The Subcommittee on Commerce,

Trade, and Consumer Protection will come to order. I want to welcome everybody this morning.

I represent a State that boasts one of the largest tourism industries in the country, but it would be foolish to think that only

States with warm weather and beaches attract tourists. Just the

opposite is true. We have world-renowned cities rich in tradition

and culture, from New York to New Orleans. Our diverse topography allows every activity imaginable, whether it is skiing our

mountains in the winter, exploring the desert canyons, or sailing

in the Great Lakes in the summer. Every State and territory offers

tourists something unique, enhancing the United States as the destination of choice for domestic and international tourists.

Because every State and territory maintains an interest in our

tourism industry, the health of this sector of our economy has

taken on increasing importance. While I could quote impressive

statistics demonstrating how important tourism is to our economy,

allow me to share just two. The travel and tourism is a $600 billion industry, representing

a little over 5 percent of our GDP and employing over 17 million

Americans. In my home area of central Florida, tourism brought in

$21 billion in visitor spending to the local economy last year and

accounted for 211,000 jobs, with a total amount wages earned of $5

billion.

That was last year. While the tourist industry is not isolated

from the economic slowdown, the attacks of September 11 have

changed the dynamic immeasurably. Through no fault of their own,

2

tourism and tourist-dependent businesses large and small that

were already weathering economic challenges have been thrust into

a more serious dilemma that could not be predicted.

My State of Florida is especially hard hit for two reasons. First,

Florida’s economy is disproportionately dependent on travel and

tourism revenues; and, like Nevada, New Hampshire and a few

other States, Florida, not having an income tax, is heavily dependent on sales tax revenue to meet its public service obligation. An

initial estimate puts the cost of the attacks to Florida at $183 million just in lost sales tax from tourists’ spending by the end of the

year.

Though the Commerce Department has recently issued forecasts

for a healthy return in the long-term outlook, the short-term outlook is less optimistic. I don’t know that any of us could write a

cure-all prescription, but the President’s call to our routine and our

way of life seems to be an excellent starting point. However, restoring the confidence to do that appears to be the obstacle holding

back a full and fast recovery.

If we are to restore confidence in travel, it is natural that we pay

particular attention to the airline industry. The subcommittee held

a hearing earlier this year on airline mergers, during which we received testimony highlighting the importance of air travel to our

economy. No one doubts those claims now as we witness the struggles of every business dependent upon air travelers.

Many Floridians’ livelihoods are highly dependent on air travelers visiting the State. Before the attack, 55 percent of visitors to

Florida arrived by air, so any substantial decrease in the number

of air travelers creates serious ripple effects within Florida’s economy. This is true of other parts of the country, including Nevada,

Hawaii and indeed our own Washington, DC, where travel and

tourism is the second-largest employer behind the Federal Government.

Restoring the confidence in travel in general and air travel in

particular in the wake of the September 11 attacks is one of the

more difficult challenges we face today. Still, I am confident we can

restore confidence and businesses will again flourish.

The Federal Government immediately implemented new security

measures for air travel and will continue to make any necessary

changes. There are no guarantees in this world, but given our

country’s history of success we will find solutions that work.

I welcome our witnesses today and thank them for their participation. I look forward to their insights so Congress can accurately

identify the public policy issues where it is appropriate for the Federal Government to be involved. In that light, I am carefully reviewing with my colleagues the proposals offered on the Senate

side by Senator Kyl and Senator Miller and on the House side by

my colleagues Congressmen Shadegg, Abercrombie, and Ms. Wilson, including the $500 tax credit bill that they support.

So, with that, I want to welcome our witnesses and also have the

ranking member, Mr. Towns—welcome him for an opening statement.

[The prepared statement of Hon. Cliff Stearns follows:]

3

PREPARED STATEMENT OF HON. CLIFF STEARNS, CHAIRMAN, SUBCOMMITTEE ON

COMMERCE, TRADE AND CONSUMER PROTECTION

I am proud to represent a state that boasts one of the largest tourism industries

in the country. But it would be foolish to think that only states with warm weather

and beaches attract tourists. Just the opposite is true. We have world-renowned cities rich in tradition and culture, from New York to New Orleans. And our diverse

topography allows every activity imaginable, whether it be skiing our mountains in

the winter, exploring the desert canyons, or sailing the Great Lakes in the summer.

Every state and territory offers tourists something unique, enhancing the United

States as the destination of choice for domestic and international tourists.

Because every state and territory maintains an interest in our tourism industry,

the health of this sector of our economy has taken on increasing importance. While

I could quote impressive statistics demonstrating how important tourism is to our

economy, allow me to just share two. The travel and tourism is a $600 billion industry representing little over 5% of our GDP and employing over 17 million Americans.

Specifically, in my home area of central Florida, tourism brought some $20.9 billion in visitor spending to the local economy last year and accounted for over

211,000 jobs with total annual wages earned of $5 billion. That was last year. While

the tourism industry is not isolated from the economic slowdown, the attacks of September 11 have changed the dynamic immeasurably. Through no fault of their own,

tourism and tourism dependent businesses large and small that were already

weathering economic challenges have been thrust into a more serious dilemma that

could not be predicted.

My state of Florida is especially hard hit for two reasons. First, Florida’s economy

is disproportionately dependent on travel and tourism revenues. And like Nevada,

New Hampshire and a few other states, Florida not having an income tax is heavily

dependent on sales tax revenues to meet its public service obligations. An initial estimate puts the cost of the attacks to Florida at $183 million just in lost sales taxes

from tourist spending by the end of the year.

Though the Commerce department has recently issued forecasts for a healthy return in the long-term outlook, the short-term outlook is less optimistic. I don’t know

that any of us can write a cure-all prescription, but the President’s call to return

to our routine and our way of life seems to be an excellent starting point. However,

restoring the confidence to do that appears to be the obstacle holding back a full

and fast recovery.

If we are to restore confidence in travel, it is natural that we pay particular attention to the airline industry. The Subcommittee held a hearing earlier this year on

airline mergers during which we received testimony highlighting the importance of

air travel to our economy. No one doubts those claims now as we witness the struggles of every business dependent on air travelers. Many Floridians’ livelihoods are

highly dependent on air travelers visiting the state. Before the attacks 55% of visitors to Florida arrived by air. So any substantial decrease in the number of air travelers creates serious ripple effects within Florida’s economy. This is true of other

parts of the country, including Nevada, Hawaii and indeed our own Washington,

DC, where travel and tourism is the second largest employer behind the federal government.

Restoring confidence in travel in general and air travel in particular, in the wake

of the September 11 attacks, is one of more difficult challenges we face today. Still,

I am confident we can restore confidence and business will once again flourish. The

Federal government immediately implemented new security measures for air travel

and will continue to make any necessary changes. There are no guarantees in this

world, but given our country’s history of success, we will find solutions that work.

I welcome all our witnesses today and thank them for their participation. I look

forward to your insight so that Congress can accurately identify the public policy

issues where it is appropriate for the Federal government to be involved. In that

light, I am carefully reviewing various proposals calling for direct federal assistance,

including the $500 dollar tax credit bill introduced in the Senate by Senators Kyl

and Miller and here in the house by my colleagues Mess. Shadegg, Abercrombie and

Ms.Wilson.

Mr. TOWNS. Thank you very much, Mr. Chairman.

I would like to thank the witnesses for appearing here today to

talk about the state of their industry. I would especially like to

thank my colleagues and Mrs. Nicholas, who is the President and

4

CEO of the New York City Travel and Tourism Board, for being

here to discuss the state of the tourism industry in New York.

Mr. Chairman, I would like to submit a letter from the Travel

Business Roundtable which has compiled some statistics on the

tourism industry which I feel members of the committee may find

useful and, as a longstanding tradition, I would like to move that

this information become a part of the record.

Mr. STEARNS. By unanimous consent, so ordered.

Mr. TOWNS. I would like to use the remaining time to encourage

all Americans to get out and travel this fall. There is nothing better than a weekend away in your favorite location, whether it is enjoying a golf weekend, relaxing on a beach or at a resort.

My No. 1 suggestion, Mr. Chairman, is take a trip to New York

City. There is no better place to spend a weekend, and there is certainly no better place to spend your money right now. Come to New

York and see that Broadway show you wanted to see for the past

year. Do your Christmas shopping a little early. Come walk the

streets and get a feeling of patriotism rivaled by nowhere in America. Come see the baseball playoffs, and let me inform you in advance, come to the World Series. Come help rebuild New York City

and get our economy moving again.

Last, Mr. Chairman, I would urge all of my colleagues to support

H.R. 2940, the I Love New York Tax Deduction Act. This bill would

give tax deduction for meals, travel, entertainment in New York

City until the end of 2002. I think it is so important that we do

this and we do it now.

Once again, I look forward to the testimony today, and I yield

back my time.

[The prepared statement of Hon. Edolphus Towns and the letter

follow:]

PREPARED STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEW YORK

Thank you Mr. Chairman and I too would like to thank the witnesses for appearing here today to talk about the state of their industry. I would especially like to

thank Cristyne Nicholas, who is President and CEO of the New York City Travel

and Tourism Board for being here today to discuss the state of the tourism industry

in New York.

Mr. Chairman, I would first like to submit a letter from the Travel Business

Roundtable. The T-R-B has compiled some statistics on the tourism industry which

I feel members of the committee may find useful and I would like to move that this

information be made part of the record...

As everyone knows, my city along with the entire nation is still reeling from the

effects of the September 11th tragedy. Our psyche has been damaged in many ways,

but it has not been destroyed. We are a resilient people and are bouncing back from

this attack. To do this, we need to start walking a little bit taller, keeping our chins

held a bit higher and lastly Mr. Chairman, we need to get back to traveling!

I would like to use my time today to encourage all Americans to get out and travel

this fall! There is nothing better than a weekend away in your favorite location,

whether it’s enjoying a golf weekend getaway, relaxing on a beach or at a resort

in Las Vegas OR—and this is my number one suggestion Mr. Chairman, take a trip

to New York City!!! There is no better place to spend a weekend and there is certainly no better place to spend your money right now either!

Come to New York and see that Broadway show you’ve wanted to see for the past

year. Come do your Christmas shopping a little early! Come walk the streets and

get a feeling of patriotism rivaled by nowhere in America today. Come see the baseball playoffs and hopefully, the World Series!!! Lastly, come help rebuild New York

City and get our economy moving again.

Lastly Mr. Chairman, I would urge all of my colleagues to support H.R. 2940, The

I Love New York Tax Deduction Act. This bill would give tax exemptions for travel,

5

meals and entertainment in New York City until the end of 2002. I think it is an

important piece of legislation and one that should be passed as quickly as possible.

Once again, I look forward to the testimony today and I yield back the balance

of my time.

TRAVEL BUSINESS ROUNDTABLE

October 15, 2001

The Honorable EDOLPHUS TOWNS

U.S. House of Representatives

2322 Rayburn House Office Building

Washington, DC 20510

DEAR CONGRESSMAN TOWNS: In my capacity as Chairman of the Travel Business

Roundtable (TBR), and on behalf of the thousands of small, medium and large scale

travel and tourism businesses around the United States, I am writing to thank you

and Chairman Cliff Stearns for focusing on the plight of the travel and tourism industry in your hearing this week in the House Energy and Commerce Subcommittee

on Commerce, Trade and Consumer Protection.

Travel and tourism is one of the few industries whose economic reach touches

upon each congressional district in all 50 states. In 2000, travel and tourism generated a trade surplus of $17 billion, helped support more than 17 million domestic

jobs, and created local tax revenues of $99.5 billion. The industry is the first, second

or third largest employer in 28 states and the District of Columbia.

As you and Mr. Stearns have witnessed in your own states, since the horrific acts

of September 11, 2001, the travel and tourism industry has been affected on a broad

scale. Businesses are being forced to lay off workers, hotel occupancy rates have

plummeted in major metropolitan areas and the uncertainty of future attacks is taking its toll, as both business and leisure travelers are canceling conventions,

planned business trips and family vacations. The numbers are staggering (see attachments).

As you prepare to investigate the large-scale economic impact on the travel and

tourism industry, please know that we are here and willing to help with any solutions you propose to the industry.

Respectfully, on behalf of TBR’s 55 members, I request this letter and the attachments be submitted for the Subcommittee’s official record on the hearing.

Sincerely,

JONATHAN TISCH

Chairman

Attachments

TRAVEL BUSINESS ROUNDTABLE

October 5, 2001

The Honorable EDOLPHUS TOWNS

U.S. House of Representatives

2322 Rayburn House Office Building

Washington, DC 20510

DEAR CONGRESSMAN TOWNS: On behalf of the Travel Business Roundtable

(‘‘TBR’’), I am writing to alert you to the crisis now confronting the U.S. travel and

tourism industry and to outline several concrete steps that the Administration and

Congress can take to help the industry recover from the crushing blow it received

as a result of the September 11th terrorist attacks on our country.

Comprised of more than 60 corporate, labor, and trade association members, the

TBR is proud to represent the broad diversity of the U.S. travel and tourism industry. During the past decade, travel and tourism has emerged as one of our nation’s

most productive engines of economic growth. As of last January, more than 17 million Americans were employed in travel and tourism-related jobs, with an annual

payroll of $159 billion. Travel and tourism was the first, second, or third largest industry in 28 states and the District of Columbia. And last year, travel and tourism

generated an annual trade surplus of $17 billion as well as nearly $100 billion in

tax revenues for Federal, state, and local governments.

Unfortunately, the September 11th attacks have crippled our industry as public

confidence in the safety of travel has been severely undermined, if not shattered.

Hard data as well as anecdotal experience suggest that meetings are being postponed; all but critical corporate travel is being delayed; and individuals are canceling or postponing personal travel plans within the U.S. and abroad. These disturbing trends are all occurring against the backdrop of an overall U.S. economy

that is in decline.

6

Let me be even more specific: Since September 11, hundreds of thousands of travel and tourism jobs have been lost across the country; major U.S. cities are already

reporting tens of millions of dollars in tourism-related losses; airlines, having drastically reduced their flight schedules are filling less than 60 percent of their seats

on most flights; hotels stand to lose more than $2 billion in room revenue; more

than 25% of meetings and conventions scheduled to take place by the end of the

year have been canceled; and travel agencies are reporting tens of millions of dollars

in sales losses each day. To stop and reverse these alarming trends, we need your

help and we need it now.

As an immediate step, we urge you to speak out in as many forums as possible

about the continued safety of travel and its importance to the U.S. economy. The

message to the American people must be clear—to change our way of life is a capitulation to the terrorists. We applaud President Bush’s recent public comments about

the importance of travel as well as his decision to reopen Reagan National Airport.

We also understand that Congress and the Administration are developing a package of tax relief and other initiatives designed to stimulate economic growth. As you

review the range of options available to you, we hope you will consider the following

proposals that will be particularly helpful to the U.S. travel and tourism industry

in the near term as the industry tries to get back on its collective feet. These proposals are designed to achieve three goals: 1) to assist the hundreds of thousands

of workers within the travel and tourism industry who have been displaced since

September 11th; 2) to encourage people to travel again for both business and leisure

purposes; and 3) to increase liquidity for travel and tourism-related businesses, both

large and small, that are currently confronting severe cash flow problems. Accordingly, we propose:

Helping Displaced Workers

• Direct assistance by the Federal government to those states that may be overwhelmed with worker compensation and unemployment claims resulting from

the September 11th attacks. • Assurance by the Federal government that health benefits will be continued for

displaced workers.

Encouraging People to Travel Again

• Full restoration of the business meal and entertainment deduction. • Restoration of the tax deduction for travel expenses of a spouse accompanying an

employee on a business trip to 100%. • Support for a Federal tax credit to encourage people to travel or make travel

plans by December 31, 2001. Amounts and effective dates to be determined by

Congress.

Liquidity

• Payroll tax relief for employers and employees. • Extension of eligibility for the Small Business Administration’s Economic Injury

Disaster Relief Program to otherwise qualified small businesses across the country that are unable to meet necessary financial obligations as a result of the

September 11th attacks. • Granting discretionary authority to the SBA Administrator to adjust size standards for eligibility to ensure that firms falling outside the SBA’s definition of ‘‘small’’ are not inadvertently left behind.

On a longer-term basis, two additional steps should be taken. First, a top priority

for the TBR has been the creation of a Presidential Advisory Council on Travel and

Tourism. We envision the Advisory Council, whose members would hail from the

public, private and non-profit sectors, as the fulcrum for tourism policymaking and

implementation within the Executive Branch. The Advisory Council should be established as quickly as possible. Second, the Federal government, in partnership with

the private sector, should help finance an advertising campaign that promotes the

United States as a travel destination of choice for the foreign tourist and stimulates

greater travel within the United States. The TBR strongly believes that such a campaign, if properly conceived, can pay substantial dividends in the form of increased

tourism throughout our country.

As more governors and mayors speak out about the damaging consequences of

September 11th for state and local governments, both in terms of lost revenues and

spiraling unemployment claims, one salient truth emerges: Travel and tourism is a

nationwide industry whose enormous economic presence in all 435 Congressional

Districts must not be ignored.

Thank you for giving me this opportunity to share my thoughts with you. If you

have any questions or suggestions, please contact me directly or call Chuck Merin,

TBR’s Washington representative, at (202) 530-4829. For your review, I have also

7

attached TBR’s membership list and a snapshot summary of the devastating impact

that September 11th has had on our industry.

Those of us at the TBR wish you every success as you undertake your important

responsibilities during these difficult times. Our thoughts and prayers are with you.

Sincerely,

JONATHAN M. TISCH

Chairman

Attachments

cc: TBR membership

THE EFFECTS OF THE SEPTEMBER 11 ATTACKS ON THE U.S. TRAVEL AND TOURISM

INDUSTRY

Analysts project tourism in the U.S. could drop by nearly one-third in the coming

months.

Hundreds of thousands of U.S. airline, hotel and other travel industry workers

have lost their jobs.

U.S. airlines are flying with 40 percent to 50 percent of their seats empty, even

after drastically reducing their scheduled flights.

Across the U.S., 25 % of conventions and meetings scheduled before the end of

2001 have been cancelled.

Per-room revenue is projected to decline between 3.5 percent and 5 percent this

year—the largest decrease in room revenue in 33 years. Hotels could lose $2 billion in room revenue and other associated income. Specifically, cities around the country are already experiencing tremendous losses:

• In New York, the overall occupancy rate is at 45 percent, where it would normally

be at 75 percent, and 3,000 employees have been laid off;

• In Washington, D.C., room occupancy plummeted from 80 percent to less than 20

percent, and experts say more than 50,000 hospitality jobs in the region are at

risk;

• In Central Florida, many hotels are at less than 25 percent capacity, where they

would normally more than 50 percent full;

• In Seattle, where downtown hotels are typically 90 percent occupied in September, occupancy is as low as 30 percent; and

• In Hawaii, where many hotels normally have 80 to 85 percent occupancy, many

occupancy rates are at 40 percent or lower.

Travel agencies are losing an estimated $51 million per day in sales.

Corporate travel is projected to fall by 50 percent by January 2002.

One estimate states our economy will decrease by 1.8 percent of total GDP, directly resulting in a loss of 1.1 million U.S. jobs.

MEMBERSHIP

Larry Alexander Detroit Metro Convention and Visitors Bureau; Steven C. Anderson

National Restaurant Association; Sean Anderson WH Smith USA Travel Research;

Richard A. Anderson, Carey International Limousine; Adam M. Aron Vail Resorts,

Inc.; Gloria Bohan Omega World Travel, Inc.; Christopher Bowers United Airlines;

Melinda Bush HRW Holdings, LLC; Sila M. Calderon Sol, Commonwealth of Puerto

Rico; Thomas J. Corcoran Jr. FelCor Lodging Trust; Manuel Cortez Las Vegas Convention and Visitors Bureau; John F. Davis, III Pegasus Systems, Inc.; Roger J. Dow

Marriott Lodging; William H. Friesell Diners Club International; Michael Gehrisch

International Association of Convention and Visitors Bureaus; Laurence S. Geller

Strategic Hotel Capital Incorporated; Vicki Gordon Six Continents Hotels Inc.; Michael W. Gunn American Airlines; Bjorn Hanson PhD PricewaterhouseCoopers LLP;

Wolf H. Hengst Four Seasons Regent Hotels & Resorts; Stephen P. Holmes Cendant;

Dieter H. Huckestein Hilton Hotels Corporation; Robert E. Juliano Hotel Employee

and Restaurant Employee International Union; Jacki Kelley, USA Today; Thomas

A. Kershaw The Hampshire House Corporation; George D. Kirkland L.A. Convention

& Visitors Bureau; Fred Kleisner Wyndham International; Jonathan S. Linen American Express Company; Joseph A. McInerney, American Hotel & Lodging Association; David Meyer Business Travel News; Sandy Miller Budget Group Inc.; Scott D.

Miller Hyatt Hotels Corporation; Marc Morial Mayor of New Orleans; Patrick

Moscaritolo Greater Boston Convention and Visitors Bureau; Curtis Nelson Carlson

Hospitality Worldwide; Cristyne Nicholas NYC & Company; Howard C. Nusbaum,

American Resort Development Association; Michael S. Olson CAE American Society

of Association Executives; William J. Overend The Coca-Cola Company; Paul S.

Pressler, Walt Disney Attractions; Lalia Rach, Center for Hospitality, Tourism &

Travel; Barbara J. Richardson, Amtrak; John T. Riordan International Council of

8

Shopping Centers; Lamar Smith Visa USA, Inc.; Randell A. Smith Smith Travel Research; Barry Sternlicht Starwood Hotels & Resorts; Paul Tagliabue National Football League; William Talbert Greater Miami Convention & Visitors Bureau; Robert

S. Taubman, Taubman Centers, Inc.; Jonathan M. Tisch, Loews Hotels; Tom Williams, Universal Studios; Scott Yohe, Delta Air Lines, Inc.; and Tim Zagat, Zagat

Survey, LLC.

Mr. STEARNS. I thank the gentleman.

Now the distinguished chairman of the full committee, the gentleman from Louisiana, Mr. Tauzin.

Chairman TAUZIN. Thank you, Chairman Stearns. Let me thank

you for holding this important hearing.

As the committee with primary jurisdiction over travel and tourism, it is our job to examine the state of the industry and to focus

America’s attention once again on how critical and important this

industry is and how much it does for this country in terms of jobs

and economic effect and balance of trade. For the last decade this

has been one of the shining lights in our balance of trade portfolio.

Americans need to think about that.

And I want to welcome the distinguished members joining us

today, Ms. Berkley of Nevada. You, I know, will excuse me when

I leave quickly to go downstairs because we are marking up your

bill on the regulatory reform of the Center for Medicare and Medicaid Services in our country. It is a very important bill that we are

going to try to get to the floor as soon as we can, and I want to

thank you for working with our committee and not only putting together what I think is an excellent package but I think making a

great difference for all the Medicare and Medicaid providers and,

most importantly, the patients in America who are going to benefit

from that very important effort you are making.

I want to welcome Mr. Abercrombie of Hawaii, my dear friend,

and Mr. Underwood of Guam, my dear friend, from the Resources

Committee. We worked together daily on areas of interest to this

committee because we worked together in preserving America’s

great resources on that committee, many of which are the things

America travels to see and be a part of. While we encourage foreign

travel, we always remind Americans we have got a great country.

If you haven’t seen it all, you are missing out. You ought to see it

all before you decide to go anywhere else.

And, of course, Mr. Keller from Florida, who joins Mr. Stearns

in reminding all of us that if any committee is going to put a favorable light upon all the efforts to rejuvenate travel and tourism in

this country, it is one that is chaired by the gentleman from New

Orleans and the subcommittee chaired by the gentleman from Florida. Of course, New Orleans and Florida are great tourists sites.

And I want to tell my friend from New York I love New York.

I have a son who works there, and I agree that we ought to encourage travel in New York. We ought to rebuild New York. That is

part of what I think our Nation needs to do, not just the great folks

in New York.

But two comments about it. I have never seen New Yorkers be

more pleasant in all my life, and I want to thank you for all the

folks in New York for the incredible way in which New York is remaking itself.

And, by the way, that is also true in the airlines in America.

Travelers are telling us that all the time now. People are being

9

nicer to one another. They are paying attention to one another a

little more, obviously, but they are also being nicer to one another.

We are seeing a great attitude in travel. Travel has never been the

easiest because you have got to go through the lines and get your

baggage checked and there is more inconvenience than before, but

the bright side is people are being nicer and kinder to one another

and more caring for one another.

So our country is going through something pretty nice that New

York is experiencing and travelers are experiencing and in the face

of all this ugly atrocity and terror at the same time our country is

refinding—finding again I should say—a part of its character and

a part of its good side, its good nature, and I think that is maybe

a plus here.

Today the Speaker announced, by the way, that we are probably

going to adjourn session early today and allow a full sweep of all

the buildings and all the offices to make sure that our staff and all

the Members and our guests who come here to work on important

issues like this are safe when they come to work in the Capitol. So

we are taking this very seriously.

The incident on the Senate side in Mr. Daschle’s office was a

very profound incident. About 20 people I think have been affected

by it.

In yesterday’s leadership meeting, Mr. Chairman, I can tell you

that everyone spoke with a common mind, one, that we were going

to continue to do our business calmly and responsibly for the American people but at the same time we were going to act very responsibly to make sure that our staffs and the folks who come up here

to testify and work with us are assured of their safety, just as we

are working to make sure that travel and tourism is safe again in

this country.

The President was asked about sacrifice as we enter this new

kind of war against terrorism in the world. He was asked what has

he asked Americans to sacrifice, and he gave a great answer, I

think the best answer anyone can give. He said, well, what is it

if it isn’t sacrifice when you lose a part of your soul?

We can’t win back everything we lost on September 11. We can’t

win it all back. We did lose a part of our soul. We lost something

sacred in this country on September 11, and we are going to have

to fight to bring this country back to a sense of itself and sense of

security and a sense of peace and calm again. But that is all our

job, and that is the sacrifice he is asking all of us to make.

He is asking this industry to pick itself up by its bootstraps, and

he is asking us to help where we can to make sure it is revitalized.

But he is also asking all Americans I think to understand that in

our very special, personal way we have to win back much of what

we lost on September 11, and that means going back to business

and hugging our children, going back to work and doing the things

that make our country great and special, and part of that is indeed

spending time with each other, with families and gathering together in special places in this country of beauty and calm and

places where we can entertain and enjoy the incredible blessings

that God has bestowed upon our country. And so travel and tourism are critical parts of that.

10

Thank you, ladies and gentleman, for coming from all parts of

America to remind us of that this morning. Thank you in the industry for being with us today. How important you are and how

important this industry is to the country.

Most importantly, Mr. Chairman, I think our message today is

to all Americans that this country will come through this. We will

be okay as long as every American does his and her part. And part

of it is just that, experiencing the blessings of this great country

in the way in which we conduct our lives and our businesses and

again reminding each other how important we all are to one another and renewing that new spirit in New York and on the airlines, in the travel houses and destinations and the cruise ships

and all the different parts and parcels of this industry that we are

coming back and we are coming back strong.

There is a revitalization going on in the industry. To the extent

this committee can help, I know the chairman is dedicated to doing

that and so am I.

[The prepared statement of Hon. W.J. ‘‘Billy’’ Tauzin follows:]

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

First, let me thank Chairman Stearns for holding what promises to be a very informative hearing this morning on the state of the U.S. tourism industry. I also

would like to thank the distinguished Members—Mrs. Berkley of Nevada, Mr. Abercrombie of Hawaii, Mr. Underwood of Guam, and Mr. Keller of Florida—for taking

the time to come and speak to us on the first panel this morning. We appreciate

how important this issue is to you and your constituents. And, I welcome the industry representatives, who will testify on the second panel. Thank you all for participating in this hearing.

The travel and tourism industry is an important component of the American economy that is sometimes under-appreciated. It doesn’t grab the headlines like the high

tech industry does; yet it provides millions of jobs and accounts for billions of dollars

in services each year. The industry directly employs an estimated 8 million workers.

It accounts for approximately 5% of our nation’s Gross Domestic Product. And, as

one of our largest service exports, it has run a trade surplus every year for the past

decade. These statistics help underscore just how vital this industry is to the American economy and the American way of life.

September 11th significantly effected the travel and tourism industry, perhaps

more than any other sector of our economy. The industry already had been facing

many of the same challenges of a slowing economy that were confronting other sectors before the attacks. However the direct financial impact from the two days of

grounded flights, and the phase in of flights after that, were just the beginning of

its problems.

After flight service resumed, according to numbers recently released by the Air

Transport Association, one of our witnesses here today, passenger loads were cut

nearly in half when compared to pre-September 11th travel. Passengers are slowly

returning, but flight schedules have been cut back. What had previously been a

problem of fewer travelers due to concerns about the family budget has been compounded by all the caution and worry about travel stemming from the attacks—and

the whole of the country is experiencing the impact of these added concerns.

The reduction in travel has produced a quick and severe domino effect. Hotels,

restaurants and entertainment destinations have felt the impact, as have the industries that support the tourism industry.

Although it is difficult to determine how much of this reluctance to travel is related to economic concerns and how much is related to September 11th, we must

address both. The President has developed a stimulus package to help aid the slowing economy. The federal government has also worked with industry groups to increase security and ease public concern. Meanwhile, recent statistics and forecasts

suggest air travel and the rest of the tourism industry are slowly and steadily recovering.

We will not get back what was lost on September 11th. However, we can and

must learn from the tragedies. Our response to these events will help determine the

future of this great country and ensure we preserve our way of life as we move forVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 E:\HEARINGS\76303 pfrm02 PsN: 76303
11

ward. I urge those here today and others in the industry to keep up the good work

strengthening confidence in travelers. I also want to let you know that Congress will

continue to seek to do what is necessary to assist you in those efforts.

Thank you, Mr. Chairman.

Mr. STEARNS. Thank you for your spirited opening statement.

The gentleman from Louisiana, Mr. John, is recognized for an

opening statement.

Mr. JOHN. Thank you, Mr. Chairman. I will be very brief. I have

a statement that I will enter into the record.

I want to thank the chairman and also the ranking member, Mr.

Towns, for holding this important hearing.

The events of September 11 have adversely, and to dimensions

that we could never have imagined, affected tourist-dependent

States and obviously the State of Louisiana—the great State that

I represent is one of those States. It is the second largest economy

of Louisiana. It employs about 120,000 people. It is important to

our economy.

Some estimates through the Lieutenant Governor’s Office—which

handles all tourism for Louisiana—say that we have lost $100 million up to this point in time, and for a State the size of Louisiana

that is significant. In particular, some of the events that have been

hardest hit are conventions, corporate conventions that come into

New Orleans and other cities in our great State, and they are very

dependent on flying in and flying out traffic. I think that type of

tourism is very, very important, and that has been the sector that

has been impacted the most.

But I think that Louisiana has stepped up to the plate. Local

convention centers and visitors bureaus are committed and started

a campaign of a million dollars that began I think this week trying

to get people back to Louisiana under the guise of the Louisiana

Purchase. So it is important that the State and local governments

play their role, and they are doing that, and I think that shows a

commitment of how important this industry is to our great State.

Louisiana is preparing for three very massive events in the coming months—the Super Bowl; Mardi Gras, that draws people from

all over; and if the Saints continue to win, maybe an NFL playoff

game in the Superdome, which will be great. But I believe the economic success of these events, which are really the bellwether—

they are the golden eggs of our tourist events of the whole year.

Mardi Gras obviously is something that is there annually and the

Super Bowl which New Orleans will host this year.

The success of these very major events that are attended by people from all over the world I think are going to be contingent upon

how comfortable and secure we can make travelers feel that come

not only to New Orleans and Louisiana but to other States that are

so dependent on tourism. I am very comforted that this committee

is playing a part to start opening the dialog toward that end, and

I look forward to the testimony from four of my distinguished colleagues that have similar situations to the State of Louisiana with

Nevada and Hawaii and Florida and Guam. I mean, those are very

tourism-dependent States.

So thank you for holding this hearing, and I look forward to the

testimony.

[The prepared statement of Hon. Chris John follows:]

12

PREPARED STATEMENT OF HON. CHRIS JOHN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF LOUISIANA

Thank you Mr. Chairman, I appreciate the opportunity to comment on today’s

hearing and will be brief with my remarks so that we may proceed with our two

witness panels.

Mr. Chairman, the September 11 terrorist attacks have affected every tourismdependent state. In Louisiana, tourism is the second-largest industry and employs

over 120,000 people. It is estimated that we have lost $100 million so far as a result

of the September 11 tragedy. In particular, tourism markets in the state that are

dependent on fly-in and corporate convention business have felt the largest impact.

The state and our local convention and tourism bureaus have responded with a variety of promotions, including a $1 million advertising campaign to attract visitors.

Mr. Chairman, Louisiana is preparing to host two massive events in the coming

months—the Super Bowl and Mardi Gras—that draw visitors from all over the

world. The economic success of these events will largely be determined by how secure Americans and international visitors feel heading into next year. I look forward

to the testimony of our witnesses here today to help define the role our federal government can play in making tourists feel more secure so that we can continue to

grow America’s tourism industry.

With that Mr. Chairman, I will conclude my remarks by welcoming our witnesses

and thanking them for their appearance before our subcommittee.

Mr. STEARNS. I thank my colleague and recognize the gentleman

from New Hampshire for an opening statement, Mr. Bass.

Mr. BASS. Thank you, Mr. Chairman. I, too, appreciate this hearing, and I would like to lend my support to what I think are really

great comments by our full committee chairman.

These are not easy times for any of us and what we are going

to do this week is going to be quite a bit out of the ordinary, but

it is going to make working here a lot safer, and I think it is the

right decision. I also feel that although all of us are going to have

to make sacrifices and some of them may be quite significant, not

only will our country, as he said, be okay, I think we are going to

come out of this experience stronger and more vital than ever before because we are unified in our objective to root out and end this

cancer we call global terrorism, state-sponsored terrorism.

I could be sitting there with you four today because my home

State of New Hampshire, which has no sales or income tax, is obviously very dependent upon revenues it receives from room and

meals, from business profits and business enterprise taxes. We

have a flourishing tourist industry right now in foliage viewing,

and the ski industry is coming up, and then of course all the summer activities, and we are probably—I am not sure what the statistics are for New Hampshire—having as much trouble as any other

State in this area.

Mr. Chairman, I think it might be more appropriate, however,

for us to make this a field hearing in the four localities. I have

never been to Guam before. Just to see for ourselves.

Mr. TOWNS. Will the gentleman yield?

Mr. BASS. Yes, sir.

Mr. TOWNS. I support that.

Mr. ABERCROMBIE. Mr. Chairman, you have to come through Hawaii in order to hit Guam.

Mr. BASS. All I can say, I was on an important mission with you

once and you wanted to stop in Iceland on the way home because

you figured that nobody in Hawaii would worry if they knew you

had stopped in Iceland.

13

But this is an important issue and in my home State it ripples

down through all kinds of different industries, through every town

and city. I am looking forward to hearing the testimony you bring

forward today and hope that if there is any role for Congress to

play in revitalizing tourism that we will be leading the way from

this subcommittee in reaching that objective, and I yield back.

Mr. STEARNS. I thank the gentleman.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. JOHN SHADEGG, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ARIZONA

I want to thank the Chairman for holding this important hearing.

As America moves forward following the unspeakable terrorist attacks of September 11th Congress is considering ways to help our economy recover. Talk has

centered on an economic stimulus package that focuses on pro-growth policies that

keep and create jobs. As one element of that package we should include legislation

that will jump-start the ailing travel and tourism industry.

No sector of our economy has been more damaged. And, few industries in our

country have such far-reaching impact on the U.S. economy as travel and tourism.

In fact, it is America’s third largest retail industry with $582 billion of total expenditures, generating nearly $100 billion in tax revenue for local, state, and federal governments. Without this revenue, each U.S. household would need to pay an additional $964 in total taxes.

The catastrophic events of September 11th have had a disproportionately negative

impact on the U.S. travel and tourism industry. Not only have airline, hotel, car

rental, restaurant, and other travel and tourism businesses suffered, but the attacks

have had a dramatic ripple effect that has damaged businesses only indirectly related to the travel and tourism industry.

We need to get Americans traveling again. That is why I, along with my colleague, Mr. Abercrombie, have introduced H.R. 3041, the Travel America Now Act.

The incentive is simple and modest. It will encourage Americans to resume recreational travel and tourism, as well as provide a much-needed stimulus to the entire American economy. It would provide a $500 tax credit per person ($1,000 for

a couple filing jointly) for personal travel expenses for travel originating and taken

within the U.S.

The tax credit would cover travel expenses associated with personal automobiles,

airplane, cruise, train, and bus tickets; hotel and motel accommodations; restaurant

meals; and rental cars. It would also restore full deductibility for business entertainment expenses, including meals, that are now subject to a 50 percent limitation. In

addition, the measure expands (from two years to five years) the ‘‘carry back’’ period

to allow travel-related businesses to retroactively apply post-September 11th losses

against tax liabilities incurred in previous years.

Every tax paying American can take advantage of this incentive provided: (1) the

travel is taken, or paid for, after the date of enactment of the legislation and before

the end of the year: (2) he or she travels at least 100 miles from his or her residence, and (3) his or her trip involves an overnight stay at a commercial lodging

facility.

The goal of an economic stimulus should be job preservation and creation, and

there is no better stimulus than one directed at the travel and tourism industry.

It is one of America’s largest employers—7.8 are million people directly employed

and 11.5 are million indirectly employed in the U.S. travel and tourism industry (19

million total jobs amounts to one out of every seven people employed in the U.S.

civilian labor force).

While there are some media reports that the industry is coming back, these stories are misleading. Travel and tourism is far from pre-September 11th levels. Thousands of baggage handlers, cab, limousine and shuttle bus drivers, hotel maids, bellhops, industrial laundry workers, airplane manufacturing employees, flight attendants, pilots and countless others have lost their jobs. An extension of unemployment

benefits, even with supplemental healthcare, will not get these people their jobs

back. Virtually every business in this sector is reducing staff and operating at restricted levels merely to stay afloat.

For instance, as of October 5th the nation’s airlines have cut nearly a 100,000

jobs, slashed flights by 20 percent and even those are one-third empty. Hotel occupancy is 30 percent below normal levels, and the highly popular Smithsonian Museums, which usually get 70,000 visitors a week, are down to 32,000.

14

The downturn in the travel and tourism industry is having a domino effect on

other economic sectors and in some cases has come full circle. Take for example Joe

Barner, a beverage manager for a catering company in Florida. Shortly after the attacks he was warned that the company was cutting hours and pay for managers

for ‘‘the good of the company.’’ But, a week later he lost his job, even though October

business was promising.

Though Mr. Barner is looking for another job in the hospitality business, he’s wor- ried that the slowdown in tourism will narrow or eliminate his prospects. Preparing

for the long haul, he cancelled his newspaper, pared back his cable service and traded in his car for lower payments on the same day he was laid off. And, he might

not be able to enjoy one luxury he has already paid for—tickets to a football game

in Wisconsin—because he and his wife can’t afford to travel.

The TAN Act would help people like Joe Barner and serve as a timely response

to the job losses and business downturn affecting millions of working families in

every part of the country.

As a complement to the enhanced safety measures that are being implemented,

Congress should include in the economic stimulus package a temporary incentive to

travel. It would be an important step to help maintain a vibrant travel and tourism

industry, keep working people working, and stimulate economic growth.

Once again, Mr. Chairman, I commend you for holding this hearing and sincerely

hope that we come to some real conclusions.

PREPARED STATEMENT OF HON. ED BRYANT, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TENNESSEE

The September 11th tragedies have had an impact on many various sectors of our

nation’s economy.

However, the effect of the attacks on the United States tourism industry has been

particularly strong. For weeks following September 11th, I didn’t see one constituent

darken the door of my Washington, DC office.

The impact of the 11th on the tourism industry has been felt at home in my district in Tennessee as well.

As you all know Memphis is the birthplace of rock and roll and the home of the

blues—we have Elvis, Graceland, Beale Street, and the mighty Mississippi River.

It is no wonder that the city’s second greatest industry is tourism. Elvis impersonators obviously aren’t the only people who flock to Memphis. Many others from this

country and from around the world visit Memphis every year.

However, since the eleventh, tourism revenue has dropped significantly.

The Memphis Convention and Visitors Bureau estimates that the city has lost about $20 million in economic impact from tourism revenues. With hotel occupancy

levels in Memphis down 14.8%, it is reported that these hotels have lost about $1

million a week in room revenues.

I look forward to hearing from our panelists today. It is important to look at the

changes that have occurred in our nation’s economy and try to distinguish how

much is a result of the attacks on the 11th and how much is a part of the economic

downturn that we were experiencing prior to the 11th.

I believe President Bush has done a good job renewing Americans’ confidence in

flying.

The President has strengthened security at our airports in the short term and we

are working with the President on legislation to make permanent changes in this

area. I look forward to hearing from our witnesses today on how these changes have

made Americans more secure about flying.

I also would like to hear from you about any recommendations you may have for

federal involvement and more specifically suggestions for ways that this committee

can be of assistance.

Finally, I thank the witnesses for coming today and I thank the chairman for

holding this important hearing.

PREPARED STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF NEBRASKA

As the representative of Omaha, I take great pride on behalf of the city in recognizing outstanding businesses that are friends of the community. Marriott Hotels

is one such friend, and a loyal one at that. Many of us in this room have reserved

rooms at a Marriott Hotel recently; we did so by calling the Marriott Reservation

Center, headquartered in Omaha, Nebraska. Marriott is an important player in the

Omaha economy, employing hundreds of hardworking Nebraskans and contributing

15

heavily to the community by way of product donations, employee volunteerism, and

financial contributions for community projects. It can be honestly said that without

Marriott’s presence in the Omaha community, the city would not be as enjoyable

of a place to live.

Recently, the City of Omaha broke ground on a new convention center, which will

house, among other things, a hotel that will be a central component of the building.

With my deepest regrets, the contract was awarded to a Marriott competitor. It was

an ugly battle, filled with questionable politics that filled the local paper’s front

page. It is not a decision of which the people of Omaha should be proud, and were

I still an Omaha City Councilman instead of a U.S. Congressman, I hope the decision would have gone the other way.

Nevertheless, Mr. Marriott, you can be certain that the people of my district hold

a few things close to their hearts: Nebraska football, Offutt Air Force Base, and

Marriott Hotels. No matter what hotel’s name is atop our city’s convention center,

I join many Omahans when I say that Marriott is my hotel of choice.

Mr. STEARNS. At this point, we will take the opening statements

from our colleagues. We will start with Congresswoman Shelley

Berkley from the First District of Nevada.

Your opening statements will all be made is the part of the

record. We are trying to keep it under 5 minutes. We have eight

witnesses on the second panel, but we thought it was important to

hear from you firsthand, so we welcome you for your opening statement.

STATEMENT OF HON. SHELLEY BERKLEY, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF NEVADA

Ms. BERKLEY. Thank you very much, Mr. Chairman and Ranking

Member Towns, for holding this very important hearing today.

I just returned from New York City, and I can’t encourage people

to go there more than you. I had a wonderful time. The atmosphere

is terrific. People are very enthusiastic, and they want tourists to

come and see New York.

But after they go to New York, I can’t encourage them enough

to come to Vegas. Because not only when you come to Vegas can

you see Paris, Venice, the Roman Empire, Egypt, New Orleans, the

Middle Ages, you could also see New York, New York as well.

While I can’t offer a World Series, I can certainly offer great shows,

great restaurants and wholesome family entertainment.

Tourism is the No. 1 industry in the Las Vegas Valley. Tourism

drives the economic train of my community. People’s livelihood depend on it. Indeed, the entire community depends on one industry.

That is all we have. The effects of the September 11 attacks have

been devastating on Las Vegas.

Before September 11, the Las Vegas economy was one of the

strongest in the Nation. You have all heard me brag about it since

I came to Congress. Unemployment was virtually nonexistent.

Smaller businesses were flourishing, and millions of people were

visiting. Last year, 38 million people visited southern Nevada.

Now, Las Vegas is experiencing economic upheaval. A week after

the attacks, hotel occupancy rates dropped from 100 percent to

nearly 40 percent; and 240 conventions were canceled immediately.

While the weekend hotel occupancy rates have improved, the midweek rates remain terribly depressed, and my district will likely

lose 20 percent of its convention business in the coming months.

Revenues from casino entertainment, shopping, showrooms, lodging

and dining have plunged. The hotels have laid off more than 15,000

workers and reduced the hours, often voluntarily by the workers,

16

for many, many more. For each displaced hotel worker another

worker is laid off in a related industry. Unemployment, which was

virtually nonexistent before September 11, has now reached 7 percent and rising.

Last week, I hosted two displaced hospitality workers—and ‘‘displaced’’ is the nice word for saying they don’t have a job. Jewel

Jackson and Lucy Cedeno told their stories.

Jewel is a single mother of two teen-aged girls. She worked at

the Four Seasons Hotel as a laundry valet worker and was laid off

2 days after the attack—2 days. Her unemployment benefits

amount to $243 a week. Her rent alone is $739 per month. When

her electric and food bills are included, her monthly expenses

amount to more than $1,100. This does not include health care,

clothes for herself and her children, and other daily expenses.

She told the panel that she just doesn’t know what she is going

to do now. She is looking for a job but so is everybody else, and

we don’t have another industry where she could be retained to go

to work.

Lucy Cedeno and her husband have both been laid off by the

hotel industry. In my town most people are working in the hotels;

and if there are two breadwinners in the family, they are both

working in the hotels.

When both women were asked what they needed the most, both

emphatically stated that the health insurance was the most important. They are scared to death.

Las Vegas was one of the best metropolitan areas to start a new

business. However, at this point, small businesses throughout

southern Nevada are experiencing a dramatic decline in business.

One third of small companies cited a decrease in business of a minimum of 25 percent in the last month. These businesses are being

forced to take drastic measures such as hiring freezes, delaying

payments to vendors, which of course has a terrible ripple effect,

and laying off workers. If the current situation continues, businesses will close and unemployment will go up dramatically.

Congress must move quickly on legislation to turn the economic

tide. We must extend unemployment compensation and COBRA.

Health insurance is the workers’ biggest worry. It can cost up to

$500 a month for health insurance for families. Small businesses

that have experienced losses as a result of the attacks must receive

relief.

General aviation businesses have lost revenue while grounded by

the FAA. Air tour operating companies in Las Vegas have experienced losses ranging from $25,000 to $700,000 as a result of airport

closures. Small Business Administration loans should be expanded

to help businesses in areas hard hit by the ripple effect of September 11.

Full deductibility—and I can’t emphasize this enough. My workers want it. My casinos want it. My restaurants want it. Full deductibility for business meals must be included in the economic

stimulus package. Allowing for full deductibility of business meals

will encourage business to increase travel by making travel less expensive. A business meals tax deduction benefits the entire economy.

17

Confidence in air travel must be restored. Forty-six—not 55 percent but 46 percent of Las Vegas tourist business arrives by air.

The Senate has overwhelmingly passed a security package. I implore the House to do the same. We can talk about confidence. We

can talk about people going their own way and enjoying their lives

as they did before September 11. They are scared to death to get

on a plane, and it is getting worse instead of better. Serious consideration should be given to a $500 tax credit for people traveling

within North America. This credit would give people an incentive

to get back on the planes, trains and in cars to travel.

I urge quick passage of legislation that will enable areas such as

Vegas to rebound, putting people back to work and restoring the

economic health of our country with vast and expanding unemployment. How are we going to restore consumer confidence? They can

have all the confidence in the world. If they haven’t got any money

to spend, they are not going to be in the stores; and we have got,

needless to say, a big shopping time coming up with the holidays.

I urge us to move as quickly as possible on this package.

Thank you, Mr. Chairman.

[The prepared statement of Hon. Shelley Berkley follows:]

PREPARED STATEMENT OF HON. SHELLEY BERKLEY, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEVADA

Thank you, Mr. Chairman and Ranking Member Towns for holding this very important hearing today. Tourism is the Number 1 industry in the Las Vegas Valley.

Tourism drives the economic engine of my community. People’s livelihoods depend

on it.

The effects of the September 11th attacks have been devastating on Las Vegas.

Before September 11th, the Las Vegas economy was one of the strongest in the nation. Unemployment was low, small businesses were flourishing and millions of people were visiting. Last year, 38 million people visited southern Nevada. Now, Las

Vegas is experiencing economic upheaval.

A week after the attacks, the hotel occupancy rates dropped from 100 percent to

nearly 40 percent and 240 conventions canceled. While the weekend hotel occupancy

rates have improved, the midweek rates remain depressed. And, my district will

likely lose 20% of its convention business in coming months. Revenues from casino

entertainment, shopping, showrooms, lodging and dining have all plunged.

The hotels have laid off 15,000 workers and reduced the hours for many more.

For each displaced hotel worker, another worker is laid off in a related industry.

Unemployment has reached 7 percent. Before September 11th, this rate was just 4.8

percent.

Last week, I hosted two displaced hospitality workers from Nevada. Jewel Jackson and Lucy Cedeno told their stories to a House panel. Jewel is a single mother

of two teenaged girls. She worked at the Four Seasons Hotel as a laundry valet

worker and was laid off two days after the attack. Her unemployment benefits

amount to $243 per week. Her rent alone is $739 per month. When her electric and

food bills are included, her monthly expenses amount to more than $1,100. This

does not include health care, clothes for herself and her children and other daily

expenses. She told the panel that she just doesn’t know what she is going to do now.

She is looking for a job, but there is not much out there now.

Lucy Cedeno and her husband have both been laid off by the hotel industry. When

both women were asked what they needed, both emphatically stated that health insurance was the most important.

Las Vegas was one of the best metropolitan areas to start a new business. However, at this point, small businesses throughout southern Nevada are experiencing

a decline in business. One third of small companies cited a decrease in business of

25 percent. These businesses are being forced to take drastic measures such as hiring freezes, delaying payments to vendors and laying off workers. If the current situation continues, businesses will close and unemployment will go up dramatically.

Congress must move quickly on legislation to turn the economic tide. We must

extend unemployment compensation and COBRA. Health insurance is the workers’

biggest worry. It can cost upward of $500 per person per month. Displaced workers

18

collecting only unemployment insurance cannot afford these costs and still pay for

other necessities.

Small businesses that have experienced losses as a result of the attacks must receive relief. General aviation businesses have lost revenue while grounded by the

Federal Aviation Administration. Air tour operating companies in Las Vegas have

experienced losses ranging from $25,000 up to $700,000 as a result of airport closures. Small Business Administration loans should be expanded to help businesses

in areas hit hard by the ripple effect of September 11th.

Full deductibility for business meals must be included in the economic stimulus

package. Allowing for full deductibility of business meals would encourage business

to increase travel by making travel less expensive. A business meal deduction benefits the entire economy.

Confidence in air travel must be restored. 46 percent of Las Vegas’ tourists arrive

by air. The Senate has overwhelmingly passed its security package. I implore the

House to do the same.

Serious consideration should be given to a $500 tax credit for people traveling

within North America. This credit would give people an incentive to get back on

planes, trains and in cars and travel.

I urge quick passage of legislation that will enable areas such as Las Vegas to

rebound, putting people back to work and restoring the economic health of our country.

Mr. STEARNS. I thank my colleague.

The gentleman from Hawaii Congressman, Neil Abercrombie.

STATEMENT OF HON. NEIL ABERCROMBIE, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF HAWAII

Mr. ABERCROMBIE. Thank you, Mr. Chairman.

I will in fact submit a statement.

I would like as well, Mr. Chairman, in conjunction with what I

am about to say, to submit—I have got a bunch of copies here

which actually, if I can get some help from the staff, I would like

to pass along to you right at this moment.

Some of you maybe didn’t have an opportunity to see the paper

this morning. The headline here is, United Chief Says Head Airline

Could Fail. The Chairman of United Airlines has sent a letter to

company employees yesterday warning the carrier will perish

sometime next year—that is a direct quote—unless it stops the financial losses that have accelerated dramatically since the September 11 terrorist attack.

Mr. Chairman, I want to follow up on what Shelley had to say

by starting out a little by stating the obvious. Everybody has a

story here, but I think it is important to establish this perspective

for what I have to say that follows.

Tourism obviously, in Hawaii, it is more than a third of our income. We are affected by international travel as well—not just

going out, coming in. New York City, New Orleans, wherever it

happens to be, Florida, I am sure you do a tremendous amount of

business. Mr. Keller, I know, does a tremendous amount of business in Orlando from international travel.

Our international travel is down 47 percent right now, and it has

a tremendous effect immediately on the bottom line, on the immediate bottom line for us. This was—it is now 47 percent. That is

an improvement for what it was the rest of the September, which

was 78 percent. You just cannot continue to do business under

these circumstances when you are taking that kind of a hit. Some

of the hotels are reporting they are only down 20 percent or 40 percent in terms of their occupancy. That is because they closed down

whole sections of buildings and simply laid people off.

19

In Hawaii last week things are improving in the headlines of the

newspaper because we only have 3,600 people applying for unemployment when it was 5,000 2 weeks previous. That is an improvement for us simply because the numbers are going down.

I will be speaking shortly about the bill that Mr. Kyl and Mr. Miller and Mr. Shadegg and myself have on the $500 tax credit.

You can get from New York to Hawaii for $400 round trip. That

is one of the reasons that United is having the trouble. And, you

know, I see people smiling and saying that sounds good, let us go.

You have to have a job and confidence to do it. But they are not

going to make money with that. They simply can’t keep up that

kind of a so-called bargain, 8 full package days from San Francisco

for $359. I mean, that is how desperate we are trying to get people

out there.

The Los Angeles Times has a story here: Hawaii takes a big hit

waiting for tourists to come flying back. These are two kids from

the Hilton Hawaiian Village Hotel down in my district with their

two children there. Between them they make good money. I have

always been a big fan of the tourist industry because it does give

people an opportunity, men and women. There is no glass ceiling

in this industry. You produce, you compete, you can rise in it. They

make $60,000 between them, $60,000 income between them. They

are both out of work.

It isn’t so much whether people are doing all right at the end of

the month. It is what happens 45 days from now. They have got

mortgage payments to make and bills to pay. They can’t go out

Christmas shopping.

And one of the great things about being a Member of Congress,

as opposed to—you know, Mr. Greenspan is speaking somewhere

on the Hill today. That is great for him. Greenspan will have a

paycheck at the end of the month. Greenspan will have a paycheck

next month and the month after, and when he retires he is not

worried about whether he and his family are going to be able to

take care of themselves and pay their bills.

These folks and our folks—one of the things about being a Member of Congress, we add votes up one at a time here and one at

a time at home. If there is anybody in the country that understands what it is, it is the Members of the House of the Representatives. As my wife says to me all the time, you don’t get elected

every 2 years. It is every other year. We have to renew our licenses

every other year. If there is anybody in this country that understands what individual pain is all about and what individual problems are that need solutions, it is the Members of the House of

Representatives.

So I am very happy to be here in that sense, Mr. Chairman,

today because I know that you and the members of your committee

can help us with that. And I want to get directly to what that is.

We have got to take up the question of legislation. It is one thing

to try to save the airlines, and we have tried to do that. It is another thing to try to get confidence in air safety, and we are struggling with that, and I know you are working on it. But then we

have to get legislation that get these tax credits going, that will get

the spousal travel back into effect and will allow for business net

operating loss carry-backs to come in.

20

If we put that combination in and you can prevail upon Mr.

Thomas and the leadership and we can in the Democratic Caucus

to come in with a travel and tourism package that is going to address individual families in this country, then we can succeed. Absent that, I think we are going to face a worse crisis 45 or 60 or

90 days from now than we could prevent if we take action now.

That is why your hearing today is vitally important, and we are

very grateful to you for it.

Thank you, Mr. Chairman, and aloha.

[The prepared statement of Hon. Neil Abercrombie and the article follow:]

PREPARED STATEMENT OF HON. NEIL ABERCROMBIE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF HAWAII

Chairman Stearns, Ranking Democrat Towns and Members of the Subcommittee:

Thank you very much for affording me the opportunity to testify before you here

today on the state of the travel and tourism industry. As you well know, it is not

a pretty picture. The toll of the terrorist attacks continues, not just in New York

and here in Washington but across the nation, much to the undoubted satisfaction

of the attackers. I hope to be able to give you a clearer picture of the industry’s condition and some solutions.

Hawaii is one of the most desirable tourist destinations in the world. While it has

delivered economic blessings, it is also highly vulnerable to disruption. Tourism now

dwarfs all other sectors of our economy. Over $12.0 billion in revenue comes to Hawaii through travel and tourism, 25% of the state economy, according to the Bank

of Hawaii.

When a downturn occurs, it has a serious and immediate impact, as is the case

today. As of October 14, international arrivals have declined 47%, and the key Japanese arrivals have declined 36%. Arrivals from the mainland have declined‘‘only’’

20%. These figures, as bad as they are, represent improvements from late September when international travel was down by 78%.

The Hawaii Hotel Association reported lately that hotel occupancy is down 40%

in up market resort areas, such as Waikiki Beach which I represent and the KonaKohala area on the Big Island of Hawaii.

Hawaii’s travel and tourism industry is responding. You can find round-trip airline tickets from New York to Hawaii for $400. From Los Angeles or San Francisco,

you can get an eight day Hawaii vacation, including hotel, airfare and most expenses for $359 per person.

But good deals are not worth a nickel if people do not get on airplanes to go

places, whether Hawaii, Orlando, Las Vegas, New Orleans, Chicago or New York.

It takes people willing and confident to travel by air to occupy the hotels, attend

the theater, fill the restaurants, take the cabs and tip the waitresses, the sky caps,

the doormen and the hotel maid service. While Hawaii is an integral part of the

United States, there are no alternatives to getting there other than flying.

That makes apparent the fundamental and most important steps we in Congress

can take: making air travel safe, and communicating air travel security to the public. Nothing short of re-establishing that confidence will succeed in getting the industry hardest hit by the terrorist attacks back on its feet.

We’ve gotten assistance quickly and generously to the airlines. Now Congress

must put two more legs on the three-leg stool. We must move equal speed to pass

airplane and airport safety and security laws. Although I favor federalizing the baggage checking and security system, I am open to other solutions if they can provide

comparable protection. If it requires National Guard troops in the interim, this is

a legitimate use of personnel in a national emergency. Clearly, trained security personnel must be put on board and airline employees, flight attendants and pilots

given appropriate equipment and training. Cockpit safety is essential. Although

these may seem elementary steps, they must be accomplished and we’re not there

yet.

After assuring essential safety and security, there must to be a stimulus or incentive to encourage people to travel. There are a number of proposals that have been

brought forth, but having been a proponent of the travel industry since elected to

Congress eleven years ago, I’d like to focus on a couple of ideas that would succeed

in boosting travel.

21

First, Congressman John Shadegg and I have introduced the Travel American

Now Act (H.R. 3041) in response to the crisis. It consists of a temporary income tax

credit of $500 for Americans to travel by plane, train, bus or auto to destinations

at least 100 miles from home. Reasonable expenses, such as meals, lodging, entertainment and recreation within the U.S. would qualify for this credit for expenses

between enactment and December 31 of this year. Group tour fees and agent fees

would be covered.

Another provision would allow a 100 percent business meals and entertainment

deduction through December 31. Some have projected that business travel has been

the hardest hit segment of the industry, especially with some sectors of the economy

clearly softening before September 11. This would help get business travelers back

moving throughout the country.

Lastly, it would allow Net Operating Loss carryback for taxes paid by travel-related industries adversely affected by the attacks for an additional 3 years. Companies that were profitable before September 11 would be able to recover at least some

of their losses.

Separate from H.R. 3041, I have introduced legislation in each of the last Congresses to re-establish the spousal business travel deduction, allowing a spouse who

materially participates in business activities to claim a legitimate business-associated deduction. This will greatly help tour packagers to offer even more attractive

combinations of air fares, lodging, meals and other travel-related items. Not only

will this encourage individuals businesspersons to travel, but it will be a great boost

to convention and trade show destinations. It is pro-family, encouraging spouses to

travel together, and will often allow them, perhaps with children, to spend an extra

day or two at their destination.

And speaking of families and children, the real tragedy of the results of the terrorist attacks has been hundreds of thousands of jobs lost, and many more working

people have had work levels and hours reduced. The impact on hundreds of thousands of American’s families is only now being felt. For many, there are little or

no financial reserves, and people could be homeless in Hawaii in another 4 weeks.

Unemployment compensation pays only a fraction of normal expenses. These benefits are less than rent and mortgages, and they does not count food, medicine and

utilities. Congress must act speedily to increase and extend unemployment compensation. Even though it is only a temporary and inadequate cushion, it is better

than no safety net at all.

A portion of the COBRA health insurance benefits premiums should be provided.

Currently, an unemployed person must pay 102 percent of the costs. Job training

needs to be provided to those permanently affected. Employers should assure full

benefits and seniority be provided to those who return to work.

Chairman Stearns, these are practical, attainable and effective measures we can

move on quickly. I have spoken to the House leadership on these matters in an effort to move them forward. I very much encourage you and the members of the

Commerce Committee to do so as a result of the testimony you have solicited and

receive today. I am encouraged by your attention to the crisis in the industry that

is so vital to Hawaii and my constituents, as well as to millions of others in the

industry across American. This is one of the perhaps few actions taken since September 11 that have the potential for reviving this industry.

[Wednesday, October 17, 2001—The Washington Post]

UNITED CHIEF SAYS AIRLINE COULD FAIL

By Frank Swoboda, Washington Post Staff Writer

The chairman of United Airlines sent a letter to Company employees yesterday

warning that the carrier ‘‘will perish sometime next year’’ unless it stops the financial losses that have accelerated dramatically since the Sept. 11 terrorist attacks.

‘‘Today, we are literally hemorrhaging money,’’ James Goodwin wrote in the letter. ‘‘Clearly this bleeding has to be stopped—and soon—or United will perish sometime next year.’’

United would not comment on the letter, but a source at the airline confirmed it

and said it had gone to the company mailroom to be sent to the airline’s 100,000

employees.

The letter’s existence and contents were first reported yesterday on the Web site

of Air Transport World, a monthly trade publication.

Some analysts have projected that United, the nation’s second-largest airline,

could lose more than $1 billion this quarter. United had been experiencing heavy

22

losses even before the attacks because of a sharp drop in business travel and labor

problems.

United, US Airways, America West and possibly Continental are generally regarded as being in the most precarious financial positions, all for different reasons.

United is heavily dependent on business travel, which fell off at the beginning of

the year and hasn’t come back. Southwest and Delta are financially strongest

among the major airlines.

Company officials would not speculate on whether Goodwin’s letter might be part

of a campaign to pressure its unions into a new round of contract concessions.

The fourth quarter is expected to be significantly worse for almost all the airlines

than the quarter just ended—which is projected to be the third-worst in industry

history.

Michael Linenberg, an airline analyst for Merrill Lynch & Co., predicted yesterday that the industry would lose $2.1 billion in the third quarter and $3.5 billion

in the fourth quarter. The largest quarterly loss ever for the airline industry was

$3.7 billion in the fourth quarter of 1990.

Glenn Engel, an analyst for Goldman Sachs Group Inc., said he would be ‘‘shocked

if United perishes a year from now,’’ according to the Associated Press. But another

analyst, Helane Becker of the Buckingham Research Group, said Goodwin’s scenario

rings true for United and probably every major U.S. airline. ‘‘The numbers they’re

going to report in this quarter are going to be ridiculously horrible,’’ she said.

Since terrorist hijackers attacked the Pentagon and the World Trade Center, passengers have been staying away from the airlines by the thousands. Those who are

flying are mostly being lured by low fares that the airlines cannot afford to continue

indefinitely. Although several airlines have reported that the number of passengers

on their flights has increased recently, since dropping off dramatically after the attacks, the financial yields—the revenue—from each ticket sale has dropped significantly, according to industry officials.

Almost all the airlines have cut flights, some by as much as 23 percent, since the

attacks. United has already announced plans to cut 20,000 workers.

In his letter, Goodwin said: ‘‘Before September 11 we were not in a comfortable

financial state, with costs exceeding our revenue on a daily basis. Today the situation is exacerbated with costs exceeding revenues four times the pre-September 11

rate.’’

Goodwin said that in the aftermath of the attacks ‘‘we are in nothing less than

a fight for our life.’’ He added: ‘‘Never in our 75-year history have we faced an economic challenge of this magnitude, when the drop-off in air travel has been so unexpected and prolonged. In the past we struggled to make a profit. Now we’re in a

struggle just to survive.’’

Mr. STEARNS. Thank you.

I welcome my colleague from Florida, the congressman from Orlando, Mr. Ric Keller.

STATEMENT OF HON. RIC KELLER, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF FLORIDA

Mr. KELLER. Good morning, and I want to thank you, Chairman

Stearns, and the other subcommittee members for allowing me to

brief you today.

I can tell from looking at some of the empty chairs that one of

you must have leaked the word that I would be speaking today.

I represent Orlando, Florida, the world’s No. 1 tourist destination, and I can tell you that we have been uniquely impacted by

the events of September 11. Specifically, because people are afraid

to fly, our tourism-based economy has been devastated. It has hurt

us in two ways, in terms of job losses and decreased local tax revenues.

First, I will address the issue of job losses. One in four people

in my district is employed by the tourism industry. I have personally spoken with theme park workers, hotel workers, convention

workers and cabdrivers that have lost their jobs. From September

12 until today, there has been a 55 percent increase in the number

23

of daily unemployment claims, and the majority of these unemployed workers are linked to tourism.

Following the terrorist attacks of September 11, the Governor of

Florida conducted an industry-wide survey to estimate the economic impact on tourism-related businesses in Florida, and let me

tell you what the survey indicated.

Hotel occupancy rates, which normally average about 75 percent

this time of year, are only 40 percent.

Florida’s major tourist attractions experienced a 50 to 70 percent

drop in attendance.

Rental car companies have seen a 50 percent drop in business.

Airlines had to lay off thousands of employees as a result of

plane loads averaging only 35 percent of capacity in the period

after September 11. The lack of passengers traveling to Florida will

continue to impact tourism since over 50 percent of all tourists arrive in Florida by air.

The second way the tourist attacks have impacted central Florida

is by a dramatic decrease in local tax revenues. Since Florida does

not have a State income tax, we are dependent in large part upon

sales tax revenues to fund our government. In fact, visitors generated approximately 48 percent of the $1.5 billion in sales tax collected in Orange County in 2000. Without these tourist tax revenues, every household in Orange County would have to pay an additional $551 a year in taxes to receive the same level of service

they currently enjoy.

I believe that increased consumer spending on travel and tourism

is absolutely critical to revitalizing central Florida’s tourism-based

economy. For this reason, I strongly support giving travelers a

$500 tax credit if they book a trip before December 31, 2001. This

$500 tax credit is also supported by major employers in my district,

tourism leaders and our local political leaders. In fact, in just a few

minutes you will hear directly from one of our major employers.

Mr. Fred Lounsberry is the senior executive with Universal Studios. You will hear directly from him.

I want to conclude by thanking the committee again for giving

me the opportunity to brief you on the state of the tourism industry

in central Florida. Thanks.

[The prepared statement of Hon. Ric Keller follows:]

PREPARED STATEMENT OF HON. RIC KELLER, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF FLORIDA

I want to thank Chairman Cliff Stearns and the Subcommittee members for allowing me to brief you today.

I represent Orlando, Florida—the world’s number one tourist destination—and I

can tell you that we’ve been uniquely impacted by the events of September 11th.

Specifically, because people have been afraid to fly, our tourism-based economy

has been devastated. It’s hurt us both in terms of job losses and decreased local tax revenues. First, I’ll address the issue of job losses. One in four people in my district are employed by the tourism industry.

I have personally spoken with theme park workers, hotel workers, convention

workers, and cab drivers that have lost their jobs. From September 12th, until

today, there has been a 55% increase in the number of daily unemployment claims.

The majority of these unemployed workers are linked to tourism.

Following the terrorist attacks of September 11th, the Governor of Florida’s Office

of Tourism and Economic Development conducted an industry wide survey to estimate the economic impact on tourism related businesses in Florida. The survey indicated:

24

• Hotel occupancy rates, which normally average about 75% this time of year, are

only 40%.

• Florida’s major tourist attractions experienced a 50% to 70% drop in attendance.

• Rental car companies have seen a 50% drop in business.

• Airlines have had to layoff thousands of employees as a result of planeloads averaging only 35% of capacity in the initial period after September 11th. The lack

of passengers traveling to Florida will continue to impact tourism since over

50% of all tourist have arrived by air in the past years.

The second way the terrorist attacks have impacted Central Florida is by a dramatic decrease in local tax revenues. Since Florida does not have a state income tax,

we are dependent in large part upon sales tax revenues to fund our government.

In fact, visitors generated approximately 48% of the $1.5 billion in sales tax collected in Orange County in 2000.

Without tourism tax revenues, every household in Orange County would have to

pay an additional $551.00 in taxes each year to receive the same level of service

they currently enjoy.

I believe that increased consumer spending on travel and tourism is absolutely

critical to revitalizing Central Florida’s tourism based economy. For this reason, I

strongly support giving travelers a $500 tax credit if they book a trip before December 31, 2001. This $500 tax credit is also supported by major employers in my district, tourism leaders, and local political leaders.

I thank the committee for giving me the opportunity to brief you on the state of

the tourism industry in Central Florida. Thank you.

Mr. STEARNS. I thank my colleague.

The gentleman from Guam, Congressman Bob Underwood, welcome.

STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE

IN CONGRESS FROM THE TERRITORY OF GUAM

Mr. UNDERWOOD. Hafa Adai and good morning, Mr. Chairman

and members of the subcommittee. I am very happy to have the opportunity to testify on the case of Guam, and for all the reasons

that have been outlined I certainly support any and all legislation

which will help the tourist industry as well as directly the workers

that are affected.

It is important to understand that, for Guam in particular, the

focus on international tourists is vital. We also want to be included

in any and all initiatives, and I will just give you a couple of examples of problems that we have had as a territory.

Simple oversights include the Travel and Tourism Congressional

District Economic Impact Study issued by the Travel Industry of

America, which was alluded to earlier by Mr. Towns, does not include Guam or any of the territories. Recently, the Postmaster

General unveiled the greetings from American’s stamp series in

order to encourage tourism and travel, and it included only the 50

States. The territories were not included. I guess we are not part

of America in the stamp series. Incredibly, even the District of Columbia was not included in that.

Now, as background to understanding the state of tourism in

Guam, it is important to know where we are located. We are on

the other side of the international dateline. It takes me 19 hours

just to get home. So, as a consequence, I can’t invite you to spend

a weekend in Guam but more likely a week in Guam. But it is important to understand how vital tourism is important to our economy. It drives our economy.

Sixty percent of government of Guam revenues are derived directly and indirectly from travel and tourism. Forty percent of our

island’s workforce works in tourism. And, unlike the Continental

25

United States, Guam is heavily dependent on tourists from Asia,

with 80 percent coming from Japan. We contribute enormously to

the balance of trade situation for this country.

After September 11 the loss of consumer confidence to travel has

cost the government of Guam millions of dollars in revenue. Japanese travel agents report a 50 percent cancellation rate after September 11 and anticipate a 30 percent reduction in travel to Guam

by December. Taiwan and Hong Kong travel will be down 50 percent in the next 3 months and a 35 percent decline from Korea is

anticipated.

I believe that one way the Federal Government can assist Guam

and other U.S. areas dependent upon international travelers is to

encourage U.S. officials, particularly the State Department, to promote international traveling, whether it be international travelers

coming to the U.S. or Americans traveling abroad. This is why I

want to commend President Bush for taking the step to go to

Shanghai today to indicate his confidence in our capacity to continue to be engaged overseas.

More than 50 million international visitors spent over $100 billion in the U.S. in 2000. Fortunately, the countries that generate

the most international travelers to the U.S. come from our strongest allies. In descending order of travelers they include Canada,

Mexico, Japan, the U.K., Germany, and France. The top 10 U.S.

destinations affected by international travelers, excluding travelers

from Canada and Mexico, are, in descending order, California, Florida, New York, Hawaii, Nevada, Massachusetts, Illinois, Guam,

Texas, and New Jersey.

Given our size, we are very highly dependent on international

tourists. While Guam may have the smallest population and land

size on this list, it is important to understand that disproportionate

impact that any disruption in tourism has on our economy. Prior

to September 11, Guam’s economy was already struggling as a result of the Asian economic crisis. Our unemployment rate was already 15 percent. For 2001, our unemployment rate continues to

increase and has dramatically increased as a result of the September 11 terrorist attacks and including not just people losing

their jobs but hours being cut back dramatically, threatening

health insurance and other matters pertinent to the health and

safety and stability of the families that work in the travel and tourism industry. It is important to understand that these things indicate that the Federal Government needs to help directly the travel

and tourism industry and to provide a package that provides assistance directly to the workers.

For the record, I would like to introduce also a report by the

Guam Hotel and Restaurant Association.

Mr. STEARNS. Without objection, so ordered.

Mr. UNDERWOOD. I also want to point out that I support Senator

Boxer’s legislation, S. 1505, the Rediscover America Act of 2001.

The bill seeks to temporarily re-establish the U.S. Travel and Tourism Promotion Bureau within the Department of Commerce, and I

am intending to introduce companion legislation today.

Thank you, Mr. Chairman.

[The prepared statement of Hon. Robert A. Underwood follows:]

26

PREPARED STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE IN CONGRESS

FROM GUAM

Good morning Mr. Chairman and members of the subcommittee. I am very grateful for the opportunity to testify on the state of the tourism industry since the September 11 terrorist attacks on our nation, particularly in my home island of Guam.

This hearing is timely in light of the various economic stimulus proposals being

considered by the Administration and the Congress and I am glad that the needs

and concerns of the travel and tourism industry are being heard in this debate.

Clearly, the travel and tourism industry has a large impact on our economy by

adding nearly 5 percent to the GDP, generating more than $578 million in revenues,

supporting more than 17 million jobs, and providing a $14 million trade surplus for

the country. It is critical to assist our businesses and our workers affected in the

industry, particularly since 95 percent or more businesses in travel and tourism are

small to medium size firms. That is why I support Senator Boxer’s legislation, S.

1505, the Rediscover America Act of 2001. The bill seeks to temporarily reestablish

the U.S. Travel and Tourism Promotion Bureau within the Department of Commerce to assist the travel and tourist industry and to help restore consumer confidence. I intend on introducing a companion measure to S. 1505 today.

INCLUSION OF U.S. TERRITORIES IN TRAVEL AND TOURISM INITIATIVES

As Congress considers these important policy initiatives, it is equally important

that federal policy makers ensure that the U.S. territories are included in any proposed initiatives that would bring economic relief to our communities. Any relief

package is particularly vital to Guam and other U.S. territories, whose geographical

isolation and distance from the U.S. mainland makes air service costly and challenging to begin with and that much more vulnerable to cutbacks and downsizing

in times of difficulty. The other areas include the Commonwealth of the Northern

Mariana Islands, American Samoa, the Virgin Islands, and the Commonwealth of

Puerto Rico.

Simple oversights include the Travel and Tourism Congressional District Economic Impact Study issued by the Travel Industry Association of America, in conjunction with the Commerce and Transportation Departments. The report excludes

the U.S. territories from its study. Another example includes the recent announcement by the Post Master General who unveiled the ‘‘Greetings from America’’ stamp

series covering the 50 states. Its purpose is to generate tremendous pride in each

state and to help raise awareness of their efforts to promote and facilitate increased

travel to and within the U.S. Once again, Guam and the U.S. territories were left

out of this very important initiative to assist the travel and tourism industry. What

is more disappointing is that our nation’s capitol—Washington, D.C.—was also left

out.

GUAM’S TOURISM INDUSTRY

As background to understand the State of the Tourism Industry in Guam, it is

important to know where we are located. Guam is the furthest U.S. jurisdiction

from Washington D.C., and we are on the other side of the international dateline.

Although flying time between D.C. and Guam is about 19 flying hours, it usually

takes me a full day to get home. Yet Guam is only three to four hours away from

major Asian countries, including Japan, Taiwan, and the Phillippines. Due to

Guam’s small size and geographical isolation, Guam’s private sector economy is

minimally diversified and heavily dependent upon tourism, particularly from international travelers.

Tourism drives our economy. Sixty percent of Government of Guam revenues are

derived directly and indirectly from the travel and tourism industry and accounts

for close to 40% of the island’s workforce. In 1997, the retail trade division, gift, novelty and souvenir shops sold $415.6 million in merchandise, reporting nearly onequarter of the total $1.8 billion in service industry receipts. Within the service division, hotels and motels were the leading industry with $460 million in receipts and

passenger transportation arrangement industries, including travel agencies and tour

operators, reported receipts totaling $143.1 million.

Unlike the continental United States, Guam is heavily dependent on tourists from

Asia, with 80% coming from Japan. After September 11, the loss of consumer confidence to travel has cost the Government of Guam millions of dollars in lost revenues. Japanese travel agents report a 50% cancellation rate after September 11 and

anticipate 25%-30% reduction in travel to Guam in December. Taiwan and Hong

Kong travel will be down 50% in the next three months and a 20% to 35% decline

of travelers from Korea is anticipated. The hotel industry reports occupancy levels

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at a low of 20-30% and foresee a constant decline in the months to come. The projected losses for the hotel industry alone is approximately $30 million in gross revenues since September 11.

INTERNATIONAL TRAVELERS

I believe that one way in which the federal government can assist Guam and

other U.S. jurisdictions dependent on international travelers is to encourage U.S. officials, particularly the State Department, to promote international traveling,

whether it be international travelers coming to the United States or Americans

traveling abroad. That is why I want to commend President Bush for traveling to

Shanghai, China, for the Asian Pacific Economic Cooperation meeting. This is the

kind of signal that U.S. leaders must send to other countries.

More than 50 million international visitors spent $103 billion in the United States

in 2000. Fortunately, the countries that generate the most international travelers

to the United States come from our strongest allies. In descending order of travelers, they include Canada, Mexico, Japan, the United Kingdom, Germany, and

France. I would encourage that U.S. leaders take advantage of every diplomatic opportunity available to send a message to the leaders and citizens of these countries

that the tourism and travel industry in America is alive and well.

The top ten U.S. destinations affected by international travelers, excluding travelers from Canada and Mexico, include California, Florida, New York, Hawaii, Nevada, Massachusetts, Illinois, Guam, Texas, and New Jersey. These destinations include the largest and most populous states in the nation, whose economies are

greatly impacted by the travel and tourism industry. While Guam may have the

smallest population and land size on this list, it is important to understand the disproportionate impact that any disruption in tourism has on our economy.

Prior to September 11, Guam’s economy was already struggling as a result of the

Asian economic crisis. During 1999 and 2000, Guam’s unemployment rate was

15.2% and 15.3% respectively. For 2001, Guam’s unemployment rate is already over

15%, and is anticipated to increase by the end of the year. This rate is more than

three times the national average.

It is for all of these reasons, that I ask that Guam and the other U.S. territories

not be forgotten in any travel and tourism initiatives being considered by this Congress.

Once again, I wish to thank the Chairman for giving me the opportunity to testify

and to tell Guam’s story.

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Mr. STEARNS. I thank my colleague.

I think hearing the opening testimony of our colleagues gives

real evidence to what this impact has been, and I think for members and citizens alike who are out there and can see people suffering through either being laid off or perhaps trying to meet their

mortgage payments, their rental, it is a huge impact; and as long

as this continues, the worse it gets. So I thank my colleagues for

coming very much.

Mr. UNDERWOOD. Thank you.

Mr. STEARNS. We will now have the second panel, which we have

eight separate witnesses. The second panel would come to the table

if they would.

We have Linda Conlin, the Assistant Secretary for Trade Development from the Department of Commerce. We have William Norman, Travel Industry Association, CEO and President. We have

Robert Warren, the General Counsel and Secretary for the Air

Transport Association of America. We have here the Chairman and

CEO of Marriott International Corporation, J.W. Marriott. We have

the President and CEO of New York City and Company, Cristyne

Nicholas. We have the Universal Studios Recreation Group Senior

Vice President, Fred Lounsberry. We have the President of the

International Cruise Lines Council, Michael Crye. And then we

have the President and CEO, Terrell Jones, of Travelocity.Com. So

this is a very important hearing to hear from industry.

We have heard from Members of Congress who talk to their constituents and know about the small businesses, but now we have

a unique opportunity to hear from industry.

I thought we would start from my left to the right.

Ms. Conlin.

Mr. DEUTSCH. If I can ask for unanimous consent.

Mr. STEARNS. For unanimous consent, the gentleman from Florida, Mr. Deutsch, is recognized.

Mr. DEUTSCH. I apologize. You are probably aware the building

is going to be evacuated at 3 o’clock. I haven’t figured out why we

are not evacuating now. We are evacuating at 3 o’clock.

But as someone who represents South Florida, we are as affected

maybe as other areas in the country. There may be other areas like

Hawaii and Las Vegas that might be a little bit proportionally affected. Almost on a daily basis we are seeing the impact, and literally anything this Congress can do to make sure that the continuation of tourism is able to work I am supportive of.

Thank you.

Mr. STEARNS. I thank my colleague who, again, is in a very tourist-oriented area like myself and Florida.

So we are most appreciative of all of you taking your time. We

know how valuable your time is. You are just as busy if not more

than any of us in Congress.

Mr. STEARNS. Ms. Conlin, the Assistant Secretary of Trade Development, Department of Commerce, if you would start out with

an opening statement, we would appreciate it.

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STATEMENTS OF LINDA M. CONLIN, ASSISTANT SECRETARY,

TRADE DEVELOPMENT, DEPARTMENT OF COMMERCE; WILLIAM S. NORMAN, PRESIDENT AND CEO, TRAVEL INDUSTRY

ASSOCIATION; ROBERT WARREN, SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND SECRETARY, AIR TRANSPORT ASSOCIATION OF AMERICA, INC.; J.W. MARRIOTT, JR., CHAIRMAN AND CEO, MARRIOTT INTERNATIONAL, INC.; CRISTYNE

L. NICHOLAS, PRESIDENT AND CEO, NYC & COMPANY; FRED

LOUNSBERRY, SENIOR VICE PRESIDENT OF SALES, UNIVERSAL STUDIOS RECREATION GROUP; J. MICHAEL CRYE,

PRESIDENT, INTERNATIONAL CRUISE LINES COUNCIL; AND

TERRELL B. JONES, PRESIDENT AND CEO, TRAVELOCITY.COM

Ms. CONLIN. Thank you, Mr. Chairman.

Mr. Chairman, Ranking Member Towns, members of the subcommittee, I am honored to be invited to provide testimony this

morning regarding the impact of the tragic events of September 11

on the travel and tourism industry and U.S. Government efforts

being made toward supporting the industry’s recovery.

I have provided, Mr. Chairman, a more detailed written account

for the record, and I will summarize its key points this morning.

Undoubtedly, the terrorists have caused a terrible loss of life and

created concern among many Americans about basic safety and security across all walks of life, but I have to tell you that during

these times I have never felt more proud to be an American and

to have the privilege of serving as a member of this administration.

I have faith in our great country and in our strong leadership, and

I feel fortunate to be in the Department of Commerce as the Assistant Secretary for Trade Development where I can call upon close

to 20 years experience in the travel and tourism industry to help

in the efforts for this industry’s recovery. It is my honor to have

the opportunity to work together with President Bush, Secretary

Evans and Under Secretary Aldonas in this effort.

I want to begin my testimony by providing a few key facts; and,

Mr. Chairman, you have already mentioned some of them. But I

think they bear repeating to demonstrate the importance of the

travel and tourism industry to the U.S. economy.

According to the Travel Industry Association of America and the

U.S. Department of Commerce, total spending in calendar year

2000 by domestic and international travelers in the United States

reached beyond $582 billion. Spending by these travelers supported

some 19 million jobs, and certainly the distinguished member from

Hawaii gave a very human face to those 19 million jobs. Total tax

revenues generated by travel and tourism amounted to almost $100

billion.

As a former small businesswoman in the travel and tourism industry, I fully appreciate that 95 percent of the travel and tourism

industry is comprised of small- and medium-sized businesses.

International travel to the United States is this country’s top services sector export. In 2000, international travelers to the United

States pumped some $103 billion into the economy, supporting

nearly 1 million jobs, and for the 11th year in a row international

travel contributed positively to the balance of trade, generating a

$14 billion trade surplus.

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So the administration is therefore aware that restoring consumer

confidence in travel is a key factor to help generate recovery for the

economy as well as travel and tourism overall. Preserving our citizens’ ability and freedom to travel is pivotal to generating economic

recovery.

With the support of key industry trade associations and leaders

such as the Travel Industry Association and the Travel Business

Roundtable, on September 25 Secretary Evans organized a business leaders roundtable with 15 CEOs from the travel and tourism

industry. Some of them join me here today. These individuals represented companies in the hotel and resort, rental car, theme park,

travel agent, rail, bus tour operator and airline businesses. This

discussion allowed Secretary Evans to learn firsthand from each

representative about the impact of the terrorist attacks on their individual industry sectors as well as hear perspectives on the role

that the U.S. Government should play in helping to revitalize this

vital sector of the U.S. economy.

Two days later, Secretary Evans continued this dialog, speaking

with representatives from the National Restaurant Association;

and, in turn, they similarly conveyed their concerns and perspective on appropriate responses.

Since the attack, I have also personally met and spoken with a

number of travel and tourism industry leaders to learn more about

the impact of these events and to hear additional suggestions for

government action. As a result of these meetings and conversations, Secretary Evans determined that a restoration of confidence

in leisure and business travel can be assisted and helped through

stronger government coordination and greater partnership with the

private sector.

Specifically—and I would just like to comment on some of these

measures if I may, Mr. Chairman—one of these measures is Secretary Evans’ decision to reconvene regular senior level meetings of

the Tourism Policy Council, known as the TPC. The TPC’s overall

function is to serve as the primary forum to coordinate Federal

policies and regulations affecting travel and tourism. Let me tell

you why that is so important.

By bringing together the key departments and agencies that

oversee policies affecting travel and tourism, the TPC provides the

appropriate framework for addressing short-term recovery support

and preparedness. Over the medium to long term, the TPC also

provides a mechanism to ensure that the national interest in tourism is fully considered in Federal decisionmaking. The Council has

been enthusiastically endorsed by the White House Domestic Consequences Policy Council and will hold its first meeting at the Department of Commerce next week, 1 week from today, on October

24.

I have outlined the membership of this Council in my written

testimony. However, I think it is important to note that Secretary

Evans will chair the Council, which will include senior representatives from a broad range of departments and agencies, including

the State Department, the Department of Transportation, Customs,

the Immigration and Naturalization Service, the FAA, and the

newly created Office of Homeland Security. In addition, to ensure

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coordination with Congress, the Secretary has extended invitations

to the co-chairs of the Senate and congressional tourism caucuses.

The second key initiative in Secretary Evans plan to support

recovery——

Mr. STEARNS. I need you to summarize.

Ms. CONLIN. Yes—will be to further public sector and private sector cooperation through an ad hoc roundtable.

Overall, Mr. Chairman, in concluding, let me say that it is absolutely essential that the Federal Government play a key role in restoring public confidence in not only our air transport system but

also travel and tourism in general. We believe that the measures

that we are now undertaking will help to do that.

I thank you once again, Mr. Chairman, for allowing me to inform

you about the measures that we are taking. Thank you.

[The prepared statement of Hon. Linda M. Conlin follows:]

PREPARED STATEMENT OF HON. LINDA M. CONLIN, ASSISTANT SECRETARY FOR TRADE

DEVELOPMENT, DEPARTMENT OF COMMERCE

I am honored to be invited to provide testimony before the House Committee on

Energy and Commerce, Subcommittee on Commerce, Trade and Consumer Protection, regarding the impact of the tragic events of September 11, 2001, on the travel

and tourism industry as well as on industry recovery efforts. The terrorists have

caused a terrible loss of human life and created concern among many about basic

safety and security across all walks of life. During these times, I have never felt

more proud to be an American and to have the privilege of serving as a member

of this Administration. I have faith in our great country and in our strong leadership, and I feel fortunate to be in the Department of Commerce serving as the Assistant Secretary for Trade Development where I can use the expertise I have in

the travel and tourism industry to be of help in bringing about this industry’s economic recovery. It is my privilege to be working to support President Bush, Secretary Evans and Under Secretary Aldonas in this endeavor.

I want to begin by emphasizing that the travel and tourism industry is extremely

important to the U.S. economy. According to the Travel Industry Association of

America and the U.S. Department of Commerce, total spending in calendar year

2000 by domestic and international travelers in the United States was $582 billion.

Total direct and indirect employment supported by travel spending was 19 million

people. Total federal, state and local tax revenues generated by spending on travel

and tourism in 2000 was almost $100 billion. The vast majority (95 percent) of the

travel and tourism industry is comprised of small and medium enterprises. International travel to the United States is the top services sector export for the country.

In 2000, the total impact of international travel (the sum of travel and passenger

fares exports) on the United States was $103 billion, and it generated a $14 billion

trade surplus. The international travel export sector supported nearly one million

jobs, generating $14 billion in tax revenue in 2000.

The Administration is aware that restoring consumer confidence in travel is a key

factor to help generate recovery for the travel and tourism industry as well as the

overall economy. Preservation of our citizens’ ability and freedom to travel is pivotal

to ensuring a rapid economic recovery. With the support of key industry trade associations and leaders such as the Travel Industry Association of America and the

Travel Business Roundtable, Secretary Don Evans organized and hosted a business

leaders roundtable on September 25, 2001, with fifteen CEOs from the travel and

tourism industry. These executives represented companies with operations in the

hotel and resort, rent-a-car, amusement, travel agent, rail, bus, and airline businesses. The discussion gave Secretary Evans first-hand information from each participant on the impact of the terrorist attacks on their individual industry sectors

as well as perspectives on how the U.S. Government could be involved in revitalizing this important sector of our economy.

‘‘The fundamentals of our economy remain sound,’’ observed Secretary Evans following that meeting. He added, ‘‘A reinvigorated U.S. travel and tourism industry

is important to economic vitality at home and abroad. International travel represents one of the top exports for our country, generating over $103 billion in revenue last year, and supporting nearly one million jobs.’’

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On September 27, 2001, Secretary Evans conducted a conference call with six key

representatives from the restaurant industry and the National Restaurant Association. Each participant similarly conveyed their business concerns and perspectives

on appropriate responses from government. Since that time, I have personally met

and spoken with a number of other travel and tourism industry leaders to learn

more about the impacts of these events on the industry and gather additional suggestions for governmental action.

As a result of the meetings and discussions taking place, Secretary Evans has determined that a restoration of confidence in leisure and business travel can be accomplished through stronger governmental coordination and new partnerships with

the private sector. I am here to present what we view as a response that can be

accomplished rapidly without new funding requirements.

First among these measures is Secretary Evans’ decision to reconvene regular,

senior-level meetings of the Tourism Policy Council (hereafter referred to as the

TPC). This proposal has been endorsed enthusiastically by the White House Domestic Consequences Policy Council, and the Secretary will be holding the next meeting

at the Department of Commerce on October 24. The TPC was originally established

in 1981 and re-authorized by the U.S. National Tourism Organization Act of 1996

(22 U.S.C. 2124). The TPC’s overall function is to serve as the primary forum to coordinate federal policies and regulations affecting travel and tourism. This must be

done in a manner that preserves overriding safety and security considerations. We

seek to support a restoration of confidence while also supporting convenience where

possible in order to help stimulate a renewed appetite to travel by individuals and

businesses. By bringing together the key agencies that oversee policies affecting

travel and tourism, the TPC currently provides an appropriate forum for short-term

recovery support and preparedness. Over the medium to long-term, the TPC also

provides a continuing forum for coordinating U.S. Government efforts on behalf of

travel and tourism.1The Secretary serves as the chair of the Council. According to

the statute, other regular members of the TPC include the Director Office of Management and Budget, the Secretary of State, the Secretary of the Interior, the Secretary of Labor, the Secretary of Transportation, the Commissioner of the United

States Customs Service, and the Commissioner of the Immigration and Naturalization Service. The Act also allows the Secretary of Commerce to include representatives of other federal agencies as needed, and as a result he has expanded his

invitee list to include the Administrator for the Federal Aviation Administration,

the Secretary of the Treasury, the Attorney General of the United States, the Secretary of Housing and Urban Development, the Administrator of the Small Business

Administration, and the Assistant to the President for Homeland Security. In order

to ensure that we are also coordinating with the Congress as effectively as possible,

the Secretary also has extended invitations to the Co-Chairs of the Senate and Congressional tourism caucuses.

Secretary Evans also is looking at instituting ad hoc meetings between government and private sector representatives to coordinate implementation of an effective

public relations strategy to help restore confidence in travel and tourism. The mandate for this roundtable would include sharing and disseminating government and

private data on travel and tourism to monitor recovery efforts and learning from industry about specific communications plans and activities for restoring consumer

confidence in the safety and security of travel.

There are various promotional activities that the Federal Government can institute to more actively support the industry, both over the short term to aid recovery

as well as over the long term. Messages are important. The President’s statements

at Chicago O’Hare Airport, as an example, were enough to buoy the bookings of future British travelers to the United States. In addition, the Secretary of Commerce

took a flight with his peers to Kansas City, Missouri, and had lunch in a local establishment to underscore the safety of travel and the need to ‘‘get back to business.’’

As you may know, nine Governors took trips on commercial airlines as well to convey the safety message. Mayors of large cities, in particular Mayor Williams of

Washington, D.C., and Mayor Giuliani of New York City, have extended invitations

to the public to come to their cities and support the industry by taking in the wealth

of entertainment and attractions available to tourists. Outgrowths of these invitations even resulted in nearly 1000 Oregonians taking a Flight to Freedom trip to

enjoy New York City. Certainly, Congressional members have participated in this

intrinsic way to convey first-hand that every effort is being make to provide for traveler safety.

We are aware of the involvement of Congress in various other hearings that have

given the travel and tourism industry the prominence and attention needed at this

crucial time. I applaud the Congress for passing the Air Transportation Safety and

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Systems Stabilization Act to provide economic assistance to airlines and to bolster

confidence within the industry, in financial circles, and among the flying public.

The travel and tourism industry differs from many others in that the product is

generally considered expendable. Once the day is gone, you can not recover the loss

of the hotel room not sold or the airline ticket not purchased. These are not inventory to be sold at a later date. Let me share some of the short-term projections from

various components of the industry.

According to the Travel Industry Association of America, projected total U.S. domestic travel will be down 5 percent in 2001. The growth in 2002 is forecasted at

only around 1 percent, keeping it below 2000 levels.

The U.S. Commerce Department’s revised forecast on international travel indicates that this segment of the industry will experience a 13 percent decline for 2001,

but shows signs of recovery by the end of 2002 (up 4 percent ) and over the next

few years (this travel is projected by 2005 to be 12 percent above 2000 levels, reaching an estimated 57.2 million international travelers).

According to the Air Transport Association forecasts released at a recent Travel

Marketing Outlook Forum in Atlanta, revenue passenger miles are projected to decline around 12 percent. Growth for calendar year 2002 will be less than 5 percent

over 2001.

According to Smith Travel Research, the hotel industry will see its overall 2001

occupancy down 2.4 percent to 60.7 percent with revenues per room at a lower 4.7

percent than 2000. Although less than projected, the industry is still estimated to

make a $16.7 billion profit level in 2001. Weak growth in room demand (1.2 percent

increase) and flat growth in revenue per room is projected for 2002, suggesting that

it will take at least nine months for the industry to recover from the September 11

attacks.

According to the American Society of Travel Agents, the 2001 travel agent revenue will decline by 26 percent to less than $10 billion. They expect revenues to

dramatically decline again in 2002 to less than half the 2001 level.

Not everyone is forecasting declines for 2001. The National Restaurant Association is projecting a 5 percent increase in total restaurant industry sales for 2001.

The American Automobile Association has stated that auto travel will most likely

increase in 2001. Amtrak has seen increased ridership and Greyhound has seen an

increase in revenues.

The impact of the September 11 attacks on the travel and tourism industry is significant, but the industry can and will recover. The individuals whom I know well

and respect who make up the travel and tourism industry are hard-working, dedicated, resilient and resourceful. They are committed to working together to reassure

the public in the safety of travel. The Administration, the Secretary of Commerce

and I all share your appreciation for the importance of the travel and tourism industry to our country and the economy. I am grateful to have had this opportunity to

inform you of the steps we are taking to facilitate the industry’s recovery.

Mr. STEARNS. I thank you.

Mr. Norman, your opening statement.

STATEMENT OF WILLIAM S. NORMAN

Mr. NORMAN. Mr. Chairman, Ranking Member Towns and members of the subcommittee, thank you for the opportunity to appear

before you today to comment on the current state of the U.S. travel

and tourism industry.

The Travel Industry of America, or TIA, represents some 2,600

organizations that encompass every segment of the $582 billion

travel industry in the United States. TIA’s mission is to represent

the whole of the travel industry to promote and facilitate increased

travel to and within the United States.

I am also pleased to represent a broad coalition of travel industry

members who comprise the travel industry recovery coalition.

These two dozen travel industry organizations are working in a

unified fashion to support marketing and legislative proposals that

will get the travel industry back to business as usual.

The tragedies experienced by our Nation on September 11 have

had a disastrous impact on our Nation’s travel and tourism indusVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 E:\HEARINGS\76303 pfrm02 PsN: 76303
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try. You will hear from a number of industry leaders this morning

who will detail the impact of these recent events on their particular

segments of travel and tourism. But overall, Mr. Chairman, U.S.

travel in the fourth quarter of 2001 is expected to drop significantly, causing travel for all of 2001 to experience an average drop

of 5 to 10 percent.

We are also experiencing and expect the travel to remain soft in

the first half of 2002 before returning to normal levels later in the

year, but that would still be below the 2000 record, year of 2000.

While business travel was already slightly down for the year, prior

to September 11, it came to a virtual standstill in the first 2 weeks

following the attack. Business travel is now showing some signs of

recovery. But the trend is fragile. While personal travel is not down

as significantly as business travel, many States and cities across

this Nation have experienced major declines in visitation.

As you can imagine, destinations such as Washington, DC, and

New York City have been especially hard hit. But so have places

such as Florida and Hawaii and California and many other States

as well. Because of the significant declines in travel, a number of

States have already announced major budget cuts. For some States,

Florida and Hawaii in particular, this is a direct result of lost tourism. While in other places it is a combination of lost tourism revenue and a general slowdown in the economy. But why have some

Americans stopped traveling or changed their plans? There are currently some concerns about traveling by air or traveling to certain

major urban areas. However, our recent surveys show that adults

not planning trips in the next 6 months are driven primarily by financial concerns. While we commend all levels of government for

the extraordinary efforts that have been made to provide improved

security for travelers, much work remains to be done.

We urge the Congress and the administration to reach agreement soon on an aviation security package and come to a quick

agreement on an economic stimulus package. A matter of days

after the attacks of September 11, TIA developed a comprehensive

recovery plan on behalf of the entire U.S. travel industry. With significant input from industry leaders, we initiated various efforts

aimed at helping the industry get back to business as usual.

On behalf of the unified travel and tourism industry, we have

two major objectives that guide our recovery program. Our first objective has been and remains to work with the government to insure that travel in the United States is safe and secure. Our second

major objective remains rebuilding confidence among travelers.

Travel is one of our most cherished freedoms, and a return to travel is a return to normalcy. TIA and two dozen other national travel

and tourism organizations have joined in a coalition effort to support a six-point plan.

We believe this should be included in an economic stimulus package. We believe this plan is very workable since its impact will be

immediate, it is truly stimulative and its provisions are short-term.

This plan would provide incentives for personal and business travel

and improve cash-flow for ailing travel companies and establish a

private public sector travel promotion campaign. It would also extend benefits for unemployment or unemployed workers and assist

small businesses with expanded loans.

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A complete description of all six provisions is included in the

written testimony which we provided to the subcommittee. I am

also pleased to report, Mr. Chairman, that H.R. 3140, which was

introduced last evening by Representatives Patrick Kennedy and

Alcee Hastings, includes all six provisions endorsed by the Travel

Industry Recovery Coalition. We thank both of those representatives for their strong support during these challenging times. Also,

three of our six provisions are tax related and are included in H.R.

3041, and S. 1500, supported by Representative John Shadegg of

this committee and Heather Wilson and Senators Jon Kyl and Zell

Miller.

We thank these members for their leadership for introducing

these bills and urge all Members of Congress to support these bills.

In closing, I would like to say once again that the U.S. travel industry intends to do all it can to get back to business as usual, and

during this time of national testing, travel may best symbolize the

normalcy of our Nation’s leaders have called for us to restore.

We thank you for the opportunity to tell our industries story and

our current plans for recovery.

[The prepared statement of William S. Norman follows:]

PREPARED STATEMENT OF WILLIAM S. NORMAN, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, TRAVEL INDUSTRY ASSOCIATION OF AMERICA

Mr. Chairman, Ranking Member Towns, and Members of the Subcommittee, on

behalf of our 2,600 member organizations and a broad coalition of travel industry

members, I want to thank you for the opportunity to testify about the current state

of the U.S. travel industry.

The Travel Industry Association of America (TIA) is the national, non-profit organization representing all components of the $582 billion U.S. travel and tourism industry. TIA’s mission is to represent the whole of the travel industry to promote and

facilitate increased travel to and within the United States. Our 2,600 member organizations represent every segment of the industry, and I am pleased to be joined

on this panel today by several TIA members. We are also pleased to represent a

broad coalition of industry members, who are listed in the attachment to my testimony.

The tragedies experienced by our nation on September 11 have had a disastrous

impact on this nation’s travel and tourism industry. While the most immediate and

dramatic impact was felt by the nation’s airlines, many other companies and organizations that cater to business and personal travel have been affected as well. Airline

capacity and load factors are down, hotel occupancy is down, while many meetings

and conventions have been canceled or deferred. Car rentals at airports have declined, tour bus bookings are off, and there are fewer guests visiting amusement

parks and attractions. Because a number of these industry segments are represented at this hearing today, I will defer to them in providing the subcommittee

with details about the current state of affairs in their sectors.

Overall U.S. travel in the fourth quarter of 2001 is expected to drop significantly,

and travel for all of 2001 will experience a modest drop. We are also expecting travel to remain soft in the first half of 2002 before returning to year 2001 levels later

in the year. All of this assumes, of course, there are no additional incidents.

With a softening economy in 2001, corporate travel was already slightly down for

the year prior to September 11. In the first few weeks following the attacks, business travel came to a near standstill. While many companies declared themselves

open for business and said they were allowing their employees to travel, the simple

truth is that many employers significantly cut back on business travel. While these

‘‘road warriors’’ are flying and driving again to conduct the nation’s business, travel

in this segment is still off significantly.

While most association meetings and conferences are continuing, dozens of major

corporate meetings and conventions have been canceled or postponed. Shortly after

September 11, for example, the Orlando Convention and Visitors Bureau announced

it had experienced a nearly $200 million loss in convention business. Right after the

attacks it was said by one industry executive that you could roll a bowling ball right

down International Drive in Orlando and not hit anything. While cancellations have

48

slowed, major convention facilities across the country have experienced hundreds of

millions of dollars in lost revenue from dropped meetings.

While personal, or leisure, travel is not down as significantly as business travel,

states and cities across the nation have experienced major declines in visitation. Because travel and tourism is one of the top industries in terms of jobs and revenue

in so many states, business revenue is way off, employees are being laid off, and

sales tax collections are down dramatically. Many state governments already have

announced the need to make major budget cuts.

Two examples are particularly illustrative. Visitation to the state of Florida is

down dramatically, and it is expected the state could lose as much as $3 billion in

sales through the end of this year. Hawaii Lt. Governor Mazie Hirono reported to

the Senate Commerce Committee last week that overall visitation to Hawaii is down

by 40%, with their largest overseas travel segment—Japan—down by 50%. The

downturn in Japanese travel alone to Hawaii has caused the state to lose $4 million

each day.

Every state and city has a similar story to tell about the falloff in visitation to

their destinations. And because the travel industry is a top 3 employer in 28 states,

the downturn in this industry has caused a great deal of hardship throughout the

nation. One out of every seven Americans is directly or indirectly employed in the

business of travel and tourism. The livelihood of these 19 million Americans depends on travelers having the confidence to travel.

Why have some Americans stopped traveling, or changed their plans? There is

certainly concern about getting on airplanes or traveling to major urban centers

such as New York City or Washington, DC. We commend all levels of government

(local, state and federal) for the extraordinary efforts that have been made to provide safety and security for travelers, whether flying or driving around this great

country. We must continue to be vigilant in our security efforts to prevent further

acts of violence, which will only cause Americans to hunker down and abandon their

normal way of life—including travel for business or personal reasons.

Others are not traveling, or have altered their plans, out of concern over the nation’s softening economy and their own financial security. Still others have delayed

making travel plans because they question the viability of the company they would

buy a ticket or tour package from. They wonder if the travel company they deal with

will be in business weeks or months from now and how they would collect a refund

if the company went bankrupt.

Government and travel industry leaders must work in partnership to reassure the

American people that both their physical security and the nation’s economic security

will be protected in this time of crisis. Congress and the Administration must act

expeditiously to approve an aviation security bill, and also devote resources and

planning to provide for safety in all modes of travel. Congressional leaders and the

White House must also come to a quick agreement on an economic stimulus package

to keep the nation’s economy from slipping into a major recession.

Restoring confidence in Americans to travel through their country is also critical

if we are to lure back international travelers, who spend nearly $100 billion in the

U.S. each year, and account for 1 million direct U.S. jobs. Travel and tourism is big

business and a major services export, and until these recent events the industry was

actually producing a $14 billion positive balance of trade in international tourism.

A matter of days after the attacks on September 11, TIA developed a multi-faceted recovery plan on behalf of the U.S. travel industry. With significant input from

industry leaders, TIA has instituted various efforts and programs in areas such as

marketing and public relations, research, and government affairs—all aimed at

helping the industry get back to business as usual.

TIA, on behalf of the unified travel and tourism industry, has two major objectives

that guide its recovery program. Our first objective has been, and remains, to ensure

that travel in the United States is safe and secure. The travel industry pledges to

work with our nation’s political leaders to support policies to enhance the nation’s

security in all areas of travel and tourism. We have also called on all travel companies to do a thorough review of their security procedures and make any necessary

changes or enhancements to protect their guests and customers.

Our second major objective remains rebuilding confidence among travelers. Travel

is one of our most fundamental freedoms and a return to travel is a return to normalcy. TIA and its member companies and organizations have already dedicated

millions of dollars in resources to get Americans traveling again. We also support

a public-private sector campaign to promote travel that will tell the industry’s story

and help to restore consumer confidence in travel. In addition, there is much the

industry is doing in the area of public relations and research to support our recovery

efforts.

49

Most importantly for Members of this Subcommittee, and the U.S. Congress, TIA

and more than twenty other national travel and tourism organizations that have

joined in our coalition effort, have developed a six-point plan we believe should be

included in an economic stimulus package to restore the U.S. travel industry to its

pre-September 11 condition. We believe this plan is very workable since it its impact

will be immediate, it is truly stimulative, and its provisions are short-term.

This plan would provide incentives for personal and business travel, improve cash

flow for ailing travel companies, and establish a public-private sector travel promotion campaign. In addition, it would extend benefits for workers who are unemployed or under-employed, and would broaden loan programs for small businesses

in travel and tourism harmed as a result of the September 11 tragedies.

The following is a brief description of all six provisions:

• Provide substantial federal funding, with private-sector support and input, for advertising campaigns to encourage travel to and within the United States.

• Provide a workforce tax credit for training, retention, and hiring of travel and

tourism industry workers; financial assistance to help employees meet COBRA

payments and maintain their health insurance; and payroll tax relief for employers and employees.

• Expand the SBA loan program to small businesses that would not otherwise qualify for the Economic Injury Disaster Loan Program, with loans to be available

at the lowest possible loan rate.

• Provide for a $500 tax credit ($1000 for taxpayers filing jointly) for enumerated

personal travel expenses for travel originating and occurring within North

America (airplane, cruise, train and bus tickets, hotel and motel accommodations, and rental cars, but not meals) through the end of 2002.

• Restore full deductibility for those business entertainment expenses, including

meals, that are now subject to a 50% deduction through the end of 2002. (The

average business meal is less than $20 and does not include any alcoholic beverages at lunchtime.)

• Expand the allowance for the carry back of net operating losses for taxpayers in

the travel and tourism industry beyond the current two-year limit for losses attributable to the period 9/12/01-12/31/02.

The three tax provisions are included in H.R. 3041 and S. 1500 sponsored by Representatives John Shadegg, Neil Abercrombie, and Heather Wilson, and Senators

Jon Kyl and Zell Miller. We thank these Members for their leadership in introducing these bills, and urge all Members of Congress to support these bills. We are

pleased that the Ways and Means Committee has included the net operating loss

proposal in its economic stimulus package, and hope that the proposed tax credit

and business entertainment provisions can be included in the final package sent to

the President.

As Senator Kyl stated so correctly in testimony before the Senate Commerce Committee just last week, the U.S. travel industry has taken a major ‘‘body blow’’ as

a result of the September 11 tragedies. Few industries have been so directly and

negatively impacted, and now we are looking to the Congress and Administration

for leadership in providing safety and security and helping to restore consumer confidence in travel once again.

In closing, I would like to say once again that the U.S. travel industry intends

to do all it can to get back to business as usual. During this time of national testing,

travel may best symbolize the normalcy our nation’s leaders have called on us to

restore. Please join with us in reminding the American people at every opportunity

to defy international terrorists by exercising America’s precious freedom to travel.

Work with us create the conditions that will once again allow Americans to begin

traveling again, so we can put America’s workers back to work, and help to restore

the nation’s economy to its fullest potential. Thank you for the opportunity to tell

our industry’s story and our current plans for recovery. I would be happy to answer

any questions you may have.

MEMBERS OF THE TRAVEL INDUSTRY RECOVERY COALITION

Air Transport Association; American Association of Museums; American Bus Association; American Recreation Coalition; American Society of Travel Agents; Association of Retail Travel Agents; Association of Travel Marketing Executives; Carlson

Companies; Hospitality Sales & Marketing Association International ; International

Association of Amusement Parks & Attractions; International Association of Convention & Visitors Bureaus; International Council of Cruise Lines; National Association of RV Parks and Campgrounds; National Business Travel Association; National

Council of Attractions; National Council of Destination Organizations; National

Council of State Tourism Directors; National Tour Association; Receptive Services

50

Association; Recreation Vehicle Industry Association; Society of Government Travel

Professionals; Travel Goods Association; Travel Industry Association of America; US

Tour Operators Association.

Mr. STEARNS. I thank the gentleman.

Mr. Warren, the general counsel for Air Transport Association of

America.

STATEMENT OF ROBERT WARREN

Mr. WARREN. Thank you. Mr. Chairman, Ranking Member

Towns, members of the committee. I am Robert Warren, senior vice

president, general counsel of the Air Transport Association of

America. And on behalf of our members, I want to say thank you

very much for holding these very important hearings today. This

morning I want to talk about the current conditions of the airline

industry and its effect on tourism. More importantly, I want to talk

about what we, those in the airline business and all of us in the

tourism industry can do to improve that condition.

We first, however, need to follow, I think, President Bush’s clear

admonition to return to our daily lives and not let the terrorists

win. And part of this return to normal lives involves travel for both

business and pleasure. We face a long and difficult climb back to

a robust economic well-being and we recognize that our industry is

not alone in dealing with economic woes brought on largely by the

rippling effects of the terrorist actions of September 11 and thereafter. And when business in America hurts, the airlines and all facets of the tourism industry feels the pain even more acutely.

For every airline employee, 16 jobs are provided by business that

depend all or in large part on the airlines for their existence. This

total adds up to nearly 10.5 million jobs and accounts for 4 percent

the gross domestic product. The President and the Congress have

not only recognized our problems, but also have recognized a national need for a viable and vigorous airline industry and have

taken steps to help us deal with our predicament, and we in the

airline industry are, of course, very grateful.

The $15 billion in loans and grants for which Congress has voted

will enable the airline industry to continue to be a vital part of the

tourism industry in the United States. The only permanent cure for

what ails our industry is to get America flying again, to get people

and products back on board our planes for business, for vacation

to visit relatives, and for all the reasons that Americans and visitors alike have chosen to fly.

Currently, we are flying close to 30 percent fewer passengers

each day than we were a year ago. We need to get back to where

we were and until that happens, hotel rooms, restaurants, cruise

ships remain substantially and adversely affected. When we do get

back to where we were, it will also help travel and tourism and it

will increase needed State and local tax revenues. And this can

only happen by convincing the American people as well as businesses and industry that flying today is safer and more secure than

it ever has been. We need to restore the confidence of the American

people in the safety and convenience of air travel.

President Bush certainly contributed mightily in this effort by

his personal involvement in a national campaign to get Americans

off the ground and onto our planes and back to business. As well,

51

confidence in aviation security is also a key to our recovery. As you

know, the airlines and the government have already taken steps to

increase security and are communicating that information to the

traveling public through a variety of channels.

So I want to assure you of three things: First, our job, our responsibility in the airline industry, is to remind people that flying

is a safe way to travel and that safety and security of our passengers and crew is always our first priority. Second, we will work

very hard in our efforts to enforce the FAA’s new security procedures so as not to unnecessarily delay or inconvenience passengers,

but at the same time, to make them feel secure throughout their

travels. And third, with every step we take, we are going to work

with the flying public to help them understand the importance of

improving safety and security, and at the same time educating

them as to the need for each step and the time it may take to accomplishing these goals.

In closing, let me assure you that we in the airline industry are

absolutely committed to achieving these goals and encouraging all

of America to get back to business as President Bush did when he

urged us to get on board. In the long run, it is up to us in the airline industry and the entire tourism industry to renew and invigorate this important segment of the Nation’s economy. Working together, we will keep America flying, and I urge everyone to get on

board and join us in promoting travel and tourism in this great

country.

Mr. Chairman, this concludes my prepared remarks and I would

be happy to answer any questions that you have.

[The prepared statement of Robert Warren follows:]

PREPARED STATEMENT OF ROBERT WARREN, SENIOR VICE PRESIDENT, GENERAL

COUNSEL AND SECRETARY, AIR TRANSPORT ASSOCIATION OF AMERICA, INC.

Mr. Chairman, members of the Committee, I am Robert Warren, Senior Vice

President, General Counsel and Secretary of the Air Transport Association of America, Inc. On behalf of our member airlines, and, indeed, I would venture to say on

behalf of all aviation consumers, thank you for holding today’s important hearing

on the state of the tourism industry.

This morning, I want to talk about the current condition of the airline industry

and its effect on tourism. And, more importantly, I want to talk about what we—

those in the airline business and all of us in the tourism industry—can do to improve that condition.

Sadly, I have no easy answers and I have no magic wand. But we need to follow

President Bush’s admonition to return to our daily lives and not let the terrorists

win—and part of this return to normal involves travel for both business and pleasure.

Even in the best case, we face a long and difficult climb back to economic stability. It is small solace to know that our industry is not alone in dealing with economic woes.

Wherever we look across our land, we see that the businesses that propel America, indeed, the industries that propel the world—are hurting—largely because of

the ripple effects of the terrorist actions of September 11th. And when business in

America hurts the airlines and all facets of the tourism industry hurt as well.

For every airline employee, 16 jobs are provided by businesses that depen—all or

in large part—on the airlines for their existence. The total adds up to nearly tenand-a-half million jobs and accounts for four percent of the gross domestic product.

While you may find these statistics interesting, when I look at them today, I find

them alarming. Because they are not holding up under today’s conditions. Too many

jobs are being lost. Too many schedules are being cut back. Too many planes are

no longer are flying. And too many employees are being furloughed.

The President and the Congress have not only recognized our problems, but also

recognized the national need for a viable and vigorous airline industry, and have

52

taken action to help us deal with our predicament. And, we in the airline industry

are, of course, grateful. The $15 billion in loans and grants—for which Congress has

voted—will enable the airline industry to continue to be a vital part of the tourist

trade in the United States.

The only permanent cure for what ails our industry is to get America flying again.

To get people and products back onboard our planes—for business, for vacation, to

visit relatives—for all the reasons that Americans and visitors alike have always

chosen to fly.

Currently, we are flying close to 30 percent fewer passengers each day than we

were a year ago. We need to get back to where we were. And, until that happens,

hotel rooms and restaurants and cruise ships will remain substantially and adversely affected. When we do get back to where we were, it will also help local travel

and tourism, and it will increase needed state and local tax revenues.

So, how do we make it happen?

Again, there are no easy answers.

First, we have to convince the American people, as well as business and industry,

that flying today is safer and more secure than it has ever been. We need to restore

the confidence of the American people in the safety and convenience of air travel.

We need to tell them again and again. And, we need to show them that flying is

safe, and that we are making it safer all the time.

When the public sees members of the President’s Cabinet flying, as six of them

did last month; and when the public sees members of Congress flying every week,

we hope they will too.

President Bush’s personal involvement in a national campaign to get Americans

off the ground, onboard our planes and back to business is a very important development.

Communication is also a key component of our recovery and, as you know, the

airlines and the government have already taken a number of steps to increase security, and are communicating that information through a variety of channels.

For instance, only ticketed passengers—with special exceptions for minor children

and persons with disabilities—are allowed in boarding areas. Curbside parking and

curbside check-in have been reinstated at a number of airports that meet certain

FAA criteria, and everything is being evaluated for what works and what should

be changed. Airports have added more police. And, as President Bush directed, the

state governors are supplying armed and trained National Guard troops for increased security at airports. This additional law enforcement presence should also

give passengers a greater sense of confidence.

In addition, the Air Transport Association has called on the government to re-institute the use of air marshals and to federalize airport security.

Additionally, the President announced an aggressive security package including:

• $3 billion in funding to improve security of airplanes and airports

• $500 million in grant funding to make cockpits and pilots more secure

• a dramatic increase in the number of federal air marshals on airplanes and

• management of all airport security and screening services by the federal government

Needless to say, improving airport and airplane safety and security are not new

approaches for the airline industry. As far back as 1996, following the TWA Flight

800 accident, the ATA presented a far-reaching security plan to the White House

Commission on Aviation Safety and Security, chaired by then Vice President Gore.

At that time, we warned that ‘‘terrorism has come to our shores and we need aggressively to combat the threat to our nation.’’

We promised then to do everything in our power to assist the government in improving aviation security. Our plan then included a recommendation that the FBI

dedicate a significant amount of its resources to the problem of aviation terrorism.

That, of course, included keeping careful track of persons coming from nations

known to harbor terrorists, as well as persons believed to have ties to terrorist organizations.

Other recommendations included:

• the use of air marshals and of bomb-sniffing dogs,

• the deployment of explosive-detection devices and,

• U.S. government certification of companies contracting to provide airport passenger screening

• The use of effective computer-assisted passenger screening technology and techniques, known as CAPS.

And so, I want to assure you of four things:

53

First, our job and our responsibility in the airline industry is to remind people that

flying is so safe that even the most timid should not be afraid to fly. The safety

and security of our passengers and crews is always our first priority.

Second, we are doing everything in our power to bring that about. Among other

things, we are taking another look at the proposals we made five years ago to

the Gore Commission, to update them and come back and push for the implementation of those that have not been adopted.

Third: We will work very hard in our efforts to enforce these new security precautions, so as not to unnecessarily delay or inconvenience our passengers.

And Fourth: With every step we take, we are going to work with the flying public

to help them understand the importance of improving safety and security. And,

at the same time, educating them as to the need for each step and the time

it may take to accomplish these goals.

In closing let me assure you we in the airline industry are absolutely committed

to achieving these goals and to encouraging all of America to get back to business—

as President Bush did when he urged us to ‘‘Get Onboard.’’

In the long run, it is up to those of us in the air transport industry and the entire

tourism industry to renew and reinvigorate this segment of the nation’s economy.

Government must do its part. I know you are doing your part. And I assure you

that we in the airline industry are doing and will continue to do ours.

Working together, we will keep America flying. I urge all of you to ‘‘Get Onboard’’

and join us in promoting travel and tourism in our great country.

This concludes my prepared remarks. I would be happy to answer any questions

you may have.

Mr. STEARNS. I thank the gentleman.

We have been called for a vote and we have just about 10 minutes left. And I want to be sure that members come back, so I

think we are going to adjourn right now, vote, and I will be right

back. And Mr. Towns will be right back and we will continue. And

I think other members will too. But I would say to all of you, most

of us didn’t even know about the Kyl bill or the Shadegg bill. We

got the ‘‘dear colleague,’’ but we get ‘‘dear colleague’’ letters all the

time. But the fact that this hearing has come about, it certainly

spread across the House that we now know about Shadegg’s bill.

We know about Senator Kyl’s bill. And as chairman 2 days ago, I

didn’t even—I mean, until late last week I didn’t know about Congressman Shadegg’s bill.

So by you coming here, you are impacting the Members of Congress to look at these bills. And now Congressman Patrick Kennedy’s bill I heard about today for the first time. So we are going

to vote. We will be right back. You are very important to be here

to spread the word so the other Members of Congress know about

it and we can get this stimulus package going.

So with that I will adjourn and we will be right back.

[Brief recess.]

Mr. SHIMKUS [presiding]. Let me be so bold to call this hearing

back into order. And our desire is to try to move as expeditiously

as we can. We want to make sure we get the opening statements

on record, and I will be presumptuous in taking the chair until the

chairman gets back. We now would like to hear from Mr. Marriott,

Chairman and CEO of Marriott international. Welcome. Your full

statement is in the record and you are recognized for 5 minutes.

STATEMENT OF J.W. MARRIOTT, JR.

Mr. MARRIOTT. Thank you. Mr. Chairman and members of the

committee, I thank you very much for this invitation. These past

5 weeks have been the most difficult weeks for the travel and tourism industry that I have ever experienced in the 45 years I have

54

been in the business. When the weapon of choice for a terrorist attack is four airlines filled with fuel and passengers, it is bound to

have a devastating effect on all of us.

Immediately following the attack our net reservations dropped 94

percent. Our room revenues were already down about 10 percent

prior to September 11. Business has come back, but only part way.

In the past 3 weeks, in September, we were about off about 40 percent in revenue. In the first week of October, we are 25 percent

below last year in combined occupancy and room rate, what we call

rev par. And we seem to have plateaued at that level. So we are

running about 20 to 25 percent below last year in sales. Our big

city and resort and convention hotels have been hit the hardest

with massive group cancellations. Business and vacation travel are

far below what they should be.

September and October are the very best months for business

and convention travel. Our industry has lost a lot of the profit, almost all the profit that these months usually provide. The hotel industry itself employs over 2 million people. Today, about half of

these employees either have been laid off or are working 1 or 2

days a week. While some conventions have been rebooked for next

year, the airlines are running an 80 percent schedule, planes are

half full. Big travel agencies continue to report future bookings are

very soft and now we are coming in for what is the very slow season for the hotel business. December is the worst hotel month and

January is the next worse. The lodging industry is quite capital intensive with over $150 billion in mortgage debts, and many hotels

will not make their debt service payments.

We are not asking for a bailout, just your leadership in recognizing a major problem and its tremendous impact on our economic

stability and jobs. Your immediate action is needed to help us resolve the situation before it completely erodes not only the U.S.

economy, but also the global one. We in the industry are doing everything possible to act responsibly, both with labor and management. We have a massive advertising campaign. We have lowered

our room rates. We are offering one of the most attractive travel

packages we have ever offered. We have waived the minimum

hours required for our benefits-eligible employees so they can keep

their medical coverage for themselves and their families during

this emergency period. We have frozen and reduced executive salaries. We are looking at every conceivable possibility to build back

our business. We ask our government to do the same. To join us,

labor and management, as partners in solving our travel and tourism crisis.

In bipartisan meetings with Members of Congress, we have been

challenged to make recommendations. Of those measures which

provide an immediate stimulus to our economy for a temporary period, I believe that one of the best proposals which Congress should

consider, because it will provide an immediate shot in the arm for

travel and do more to save jobs, is a travel tax credit. The Congress

should enact as part of an economic stimulus plan a temporary,

and I stress temporary business travel tax credit targeted and limited in time and cost. The Travel America Now Act of 2001 has

been introduced in both the House and the Senate.

55

The House legislation is H.R. 3041, introduced by Representative

Shadegg of Arizona, Abercrombie of Hawaii, and Wilson of New

Mexico. We strongly support their proposal. Let me quote from a

recent issue of Newsweek, ‘‘Business Trips Among the Terrorist

Victims.’’ the article goes on to state in this post attack period, 58

percent of American business corporations have plans to curtail

travel. I know a lot of Members of Congress don’t like tax credits,

but we believe they can be used effectively. We use them effectively

in getting people back to work and getting them off the welfare

payrolls, and this small investment has saved a lot of money both

for employees and employers.

Our company has employed 3,000 former welfare recipients

through our pathways to independence program. Now is the time

for Congress and the administration to be creative by using the tax

credit process to get us traveling again. There is nothing that will

get business back to normal faster and more effectively than a

travel tax credit. You must do something immediately to get our

people traveling, or the consequences for our economy could be disastrous. Labor and management are united in this effort. Just as

labor supports our efforts to stimulate the economy through a travel tax credit, we support their efforts to assist workers who have

been laid off as a result of the events of September 11. This is a

big industry. It is an important industry. I hope you will help us

get America moving again. Thank you very much.

[The prepared statement of J.W. Marriott, Jr. follows:]

PREPARED STATEMENT OF J.W. MARRIOTT, JR., CHAIRMAN AND CHIEF EXECUTIVE

OFFICER, MARRIOTT INTERNATIONAL, INC.

Mr. chairman and members of the subcommittee, I’m Bill Marriott. Thank you for

the invitation to testify this morning.

These past four weeks have been the most difficult weeks for the travel and tourism industry that I have experienced in the 45 years I have been in the hotel business.

On september 11 we had our World Trade Center Hotel completely destroyed and

our Financial Center Hotel, one-and-a-half blocks away, severely damaged. Hopefully, we will be able to reopen it in four or five months. Tragically, two of our managers were killed at wtc as they stayed behind trying to make sure that our guests

had been evacuated.

Between the two hotels we successfully evacuated over 2000 people.

When the weapon of choice for a terrorist attack is four airliners filled with fuel

and passengers, it is bound to have a devastating effect on all of us.

Immediately following the attack, our net reservations dropped 94%. Our room

revenues were already down about 10% prior to September 11. Business has come

back. But only part way. In the last three weeks in september we were off about

40% in revenue. In the first week of October we are 25% below last year in combined occupancy and room rate—or what we call revpar.

Our big city and resort convention hotels have been hit the hardest with massive

group cancellations. Business and vacation travel are far below what they should

be. September and October are the best months for business and convention travel.

Our industry has lost all of the profit that these months usually provide.

The hotel industry employs over two million people in the U.S. Today, one half

of these employees either have been laid off—or are working one or two days per

week.

While some conventions have rebooked for next year, the airlines are running an

80% schedule and planes are half full. The big travel agencies report future bookings are very soft and now we are coming into the slow season. December is the

worst hotel month and January is the second worst.

The lodging industry is very capital intensive, carrying $150 billion of mortgage

debt. Many hotels will not make their debt service payments.

We are not asking for a bailout—just your leadership in recognizing a major problem and its tremendous impact on our economic stability and jobs. Your immediate

56

action is needed to help us resolve this situation before it completely erodes not only

the U.S. economy, but also the global one.

We in the travel and tourism industry are doing everything within our power to

act responsibly in doing our part—both labor and management. We are embarking

on a massive advertising campaign to ‘‘get America traveling again’’. We have lowered our rates and are offering the most attractive travel packages ever. We have waived the minimum hours required for our benefits eligible employees

so that they can keep their health coverage for themselves and their families during

this emergency period. And we have frozen or reduced executive salaries.

We are looking at every conceivable possibility to build back our business in this

difficult time.

We ask our government to do the same—join us, labor and management, as partners in solving our travel and tourism crisis. We need your leadership as never before.

In bipartisan meetings with Members of Congress, we have been challenged to

make recommendations of those measures which would provide an immediate stimulus to our economy for a temporary period.

The one best proposal I think Congress should consider, because it will provide

an immediate shot in the arm for travel and do more to save jobs now is a travel

tax credit.

The Congress should enact, as part of any economic stimulus plan, a temporary— and I stress temporary—business travel tax credit, targeted and limited in time and

cost.

The ‘‘Travel America Now Act of 2001’’ has been introduced in both the House

and Senate. The House legislation is H.R. 3041 introduced by Representatives Shadegg of Arizona, Abercrombie of Hawaii, and Wilson of New Mexico. We support their

proposal.

Let me quote from a recent issue of Newsweek: ‘‘Business trips are among the

terrorists’ victims’’. The article goes on to state that in this post-attack period 58%

of American business corporations have plans to curtail travel.

I know that many Members of Congress do not like tax credits—but they can be

effective when used prudently and cautiously.

A great example is the work opportunity tax credit, in which our government and

business have worked in partnership to get many of our citizens off the welfare rolls

and onto payrolls where they want to be and deserve to be. All of you know how

this small investment has saved money, helping both employee and employer. Our

company alone has been able to train and put 3,000 former welfare recipients on

our payroll through our ‘‘Pathways to Independence’’ program.

Now is the time for the Congress and the administration to be creative by using

the tax credit process to get us traveling again. There is nothing that will get businesses ‘‘back to normal’’ faster—and more effectively—than a travel tax credit.

We must do something immediately to get people traveling again—or the consequences for our economy could be disastrous.

Let me also stress that labor and management are united in this effort. Just as

labor supports our efforts to stimulate the economy through a travel tax credit, we

strongly support their efforts to assist our workers who have been laid off as a result of the events of September 11.

Travel and tourism is the first, second, or third most important industry in 28

states and the District of Columbia. It employs 18 million Americans, and pays over

$100 billion per year in federal, state and local taxes. Last year it generated a $17 billion trade surplus.

I hope you will help us get America moving again.

Thank you, and I request that my entire testimony be included in the record.

Mr. SHIMKUS. Thank you, Mr. Marriott.

Now we will turn to Ms. Nicholas, president and CEO of NYC

and Company. Thank you. Your full oral statement is in the record.

You have 5 minutes.

STATEMENT OF CRISTYNE L. NICHOLAS

Ms. NICHOLAS. Thank you, Mr. Chairman and ranking members.

NYC & COMPANY Company is New York City’s official tourism

and convention marketing organization. We are a private not-forprofit organization representing more than 1,400 tourism-related

businesses, including museums, hotels, restaurant, retail stores,

57

theaters, tour operators and attractions. I would like to thank the

subcommittee for this opportunity to testify about the current state

of New York City’s tourism industry. Tourism is a vital component

of the city’s economy. It generates $25 billion in spending. It equals

3,100 for every man, woman and child in our city. The more than

37 million visitors who we welcomed to New York last year had a

tremendous and positive impact throughout all five boroughs.

First, they supported 282,000 New York City jobs from the hotel

bellhop to the executive director of the Metropolitan Museum of

Art. Tourism offers a career opportunity for individuals from all

walks of life. Our visitors generated $936 million in safety tax revenues, 882 million in State tax revenues, and $1.3 billion in Federal

tax revenues. Tourism is one of the largest job producers in New

York City with a growth rate that has been among the most stable

of the city’s major industries. And in addition, the tourism industry

has been a key employer in the Nation’s welfare-to-work initiatives.

The tragic events of September 11 have been devastating to our

city’s tourism industry. In the first 4 weeks following the attacks, we estimate that $271 million were lost in New York City visitor

spending. New York City’s hotels have experienced a tremendous

drop in activity, during what is traditionally their strongest quarter. In the weeks following the attacks, the city’s hotels lost an estimated $6 to $10 million a day in room revenues. And while hotel

activity has picked up to some extent, it is nowhere near normal

levels. The number of hotel room nights sold down 29 percent from

originally forecast. And occupancies are currently hovering around

67 percent, compared to the 84 percent the same period last year.

To date, an estimated 6,000 New York City hotel union employees, 25 percent of the entire union membership have been laid off.

A figure that includes 1,000 jobs lost due to the destruction of our

downtown hotels. New York City restaurants, a $9 billion industry,

employ more than 160,000 people. Since September 11, more than

30 restaurants have closed permanently and an additional 40 temporary closed. According to the New York State Restaurant Association, restaurant sales among their New York city members declined 47 percent between September 10 and September 30. To

date, these restaurants have laid off 12 percent of their employees

and anticipate further layoffs up to 25 percent of the entire work

force.

New York City theater community has also sustained significant

losses. Broadway ticket sales are down 26 percent since September

11 compared to the year 2000. In addition to immediate revenue

shortfalls, the advanced ticket sales which sustain cash-poor

Broadway are virtually nonexistent, making it increasingly difficult

to forecast future activity. As for the city’s cultural institutions and

attractions, the combined attendance at the Metropolitan Museum

of Art and the Museum of Modern Art and the Bronx Zoo is down

47 percent over a comparable period in 2000.

Citywide the cost associated with the destruction of the World

Trade Center is enormous. New York City is expected to lose

110,000 jobs. And we will lose an estimated $1 billion in tax revenues, including $86 million in hotel tax revenues and $270 million

in sales tax revenues. Tourism industries, the travel research agency for the U.S. Department of Commerce expects international

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visitorship to the United States to decline 13 percent. While these

valuable international travelers make up only 18 percent of New

York City’s annual visitors, or 6.8 million people, they are responsible for 41 percent of all visitor spending, which means New York,

which is the country’s number 1 destination for international visitors, stands to be disproportionately hurt.

New York City & Company joins the Nation’s tourism industry

and Travel Industry Association of America in supporting immediate legislative efforts to stimulate travel and tourism. Specifically

we encourage Congress to restore the full deduction for all business

meals and entertainment expenses now subject to a 50 percent limitation, institute a temporary Federal tax credit of 1,000 per person

and 2,000 for a couple filing jointly for personal travel expenses for

travel within the United States and restore the spousal travel deduction to 100 percent.

We support the recommendation of the travel business roundtable for the creation of a Presidential advisory counsel on travel

and tourism. We urge the Federal Government to fund national

and international tourism marketing efforts as they do in other

countries. And finally, we ask the Federal Government to lift the

NEA funding caps on New York City cultural institutions. These

legislative efforts are important, immediate and necessary steps to

maintain a vibrant tourism industry, generate much needed jobs,

and drive economic growth now and into the future. With the help

of our friends in this room and around the Nation, together we can

act immediately to spur this country, the vitally important tourism

economy, create jobs and generate taxes. And as Mayor Giuliani

has been saying for weeks now, and also Congressman Towns, the

best way that people can help New York City is to come to the city,

eat out in the restaurants, stay in a hotel, go to a Broadway show,

a museum, take a tour. We will be happy to help you with that.

It is also the best way that I know of that can also show the world

that in the wake of this tragic event of September 11, both our city

and Nation will emerge stronger than ever. Thank you for your

time.

[The prepared statement of Cristyne L. Nicholas follows:]

PREPARED STATEMENT OF CRISTYNE L. NICHOLAS, PRESIDENT & CEO, NYC &

COMPANY

Good Morning, Chairman Stearns and members of the Subcommittee.

My name is Cristyne L. Nicholas, President & CEO of NYC & Company, New

York City’s official tourism organization. A private, non-profit organization, NYC &

Company represents more than 1,400 tourism-related businesses, including museums, hotels, restaurants, retail stores, theaters, tour organizations, and attractions.

It has a current budget of $12 million and is the leading force in attracting visitors

and visitor revenue to New York City.

I would like to thank the Subcommittee for its invitation to testify about the state

of New York City’s tourism industry following the events of September 11.

Tourism is a vital component of New York City’s economy. A $25 billion industry

(equivalent to $3100 for every man, woman and child in the city), tourism’s economic impact from its more than 37 million visitors is extensive:

• Tourism supports 282,000 NYC jobs directly and indirectly. From the hotel bellhop to the Executive Director of the Metropolitan Museum of Art, tourism offers

career opportunities for individuals from all walks of life.

• Taxes generated by NYC tourism in 2000:

$936 million city tax revenues

$882 million state tax revenues

$1.3 billion federal tax revenues

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And even more impressive is the growth the industry has experienced in the last

five years: visitor spending is up 34%; city and state tax revenues rose 35% and

33%, respectively; federal taxes also rose during this time period, up 30%.

And most importantly, the number of jobs supported by tourism has increased

26% since 1996. Tourism is currently one of the top five largest providers of jobs

in New York, with a job growth rate that has been one of the most stable and sustaining year after year among the city’s major industries including health services,

business services and Wall Street. In addition, tourism has long been an active participant in the nation’s Welfare-to-Work programs and initiatives.

The events of September 11th have been devastating to the city and its tourism

industry. In the time period of September 11th through October 6th, we estimate

that $270.8 million dollars has been lost in New York City visitor spending.

And the losses continue. Tourism is greatly dependent on the consumer’s sense

of well-being and financial security. The events following those of September 11,

many of which are heightening consumer anxiety, are challenging the industry’s

ability to reassure the consumer, and probably decelerating the nation’s economic

recovery period.

Tourism is not recession-proof. In addition to well-known names such as Marriott,

the Empire State Building and Circle Line, the city’s tourism industry is a community of small businesses, many of whom will not be able to sustain long-term declines in activity.

The following explain how individual segments of the city’s tourism industry are

faring:

NYC Hotels

New York City’s hotels experienced a tremendous dropoff in activity during what

is traditionally one of the strongest visitor months for the city. In the first few

weeks since September 11th, the city’s hotels lost an estimated $6-$10 million daily

in room revenues. While hotel activity has picked up to some extent, it is nowhere

near where it was forecast to be. Specifically, in terms of the percentage of hotel

rooms occupied since September 11th:

9/11/01-9/15/01: 63.1% NYC hotel rooms occupied

9/16/01-9/22/01: 45.4%

9/23/01-9/29/01: 59.3% (comparable 2000 period: 86.2%)

9/30/01-10/6/01: 67.5% (comparable 2000 period 83.7%)

(Source: Hotel RevMax)

An estimated 6000 NYC hotel union employees (25% of the entire union membership) have already been laid off (includes 1000 jobs lost due to destruction of downtown hotels). In addition, the remaining employees have voluntarily reduced the

number of days in their work week from five to three or four to prevent any further

layoffs.

NYC Restaurants

The NYC restaurant industry is a $9 billion industry, employing over 160,000 individuals.

More than 30 restaurants have permanently closed following the events of September 11th with an additional 40 temporarily closed. (Source: Zagat Survey)

According to the New York State Restaurant Association, restaurant sales among

their New York City members declined 47% in the period 9/10-9/30 compared to

same period in 2000. Furthermore, these members have, so far, laid off 12% of their

employees and anticipate that further layoffs up to 25% of the workforce may be

necessary.

Broadway and Attractions

NYC’s theater community also sustained significant losses due to the events of

September 11. Immediately following that morning’s events, Broadway cancelled its

Tuesday evening and Wednesday matinee and evening performances. And while the

theaters reopened on Thursday, September 13th, the performances played to considerably smaller audiences than is normal in September. In terms of weekly ticket

sales, for the weeks ending:

9/16: down 65% over same 2000 period (three performances cancelled)

9/23: down 24%

9/30: down 10%

10/07: down 9%

(Source: League of American Theatres and Producers)

All told, Broadway ticket sales were down a cumulative 26% for this period over

the comparable period in 2000. The challenge now facing Broadway is that advance

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ticket sales are not at previous levels, making it increasingly difficult to forecast future activity and respond accordingly.

The city’s cultural institutions and attractions continue to feel the impact of last

month’s events. For the time period of September 11 to October 1, the combined attendance at the Metropolitan Museum of Art, the Museum of Modern Art and the

Bronx Zoo is down 47% over the comparable period in 2000.

Overall NYC Economy—Estimated Impact

The costs associated with the destruction of the World Trade Center, the damage

to Lower Manhattan, the disruption of business, the decline of consumer confidence

and a deeper-than-previously-expected recession are staggering.

NYC Office of Management & Budget reports:

• Total loss of 110,000 NYC jobs

• Estimated loss of $1 billion in tax revenues including over $100 million in hotel

tax revenues and $270 million in sales tax revenues

NYC Comptroller Office reports:

• Retail/Wholesale: $1.7 billion in losses and 17,500 lost jobs

• Hotel/Restaurants/Theaters: $2.3 billion in losses. Job losses: 8000 restaurant

jobs, 6000 hotel jobs

• Airlines: 7000 job losses

Travel Forecasts for 2001 and 2002

While it is too soon to forecast the specific long-term impact of September 11th

and subsequent events on NYC’s tourism industry, it is important to understand the

national tourism picture in which NYC operates. The Travel Industry Association

of America, the trade association for the nation’s tourism industry, has forecast the

following for domestic travel within the US:

3rdQ 2001 volume: 5% decline over same period 2000

4thQ 2001 volume: 10% decline over same period 2000

x2001volume: 5% decrease over 2000

2002 volume: 1% increase over 2001

2002 will remain below 2000 levels

The international travel picture is even more grim. This is particularly troubling

to the tourism industry in New York City, given our position as the number one

US destination for international visitors. More importantly, while international visitors represent 18% of all NYC visitors, they generate 41% of all NYC visitor spending.

As for the outlook for international travel to the US, Tourism Industries, the travel research agency for the US Department of Commerce, anticipates that:

2001 volume, already declining due to a economic slowdown, will see an accelerated

drop in 2001, resulting in double-digit declines for almost all international markets

2002 will see steady recovery, more likely in the latter half of the year. Volume will

not, however, reach 2000 levels

With the exception of the United Kingdom and Canada, most international markets

will not fully reach 2000 levels until 2004/2005. Especially troubling is Japan,

which may not fully recover until 2006.

Forecast of International Travel to the US—Top Visitor Producing Markets

2000 2001 % chg over 2002 % chg over When this will

match 2000

Total .............................................................. 50.9m 44.5m -13% 46.4m +4% 2004

Canada ......................................................... 14.6m 13.4m -8% 14.0m +5% 2003

Japan ............................................................ 5.1m 4.0m -21% 4.1m +4% beyond 2005

UK ................................................................. 4.7m 4.1m -13% 4.3m +5% 2003

Germany ........................................................ 1.8 m1.3m -25% 1.4m +6% 2005

France ........................................................... 1.1m 878,000 -19% 917,000 +5% 2004

Brazil ............................................................ 737,000 650,000 -12% 680,000 +5% 2004

South Korea .................................................. 662,000 547,000 -17% 579,000 +6% 2004

Italy ............................................................... 612,000 495,000 -19% 522,000 +6% 2005

Argentina ...................................................... 534,000 438,000 -18% 419,000 -5% beyond 2005

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NYC Tourism Industry’s Immediate Response to September 11th Events

Tuesday, September 11

The first concern was for the thousands of visitors who found themselves stranded

in a city that was virtually shut down. NYC & Company made the immediate decision to keep NYC’s Official Visitor Information Center open throughout the day and

reached out to the media to alert travelers in need that the Center was ready to

assist them.

A list of hotel room availability was immediately posted to NYC & Company’s

website, www.nycvisit.com, and updated on a 24-hour basis throughout the week to

reflect the visitor industry’s quickly changing status. This list was supplemented

with a list of which businesses were open and what services they were providing.

Meanwhile, the Convention Sales, Convention Services, and Conference Express

departments began reaching out to meetings and conventions scheduled in New

York this fall to update them on events and to reassure them that we were working

closely with the city’s hotels and event venues to minimize any possible disruptions

of their plans.

Wednesday, September 12

NYC & Company began to coordinate the efforts of the hundreds of city restaurants in order to feed emergency workers—a massive, complex, and unprecedented undertaking.

At the same time, NYC & Company joined forces with Hotel Association of New

York City to begin canvassing the city’s hotels regarding the free and deeply discounted rooms available for the rescue workers and the victims’ family members

who would be coming into the city.

Thursday, September 13

NYC & Company brought a cross-section of industry leaders to Mayor Rudolph

Giuliani’s temporary command center to communicate the entire industry’s willingness to help and to begin the important process of coordinating our broader actions

and messages with those of the city.

Friday, September 14

NYC & Company established a toll-free New York City Visitor Hotline

(888/805-4040 domestic, 860/496-5972 international) as a resource for travelers in

New York City and for those with plans to visit. NYC & Company’s professional

staff of multilingual visitor information counselors—available on the phone through

the hotline and in-person to walk-in visitors—were joined by NYC & Company staff

volunteers to extend the hours of NYC’s Official Visitor Information Center. NYC

& Company staff also established a help desk at the Mayor’s Office of Operations

at the piers to assist emergency workers and the families of the victims with housing and general information.

NYC Tourism Industry’s Short-term and Long-term Responses

Meetings and Conventions

In an overwhelming show of support for New York City, significant meetings, conventions and tradeshows have rescheduled so they could meet in NYC, including:

• The American Society of Travel Agents’ (ASTA) World Travel Congress will bring

its 2,500 attendees to New York’s Jacob K. Javits Convention Center on November 4-7, 2001.

• The American Society of Association Executives (ASAE), representing the nation’s

top trade associations and hundreds of millions of dollars of potential convention business, will hold its 150-person Board of Directors meeting on November

16-18, 2001.

• The American Federation of State, County and Municipal Employees (AFSCME),

AFL-CIO is bringing the 1,500 attendees of its biennial Women’s Conference on

November 16-18. The meeting will be dedicated to union member Father

Mychal Judge and seven people who remain missing.

• The Magazine Publishers of America (MPA) will bring the 600 attendees of the

annual American Magazine Conference on October 21-24.

• Meeting Planners International (MPI) will bring the MPI Foundation Meeting on

October 27.

Major organizations reaffirmed their choice of New York City for their high-profile

events, including:

• Microsoft will hold the official kickoff for the new Windows operating system XP

in Times Square and Rockefeller Center on October 25, 2001; events will inVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00065 Fmt 6633 Sfmt 6621 E:\HEARINGS\76303 pfrm02 PsN: 76303
62

clude a free concert by a major popular music act and a high-profile media

event featuring Chairman Bill Gates.

• The Audio Engineering Society is bringing its 15,000 to 20,000 attendees to New

York from November 30 to December 3, 2001.

• The International Engineering Conference and Exposition is bringing 2,500

attendees to New York City from November 11 to 16, 2001.

I Love NY

New York State and the Port Authority of New York and New Jersey each contributed $20 million to a greatly enhanced I Love NY advertising campaign to encourage business travelers and tourists to come back to New York in the wake of

the World Trade Center attack. The $40 million ad campaign features the ‘‘I Love

New York’’ theme and well-known New Yorkers from entertainment, news, sports

and government.

The tourism outreach campaign will initially feature a television ad with notable

New Yorkers including Yankee shortstop Derek Jeter, Regis Philbin and Kelly Ripa,

CNBC’s Maria Bartiromo, Ben Stiller, Governor Pataki and Mayor Rudolph W.

Giuliani. The television ad began airing last week. In addition to the new television

ad, the multi-media tourism outreach campaign will also feature radio and print ads

in newspapers, magazines, and travel trade publications as well as outdoor advertising, Internet ads and direct mail in ensuing weeks.

Consumer Marketing Efforts

NYC & Company has renamed its Paint the Town Red: NYC’s Winter Celebration

promotional campaign Paint the Town Red, White & Blue, adding travel package

options, and moving up the start date to November 5 to drive immediate business

to New York City.

A special Restaurant Week promotion to drive business for the New York restaurant community has been launched. From Monday, October 15 through Sunday,

October 21, 2001, almost 150 of the city’s best restaurants are offering prix-fixe,

three-course lunch menus for just $20.01 and prix-fixe dinner menus for $30.01—

a fraction of their usual cost. For the first time ever, this Restaurant Week includes

a dinner option and extends through a weekend.

NYC & Company just signed a multi-year agreement with Delta Airlines to provide added tools with which to jump-start New York City visitorship. As part of Delta’s commitment to New York City’s efforts to revitalize travel, they have committed

10,000 free domestic tickets for use in targeted promotions and are waiving the normal rapid redemption fees charged to travelers wishing to redeem their frequent

flyer miles to travel to New York City in the near future.

NYC & Company aggressively pursued pro-bono advertising space from local, national, and international newspapers and magazines for a print advertising campaign. The ad, which tells people ‘‘New York City Would Like to Thank You. In Person,’’ has run in the New York Post, USA Today, The Boston Globe, Chicago Tribune, WHERE Magazine, Travel + Leisure, several Conde ́ Nast titles, and in British

publications.

NYC & Company will also be repositioning our own television ad campaign, originally scheduled to run this fall, to address the current situation and promote immediate, short-term business.

Support for Legislative Efforts to Encourage Tourism to NYC

NYC & Company joins the nation’s tourism industry and the Travel Industry Association of America in supporting those legislative efforts that would provide immediate relief for U.S. travel and tourism by allowing for:

• restoration of full deductibility for all business meals and entertainment expenses

that are now subject to a 50 percent limitation

• instituting a temporary federal tax credit of $1000 per person ($2000 for a couple

filing jointly) for personal travel expenses for travel within the United States

• restoration of spousal travel deduction to 100% to encourage spousal travel to

meetings and conventions

We also support the recommendation of the Travel Business Roundtable for the

creation of a Presidential Advisory Council on Travel & Tourism.

Furthermore, we urge the federal government to fund national and international

tourism marketing efforts, thus joining those countries that understand the value

of tourism and the importance of maintaining presence in the global marketplace.

And finally, we ask the federal government to remove the NEA funding caps on

New York City’s cultural institutions, a group who has been greatly impacted.

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We feel all these legislative efforts are important steps in helping to maintain a

vibrant travel and tourism industry, to keep working people working, and to stimulate economic growth.

New York City absolutely, positively needs a strong, flourishing tourism industry.

As Mayor Giuliani has been saying for weeks now, the best way people can help

New York City is to come to the city, eat out at a restaurant, stay in a hotel, go

to a Broadway show, a museum, an attraction; take a tour. And it is the best way

I can think of to show to the world that in the wake of the tragic events of September 11th, our city and nation will emerge stronger than ever.

Thank you.

Mr. STEARNS. I thank you.

Senior vice president, Mr. Fred Lounsberry, Universal Studios.

STATEMENT OF FRED LOUNSBERRY

Mr. LOUNSBERRY. Thank you, Mr. Chairman, and thank you for

the opportunity to be here today. I wear three hats before you

today: Senior VP of Sales for Universal Theme Parks in Hollywood

and Florida, the incoming national Chair of the Travel Industry

Association of America, and the current Chairman of the Visit Florida public-private partnership responsible for the promotion of

tourism in Florida.

I want to just focus on some of the key points in my testimony

which has been submitted for the record. Tourism has taken a direct hit and the impact is now cascading throughout our economy.

We are now seeing the full impact of how far the absence of tourism has impacted many facets of our economy. When you and your

constituents think about tourism, the first thing that probably

comes to mind is the annual family vacation, a trip by air or auto

to a hotel or resort or to visit friends and relatives, visit attractions, renting a car and dining out.

However, it is also critical to recognize how tourism impacts our

economy far beyond these travel businesses which first come to

mind. All of these businesses have hundreds of suppliers, food and

beverage suppliers, paper products and services. In addition, there

are hundreds of peripheral businesses which support tourism and

the convention industry, transportation companies, catering, gasoline, services, tour operators and travel agencies. As we see retail

sales drop, it is also important to note that one of the top activities

when Americans travel is to shop.

Tourism is the first, second or third largest industry in 29 of our

States. In Florida that represents 20 percent of Florida’s economic

engine, employs 850,000 Floridians and generates $3 billion in

State sales tax, and those taxes generated by tourism in Florida

and elsewhere fund critical social needs. Sales tax, hotel bed taxes

and gasoline taxes fund highway construction, convention centers

and other infrastructure projects as well as schools. We must restore confidence in travel and get tourism back on its feet. We urge

the Federal Government to provide funding and create a national

advertising and marketing campaign to encourage travel to and

within the United States. This can best be accomplished by establishing a public-private partnership through Federal matching

funds to support State tourism campaigns as well as support for a

national marketing effort through TIA, which is ideally positioned

to fulfill such a role. We urge the Federal Government to raise the

public-private partnerships, such as the one which exists in Florida, to a national level.

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Visit Florida, which is a unique public-private partnership, is responsible for marketing tourism in Florida. Last week, Florida Governor Jeb Bush unveiled an economic stimulus package proposing

an additional $20 million for Visit Florida on top of the existing

$20 million budget which would be matched and leveraged into a

$100 million plus campaign to promote Florida tourism. I would

like to show you the 30-second public service announcement which

kicked off the Florida campaign to Floridians, which was produced

by Universal on behalf of Florida tourism and is now airing

throughout the State.

Mr. STEARNS. Is this airing throughout the United States or

through—— Mr. LOUNSBERRY. Just in Florida, in all the key markets through

the Florida Association of Broadcasters, and it is being put on the

air by the stations in support of tourism.

Mr. STEARNS. And is that part of this $20 million effort?

Mr. LOUNSBERRY. Rebuilding tourism will not be a quick fix. It

will take time and a concentrated effort on all fronts of our industry to rebuild consumer confidence and get Americans traveling

again. We need your support and help. Thank you very much.

[The prepared statement of Fred Lounsberry follows:]

PREPARED STATEMENT OF FRED LOUNSBERRY, SENIOR VICE PRESIDENT OF SALES, UNIVERSAL STUDIOS RECREATION GROUP, CHAIRMAN, VISIT FLORIDA, & CHAIRMAN- ELECT, TRAVEL INDUSTRY ASSOCIATION OF AMERICA

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to be with you today. My name is Fred Lounsberry, and I come before you wearing

several hats. One for my role as Senior Vice President of Sales for Universal Studios

Recreation Group. One for my role as Chairman of Visit Florida—the public-private

partnership that promotes tourism in Florida. And one for my role as incoming

Chairman of the Travel Industry Association of America.

As Chairman of Visit Florida, I have spent the weeks since the September 11th

tragedy working with our state’s unique coalition of tourism leaders to develop a recovery plan. As I will detail a bit later, Florida is taking bold and innovative steps

to revitalize its most valued asset. It is imperative that we do this on a national

level as well, and the federal government has a significant role to play. We will ask

you to provide critical leadership and resources, and to partner with state and local

governments and the private sector to help get the American people traveling again.

Many of us remember piling into the family station wagon to head to our favorite

destinations. As the Chairman knows very well, the great state of Florida which we

both call ‘‘home,’’ is blessed with that incredible aura and sense of ‘‘getting away

from it all’’ that inspires so many families and businesses to plan their vacations

and meetings there. It has become a way of life—a habit—simply ‘‘routine’’ for so

many Americans. And that translates into a $50 billion a year industry for Florida.

But on September 11, that all changed. Our nation is still sorting out the crippling effects of the most horrific act of terrorism we have ever witnessed. And even

as our men and women in uniform go after an enemy so many of us don’t fully understand beyond its sheer evil, we are still realizing the incredible ripple effect of

that fateful day.

Perhaps nowhere has the economic ripple effect been more evident than within

the tourism industry. When terror struck New York, Washington, DC and Pennsylvania, it struck the heart of America and the spirit of its people. That newfound

fear and jolt to consumer confidence scored a direct hit on the tourism industry.

Are we struggling? Yes. It’s no secret that airline travel is down, hotels are at

record low capacities, rental car companies are hurting and theme parks are being

forced to reduce operations. An already fragile economy prior to September 11 has

now plummeted below where anyone could have imagined.

Will we recover? The answer is also a resounding yes. Just as we are witnessing

the resilience of Americans and courage of ordinary people performing heroic acts,

I am here to tell you the tourism industry will thrive again.

As our country enjoys being the number one tourist destination, our competitors

throughout the world are watching to see what actions we take—and they have

65

been swift. New York is investing $40 million; Las Vegas, $13 million; and California has stepped in with $10 million. In Florida, Governor Jeb Bush has taken

to the airwaves at the industry’s request, and has pledged to do ‘‘whatever it takes’’ to help rebuild the state’s economy. I’d like to take this opportunity to show you

a 30-second public service announcement that was produced by Universal on behalf

of Florida’s tourism industry and is now airing throughout the state.

Florida’s efforts do not stop with the PSA. Even when faced with a budget shortfall no one could have anticipated, Governor Bush has committed to set aside critical funds to help tourism recover. Last Friday, the Governor unveiled an economic

stimulus package that includes an additional $20 million for Visit Florida to help

promote tourism. These initiatives include targeted advertising to Florida and outof-state markets to encourage tourists to visit the state by automobile, national marketing campaigns, and partnerships with tourism-related businesses throughout the

state to create special discount programs and other incentives to attract visitors to

Florida.

But if the efforts of Governors Bush, Davis, Pataki and others are to succeed, they

must be supplemented with federal resources. We urge the federal government to

raise public-private partnerships like the one that exists in Florida to the national

level. The federal government should partner with the states, local Convention and

Visitors Bureaus and private sector partners to create a national advertising and

marketing campaign to encourage Americans to travel again.

In order to succeed, this must be funded at a level sufficient to reach all traveling

Americans. Experts in the tourism and communications industries estimate that

such a campaign would cost $50-$60 million, leveraged additionally with our national broadcast partners. The commitment of federal funds would supplement

spending by state and local governments and private sector partners I mentioned

earlier. Other incentives such as a travel tax credit, a return to full deductibility

of business entertainment expenses and aid to displaced workers are also of great

importance.

We need your assistance and leadership, and most of all your continued confidence in our industry to know how and when any recovery plan should be implemented. Just as our military effort is strategic, methodical and calculated to have

long-term impact, the tourism recovery plan must follow suit. The world is watching

to see how we take action, and we must set the bar high during this vulnerable

time.

In the short term, we need you to continue being ambassadors of good will whose

mission is to rebuild consumer confidence. Never before has your ability to use the

bully pulpit to impact those you represent been more critical. We implore you to talk

with your constituents and to the media—encourage travel, tout all our many destinations have to offer, reinforce safety measures and reassure Americans that a return to ‘‘reasoned normalcy’’ is in our best interests.

Make no mistake, while we will put a timeframe on this recovery, this is a longterm effort. Yes, there have been and may continue to be blips of positive news for

the tourism industry. But the reality is, we’ve been hit hard. Ground zero of the

horror on September 11th was also ground zero for a great deal of our nation’s economic health.

As evidenced by this panel before you today, every faction of the tourism industry

has been adversely affected, and is now putting its collective mind together to come

up with a solution. Yes, we are competitors, but we are also partners in an industry

that is absolutely vital to our nation’s livelihood.

It will take a sustained, concerted effort on all fronts to rebuild consumer confidence and get Americans traveling again. I can say with confidence that the entire

industry stands ready and united for that challenge. With your support we will succeed.

Thank you.

Mr. STEARNS. Thank you.

Michael Crye, President of International Cruise Lines. Welcome.

STATEMENT OF J. MICHAEL CRYE

Mr. CRYE. Good morning, Mr. Chairman, Mr. Towns, Mr. Bryant.

My name is Michael Crye. I am the President of the International

Council of Cruise Lines. I am honored to appear before the subcommittee today to highlight the measures that the cruise industry

is taking to restore the confidence of the traveling public and to assure passengers that it is safe to travel on cruise vacations. I have

66

a written statement that I would request to be entered into the

record of this hearing.

Mr. STEARNS. By unanimous consent, so ordered.

Mr. CRYE. While the tragic events of September 11 have had a

tremendous impact on the entire tourism industry, I wish to reassure the subcommittee that the cruise lines are taking every safety

precaution, as their highest priority has always been the safety and

security of all their passengers and cruise. Within hours after the

terrorist attacks, members of the International Council of Cruise

Lines had implemented the highest security measures, known as

Level III, even before it was ordered by the U.S. Coast Guard and

the Department of Transportation. We have since that day been

working with all appropriate Federal agencies to ensure that traveling Americans are protected to the maximum extent possible.

The International Council of Cruise Lines is a nonprofit trade association that represents the interests of 16 of the largest cruise

lines operating in the North American cruise market and over 73

associated members companies that are cruise industry business

partners and suppliers. ICCL member cruise lines serve major

ports in the United States and call on more than 1,800 ports

around the world. Last year ICCL member lines carried more than

7 million passengers on 95 vessels.

The passenger cruise industry is an exciting, modern and rapidly

expanding global industry. According to the World Trade Organization, world demand reached 9.8 million passengers last year. With

the North American market representing two-thirds of this global

volume by the year 2010, total cruise passengers worldwide are

forecasted to grow to 20.7 million passengers. Before the attacks of

September 11, the North American market was projected to rise

from 7 million to 12 million and mainland Europe was expected to

grow from 1.3 million to 5.3 million. These numbers reflect the

cruise industry’s dynamic contribution to the global economy.

The U.S. economic impact in the North American market. U.S.

citizens were the dominant source of cruises, accounting for 82 percent of all passengers. As a result, the cruise industry has developed into a significant economic contributor to the United States

economy. Since 1990, cruise ship embarkations from North American ports have increased by almost 70 percent. The major U.S.

ports of call are located in Florida, Alaska, California, Louisiana,

New York, Texas and Massachusetts. Last year, the total economic

benefit generated by the cruise industry was approximately $17 billion. Of this, the cruise industry contributed $9.4 billion in direct

spending for the products and services of U.S. companies.

The industry’s extensive economic relationships include high tech

equipment, travel services, banking and insurance, textiles, technical services, dry-docking and ship repair. Other major U.S. industries that benefit from the cruise business are the airlines, travel

agents, food and beverage suppliers, and the business and service

sectors. As a result of these economic partnerships, the cruise industry is able to create employment for approximately 257,000

Americans and support for State and local economies in all 50

States. Total wages generated by the industry in 2000 were approximately $8.7 billion in the United States.

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Clearly these numbers demonstrate that the industry is a significant contributor to the U.S. economy and any negative economic

downturn it experiences has a ripple effect on jobs and other related industries. In recent days the industry has had a cautiously

optimistic view of prospects despite reporting a precipitous drop in

bookings since September 11. On September 12, cruise line reservation offices were overwhelmed by requests for cancellations and

new bookings were nearly nonexistent. Since that time, the trend

in future passenger bookings is at 60 to 70 percent of pre-attack

levels and is increasing slowly but steadily over the weeks. Industry executives are exercising every available marketing and communications measure to stimulate travel and believe that occupancy levels will eventually return to normal. Our major members

have just increased to 20 percent the commissions paid to travel

agents in an effort to incent them and provide additional compensation to this very hard hit segment of the industry.

The cruise industry is the second largest purchaser of airline tickets, spending over $2.1 billion on airline tickets every year.

Over 65 percent of cruise passengers arrive at the port city via air

travel, spending an average roundtrip airfare of $450 per passenger. With the impact that recent events have had on the airline

industry, the cruise industry in particular has been disproportionately impacted since we are dependent on the airlines for our passengers. Therefore, both the airline and cruise industries are taking additional steps to reassure passengers that it is safe to travel.

In a move to reassure consumer confidence and travel, the individual cruise lines and their associations have been actively communicating the safety and security procedures in place to protect

passengers and crew by media interviews, Web sites, direct communications with travel agents and governmental forums such as

this. The cruise industry is proud to highlight our environmental

safety record and to detail the heightened measures in place today.

In 2 weeks the industry will conduct a media tour in six major

media markets, and today the prices on a cruise vacation are so

good that the consumer will find it is less expensive to go cruising

than to stay at home. The cruise lines are rerouting itineraries to

move ships away from danger spots in the world. They are bringing

the ships closer to home, where it is more in expensive to be able

to come and enjoy a cruise.

Our security measures, both on and off the vessel are, as I said

before, our highest priority and we—I believe I am about to over

run my time here. So I am sorry. I will go to the conclusion paragraph.

Mr. STEARNS. If you just summarize.

Mr. CRYE. Mr. Chairman, in conclusion, we believe that the

cruise industry has taken the appropriate additional steps to restore the public’s confidence. In the short term cruise lines are rerouting itineraries. In the long term we will continue to be

proactive in developing additional security measures. These are

challenging times, but our industry pledges its cooperation and

working as partners to maintain the outstanding safety record and

to reassure the traveling public.

Thank you.

[The prepared statement of J. Michael Crye follows:]

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PREPARED STATEMENT OF J. MICHAEL CRYE, PRESIDENT, INTERNATIONAL COUNCIL OF

CRUISE LINES

Mr. Chairman, my name is Michael Crye, and I am the President of the International Council of Cruise Lines (ICCL). I am pleased to appear before the Subcommittee today to highlight the measures that the cruise industry is taking to restore the confidence of the traveling public and to assure passengers that it is safe

to travel on cruise vacations. While the tragic events of September 11th has had

a tremendous impact on the entire tourism industry, I wish to reassure the Subcommittee that the cruise lines are taking every safety precaution, as their highest

priority has always been the safety and security of all of their passengers and crew.

Within hours after the terrorist attacks, ICCL member operators had implemented

the highest security measures, known as Level III, even before it was ordered by

the US Coast Guard (USCG), and have since that day been working with all appropriate federal agencies to ensure that traveling Americans are protected to the maximum extent possible.

ICCL is a non-profit trade association that represents the interests of l6 of the

largest cruise lines operating in the North American cruise market and over 73 Associate Member companies that are cruise industry business partners and suppliers.

ICCL member cruise lines serve major ports in the United States and call on more

than 400 ports around the world. Last year, ICCL’s member lines carried more than

7 million passengers on 95 vessels. Our efforts to communicate and reassure the

traveling public is a coordinated effort, involving sister cruise industry organizations

such as Cruise Lines International Association. This coordinated effort permits us

to provide information and reassurance to many audiences including the public, government officials, the media and over 19,000 travel agencies across North America.

GLOBAL ECONOMIC DIMENSION OF THE CRUISE LINE INDUSTRY

The passenger cruise industry is an exciting, modern and rapidly expanding global industry. During the current decade, the cruise industry has continued to expand

its capacity and develop new cruising opportunities for vacationers. According to the

World Trade Organization (WTO), world demand reached 8.7 million passengers in

1999. The North American market covers 2⁄3 of the global volume, primarily due to

the renaissance of the cruising destinations in the Caribbean. By 2010, total cruise

passengers worldwide are forecasted to grow from 9.8 million last year, to 20.7 million. Within these figures, the North American market is projected to rise from 6.8

million to 11.9 million and mainland Europe will grow from 1.3 million to 5.3 million, demonstrating that the cruise industry is a dynamic sector of the global economy. The cruise industry brings a burgeoning tourism economy to American ports

and over 1800 port destinations around the world. The importance of the social and

economic opportunities cannot be understated. It has an effect on all sectors in the

port city and country. The cruise lines’ presence in port cities, even on a seasonal

basis, strengthens the economy for many local elements. In addition to local port

user fees and head taxes and surcharges, cruise ships purchase supplies and services such as pilots, tugboats, food and beverage, waste disposal services, fuel and

fresh water at ports of call worldwide. In addition, the guest and crew purchases

at port destinations provide a major contribution to the local economies including

lodging, restaurants, attractions, retail shops, tour operators and other businesses.

It is estimated that a typical cruise ship generates $260,000 in passenger and crew

expenditures during a port of call visit.

CONTRIBUTION OF THE NORTH AMERICAN CRUISE INDUSTRY TO THE U.S. ECONOMY

In the North American market, the United States is the dominant source of cruise

passengers. Comparing 1998 to 1990, cruise ship embarkations from North American ports increased by almost 70 percent. The major U.S. ports of call are located

in Florida, Alaska, California, Louisiana, New York, Texas and Massachusetts. In

Florida alone, over 3.2 million passengers embarked last year. An additional 1.1

million passengers also boarded in San Juan, Puerto Rico and non-U.S. ports, primarily Vancouver and Montreal, Canada. As a result, the cruise industry has developed into a significant economic contributor to the United States economy.

Last year, the total economic benefit by the cruise industry and cruise-related activities was approximately $17 billion. Of this, the cruise industry contributed $9.4

billion in direct spending for the products and services of U.S. companies. The industry’s extensive economic relationships include high-tech equipment, travel services, banking and insurance, textiles, technical services, dry-docking and shipyard

repair. Other major U.S. industries that benefit from the cruise business are the airlines, travel agents, food and beverage suppliers and the business and service secVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00072 Fmt 6633 Sfmt 6621 E:\HEARINGS\76303 pfrm02 PsN: 76303
69

tors. As a result of these economic partnerships, the cruise industry is able to create

employment for thousands of U.S. citizens and support for state and local economies

in all 50 states. Total wages generated for U. S. employees in 2000 were $8.7 billion

and the industry generated jobs for 257,067 Americans.

Clearly, the cruise industry is a significant contributor to the U.S. economy and

any negative economic downturn it experiences has a ripple effect on jobs and other

related industries. In recent days, the industry has had a cautiously optimistic view

of prospects for the cruise industry despite reporting a precipitous drop in bookings

since September 11th. On September 12th, cruise line reservation offices were overwhelmed by requests for cancellations and new bookings were nearly non-existent.

Since that time, we have experienced a positive trend in passenger bookings with

many lines reporting reservation volume at 70-80% of the pre-attack levels. Industry

executives are exercising every available marketing and communications measure to

stimulate travel and believe that occupancy levels will eventually return to normal.

A key variable in this forecast is the continuation of consumer confidence in travel.

The cruise industry is the second largest purchaser of airline tickets, spending

over $2.1 billion in airline tickets purchases last year. With the impact that recent

events have had on the airline industry, the cruise industry, in particular, has been

disproportionately impacted, since we are so dependent on the airlines for our passengers. Therefore, both the airline and cruise industries are taking additional steps

to reassure passengers that it is safe to travel.

In a move to reassure consumer confidence in travel, the individual cruise lines

and their associations have been actively communicating the safety and security

procedures in place to protect passengers and crew. Via media interviews, our web

sites, direct communication with travel agencies and governmental forums such as

this, the cruise industry is proud to highlight our enviable past history and to detail

the heightened measures in place today. In addition, cruise lines are now in the

process of re-routing itineraries to move ships away from the Eastern Mediterranean, northern Europe, and the Middle East as a short term measure to meet an

anticipated trend for U.S. passengers wanting to sail closer to home. Ships will still

be cruising in Europe, but instead of cruising the Eastern Mediterranean, they will

sail the Western Mediterranean and the Baltic. Most cruise lines are re-positioning

their ships to the Caribbean and other North American ports. And, of course, the

cruise industry is implementing aggressive marketing initiatives to further stimulate demand for travel. Cruise pricing, which is always viewed as a good value, now

features a variety of promotional fares designed to get America traveling again.

Many cruise lines have also implemented travel agency incentives to motivate cruise

sales and to show support for a distribution system that is suffering terribly in the

wake of this national tragedy.

SECURITY MEASURES

As I mentioned at the outset, the cruise industry has heightened its security

measures both on and off the vessel in order to provide the most secure environment

for its passengers and crew. A cruise ship is unique in that it is inherently secure

because it is a controlled environment with limited access. However, in order to

maintain this secure environment, cruise lines have established strict and highly

confidential ship security procedures that cannot, for obvious reasons, be discussed

in detail. These procedures are, in part, outlined in measures set forth by the International Maritime Organization (IMO), and the regulations established by the U.S.

Coast Guard (USCG). In the United States, the USCG oversees the enforcement of

these security measures. Regulations address both passenger ship and passenger

terminal security and outline methods to deter unlawful activities onboard passenger vessels.

In l986, the IMO adopted Measures to Prevent Unlawful Acts Against Passengers

and Crew. These measures address restricting access to authorized personnel onboard the ship and at the passenger terminal, and monitoring the flow of materials

and consumable supplies brought onboard a ship. Security procedures within these

measures include inspection of all carry-on baggage and the use of metal detectors

for embarking passengers. Strict passenger screening to prevent unauthorized entry

or carriage of weapons onboard is only one component of the security procedures implemented to deter unlawful acts on board and to provide for the safety of all passengers.

In l996, the USCG implemented an Interim Final Rule on Security for Passenger

Vessels and Passenger Terminals, which was finalized in October of l999. This rule

sets three levels of security (low, medium, and high) based on the nature of the

threat received and requires vessel operators and port terminal operators to adjust

security levels accordingly. These regulations also require ship operators to submit

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Comprehensive Security Plans to the USCG for review and acceptance. All ICCL

member lines have submitted the required security plans. These plans have been

accepted by the USCG and are audited annually. The security plans, which are sensitive law enforcement documents and therefore not available to the public, include

the following major components:

• Identification of three levels of security and specific procedures to follow at each

level

• Prevent unlawful acts on board

• Prevention and deterrence of weapons and other unauthorized items onboard

• Prevention and deterrence of unauthorized access to vessels and restricted areas

• A security officer onboard every passenger vessel

• Security training for all crew members

• A security plan that is coordinated with the terminal security plan

• Reporting of violations and unlawful acts

• Annual security audits for each ship and reviews by the USCG

Passenger vessel security plans and their amendments are reviewed by the USCG

National Maritime Center and inspections are conducted by the Captain of the Port

to verify that all security practices and procedures are effective and up-to-date.

The U.S. Department of Transportation Office of Intelligence and Security and the

USCG Commandant direct the implementation of nationwide and local security levels. Domestic threat advisories are provided to the industry summarizing the nature

of the security threat and specifying changes to security levels both locally and nationally. As a result of the attacks in September, implementation of Level III security was directed by the U.S. Coast Guard at U.S. ports.

Security Level III is the highest level of security set by Coast Guard Passenger

Vessel Security regulations. At U.S. cruise terminals, passenger vessel security

measures include passenger screening procedures similar to those found at airports.

This includes l00% screening of all passenger baggage, carry-on luggage, ship stores

and cargo, and also includes higher levels of screening of passenger identification.

Official passenger lists are carefully reviewed and proper identification is ensured

before anyone is allowed to board the vessel. Even before the attacks of September

11, all passenger lists were made available to the INS and Customs for screening.

Passenger identification is now subject to even stricter scrutiny and the industry is

working closely with the INS and other federal agencies to ensure that those passengers suspected of being on the INS ‘‘Prevent Departure’’ list are reported to the

federal authorities for further action.

Another component of Level III Security requires ship operators to restrict access

to authorized personnel and to identify restricted areas on the vessel that require

positive access control such as intrusion alarms, guards, or other measures to prevent unauthorized entry. Restricted areas on a vessel will include the bridge, the

engine room, and other areas throughout the ship where operations are conducted.

Other onboard security measures, not generally discussed for obvious reasons, are

employed to maximize shipboard security and to deter unauthorized entry and illegal activity. Every vessel has a trained security staff responsible for monitoring activities and responding to any suspicious activity that may jeopardize the safety of

the passengers and crew.

For many years, the cruise industry has been pro-active in developing effective

security measures and has looked for ways to increase passenger safety. In fact,

most ICCL member lines now utilize advanced technologies to control access to our

vessels. The Passenger Access Control System, that has been installed on most of

our member’s vessels, utilizes a passenger identification card that takes a picture

of the passenger at the time of boarding and scans the picture into an onboard computer. During the course of a cruise, the identification card is presented each time

a passenger departs or boards the vessel. The picture appears on a computer screen

that is matched against the person’s face for identification purposes before they are

allowed to board the ship. This new technology is part of an overall onboard security

system that further enhances the proper identification of all passengers and crew

boarding the vessel.

Since l998, ICCL and its member operators have been members of the U.S. Interagency Task Force on Passenger Vessel Security. This group meets every 60 days

to discuss emerging security issues, receive updated threat information, and address

specific security concerns. Since September 11, the ICCL Security and Operations

Committee members have efficiently communicated and resolved problems in daily

conference calls with all of the appropriate federal agencies. This information exchange has proven to be valuable both to our member lines and the federal agencies

involved as we mutually address matters impacting both ship operations and security. We are committed to providing the highest levels of security for our passengers

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and to working with appropriate federal agencies to address additional security

measures that may become necessary.

CONCLUSION

Mr. Chairman, in conclusion, we believe that the cruise industry is taking the appropriate additional steps to restore the public’s confidence that it is safe to travel.

In the short term, cruise lines are rerouting itineraries to move away from the Mediterranean, northern Europe, and the Middle East so that U.S. passengers will be

able to sail closer to home. In the long term, we will continue to be pro-active in

developing effective security measures to increase passenger safety as well as maintain close working relationships with federal regulatory agencies. We are cautiously

optimistic that occupancy levels will return to normal, as the consumer is increasingly reassured that the tourism industry is actively working with all appropriate

federal agencies to ensure that traveling Americans are protected to the maximum

extent possible. Of course, all of the additional security measures that we have put

in place are consuming resources and money at a rapid pace. I would urge you to

ensure that there is adequate funding that comes with any additional mandates

that you place on agencies, ports or industry in any legislation you may consider.

These are challenging times, but our industry pledges its cooperation in working as

partners to maintain the outstanding safety record of the cruise industry. As I stated before, the highest priority of the cruise industry is to provide a safe and secure

vacation experience for our passengers. The cruise industry will do everything possible to protect those who choose this outstanding and safe vacation option.

Thank you for the opportunity to appear before you today.

Mr. STEARNS. I thank you.

Mr. Jones, President and CEO of Travelocity.com, your opening

statement

STATEMENT OF TERRELL B. JONES

Mr. JONES. Mr. Chairman and members of the subcommittee,

thanks for the opportunity to testify this morning. Travelocity is

the leading travel Web site with more than 30 million registered

members. Like all travel and tourism participants represented here

today, Travelocity was profoundly impacted by the event of September 11. This morning I would like to share some thoughts about

how we have been affected, what we have been hearing from many

of our members in recent surveys and what the government can do

to help stimulate travel and tourism.

Here are some key statistics about our company’s experience.

Travelocity air ticket sales were down 75 percent in the days following the tragedy in September, but have since trended upward

to be at about 70 to 80 percent of expected October levels. This is

an encouraging rebound, but these levels remain below what we

would expect for October, normally the busiest traveling purchasing month of the year. And I would like to point out to the subcommittee that we are kind of a leading indicator, because most of

our customers book about 45 days in advance. So we are kind of

a picture of what could be happening some months from now.

We have laid off employees for the first time in our 5-year history. We have reduced our management head count by 10 percent

and announced we will close one of our call centers at the end of

the year, affecting a further 300 people. These were painful decisions for us to make. As challenging as the last 5 weeks have been

for us, I know they have been as bad or worse for others.

Steps must be taken to reassure the American people that our

transportation system is effective and to stimulate their interest in

travel spending. In the last few weeks I have heard from many

people who are reluctant to travel. Some are afraid to fly. Others

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want no part of the hassles and the inconsistencies they believe

await them at the Nation’s airports. And still others are worried

about their personal financial future in an uncertain world, foregoing vacations until they feel more confident about their jobs and

the economy.

There are initiatives that Congress can take to get these people

traveling again. Our industry needs you and your colleagues to

make it a national priority in the weeks ahead. In a recent random

survey of Travelocity members, nearly 3,000 people participated.

Here is what they told us. 83 percent are frustrated by the lack of

consistency in security procedures at the Nation’s airports. Some

passengers have complained that they are waiting in extremely

long lines and encountering screeners who seem to be enforcing inconsistent rules. Others have complained that they are waved

through checkpoints without appropriate screening. Over half the

people traveling through Baltimore, San Francisco and Denver

since September 11 have had to spend at least 1 additional hour

or more due to enhanced security at the airports. Sometimes the

wait at the airport is more than the time in the air. However, at

other airports, such as O’Hare, Dallas, Ft. Worth and Newark,

many travelers said they are experiencing waits of 30 minutes or

less. So inconsistency is an issue.

Surprisingly, 71 percent of those who have traveled five or more

times in the last year told us they were likely to apply for a voluntary national travel ID card if it would speed up their wait at

airports. Above all, security must be executed by professional workers who are properly trained and properly compensated for the critical work that they do. Higher pay, higher benefits and training are

critical. In Europe, for example, screeners receive an average of five

times the amount of training that screeners in the U.S. are given.

No matter who ultimately signs the screener’s paycheck the Federal Government must use its oversight to insist on turning this

unacceptable state of affairs around, and I urge the Congress to

pass security legislation quickly.

In addition, I believe that Congress as part of an economic stimulus package must take specific targeted action to convince Americans to travel again. As many companies and individuals reduce or

eliminate their spending on travel the downward spiral begins. Airlines flew fewer flights and laid off employees. Out of work employees cut back on their spending. And in addition to those, others

that depend on airlines and hotels for tourist dollars, including car

rental companies and cruise lines and travel distributors like

Travelocity, react similarly. That is why it is so essential that Congress act quickly to stimulate travel purchases and stop the spiral.

What should Congress do? I urge you to support the Travel

America Now Act sponsored by Congressman Shadegg. This legislation provides immediate relief through a targeted temporary tax

credit for personal vacation travel, among other things. This measure is designed to rebuild the vibrant travel and tourism industry

to keep working people working and to stimulate economic growth.

I commend Congressman Shadegg and Congressman Abercrombie for their leadership on this issue. We at Travelocity feel so

strongly about this bill that over the weekend we contacted millions of Travelocity members across the country urging them to

73

contact their Senators and Representatives to urge them to cosponsor this legislation, and you will undoubtedly be hearing from them

soon.

A few weeks ago Congress took steps to provide relief to the airline industry, an important and necessary first step. But that package does not address the underlying problem, which is demand. If

we want to get Americans flying again, we should spend money on

revenue stimulating activities.

Mr. Chairman, this is a tough time for our Nation and its people.

It is a particularly tough time for the travel and tourism industry.

With carefully considered government help I believe we will come

through with the traveling public feeling a greater sense of security

and a renewed passion for travel. Travelocity.com looks forward to

working with you and your colleagues and with our colleagues in

the industry to help make this happen.

Thank you, Mr. Chairman.

[The prepared statement of Terrell B. Jones follows:]

PREPARED STATEMENT OF TERRELL B. JONES, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, TRAVELOCITY.COM

Chairman Stearns, Congressman Towns, Members of the Subcommittee, thank

you for the opportunity to testify before you this morning. My name is Terry Jones,

and I am President and Chief Executive Officer of Travelocity.com. Travelocity is

the leading travel website in the world, with more than 30 million registered members. Like all travel and tourism companies represented here today, Travelocity was

profoundly impacted by the events of September 11. While our business has been

slowly coming back, some major hurdles remain to getting Americans traveling

again in healthy numbers. This morning, I’d like to share some thoughts about how we’ve been impacted, what we’ve been hearing from many of our members in recent

surveys, and what the government can do to help stimulate travel and tourism.

When we launched in 1996, Travelocity was the 33,000th largest travel agency

in the United States. Today, we are the sixth largest. We have sold more than 18

million airline tickets, as well as millions of hotel room nights and car rental days.

We are already a top-10 agent for many cruise lines and a leading seller of vacation

packages. In the generally dismal world of e-commerce since the dot-com crash last

year, online travel has been one sector that has thrived on the Internet. Travel is

a virtual product well suited for distribution online—there are no products to ship,

and the popularity and wide acceptance of electronic tickets mean a customer may

purchase an airline ticket on her computer, print the itinerary and (in most cases)

head straight to the gate. In all, our business doubled last year and was expected

to grow as much as 60% this year.

Yet even with our momentum and the resiliency of our category and our business,

we have faced a tough downturn since September 11. Since much of the travel purchased on Travelocity is booked far in advance, we consider our business to be a

strong leading indicator of the health of our country’s travel and tourism industry.

Here are some of the key statistics about our company’s experience:

Travelocity’s sales were down 75% in the days following the tragedy in September.

Air ticket sales have since trended upward at 80% to 90% of pre-September 11 levels and at 70% to 80% of expected October levels. This is an encouraging rebound,

but these levels remain far below what we would expect for October, normally the

busiest travel purchasing month of the year.

We have aggressively reduced our costs and have laid off employees for the first

time in our five-year history. We have reduced management headcount by 10%, and

we have announced that we will close our call center in Rancho Cordova, California

in December, further reducing our workforce by 285 employees. These were painful

decisions for us to make, as they have affected many of our employees and their

families, and I sincerely hope that the steps we have already taken will enable us

to weather whatever remains of the downturn in the travel business.

Of course, online travel is only one part of the travel and tourism industry, and

as challenging as the last five weeks have been for us, I know it has been as bad

or worse for others. Travelocity is an industry-leading company with a strong balance sheet, more capable than most of staying on course despite a slower economy

and the impact of the events of September 11. However, I regularly speak with peoVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 E:\HEARINGS\76303 pfrm02 PsN: 76303
74

ple in the vacation, cruise, hotel, car rental, convention and airline businesses, and

I continue to hear troubling, pessimistic predictions from them about the future of

their sectors. The Los Angeles Times reported on October 15 that by the end of the

year, travel experts are predicting that one out of five of the country’s 37,000 travel

agencies will be out of business. In addition, countless communities around the

country that rely heavily on tourism dollars to fuel their economies are suffering

today because of a lack of travel demand.

Steps must be taken to reassure the American people about our transportation

system and to stimulate their interest in travel spending. In the last five weeks,

I’ve heard from many people who are reluctant to travel. Some of them are afraid

to fly and are looking to the government to enhance aviation security at the nation’s airports and on commercial aircraft to restore their confidence. Others want no part

of the hassles and inconsistencies that they believe await them at some of the nation’s airports, which can turn even short flights into long nightmares. They want

the government to help streamline the travel process. And still others are worried

about their personal financial futures in an uncertain world, deciding to skip their

vacations until they feel more confident about their jobs and the economy.

There are initiatives Congress can take to help get all of these people back into

the air—and onto cruises and into hotels and rental cars as well. Our industry

needs you and your colleagues to make this a national priority in the weeks ahead.

We recently conducted a random sample survey of Travelocity customers, asking

them about their opinions and experiences following the events of September 11.

Nearly 3,000 respondents participated. The results underscore the need for Congress and the Administration to act quickly to put a comprehensive air travel security plan into action.

The biggest frustration that our travelers mention is lack of consistency—specifically, lack of consistency in security procedures at the nation’s airports. I can also

tell you from my own experience—I’ve been on several flights in recent weeks—that

these standards throughout U.S. airports vary greatly, and travelers do not know

what to expect.

Over four in five—83 percent—of Travelocity customers who traveled since September 11 said that security between airports was either ‘‘not at all’’ or only ‘‘some- what’’ consistent. Some passengers have complained that they are waiting in extremely long lines and encountering screeners who seem to be enforcing arbitrary

rules; others have complained that they are waived through checkpoints without appropriate screening. Security procedures can vary greatly from departure airport to

arrival airport. Indeed, security procedures at a single airport can vary on a daily

or weekly basis and among security checkpoints at that airport. This creates anxiety

for those afraid to fly, and frustration for those who count on the air transportation

system to get them where they need to go reliably and conveniently. Our customers

tell us that they are willing to invest more time at the airport in order to ensure

greater safety and security, but they are not willing to put up with uncoordinated,

inefficient procedures.

Based on our survey, over half the people travelling through Baltimore-Washington International Airport (BWI), San Francisco International Airport (SFO), and

Denver International Airport (DEN) since September 11 have had to spend AT

LEAST an additional hour or more at the airport because of new security procedures. Sometimes the time at the airport is more than the time in the air.

At other major airports, however, security clearance has been much more manageable. At Chicago O’Hare International Airport (ORD), Dallas-Fort Worth International Airport (DFW), and Newark International Airport (EWR), about half of

travelers said they experienced security waiting time of thirty minutes or less.

Unharmonized standards throughout the country translate into long lines at some

airports, short lines at others, and questions throughout about the effectiveness of

the system at a time when American travelers really need reassurance. This is neither good for travelers nor for security. We must make the security experience more

uniform and dependable, and it must be executed by professional workers who are

properly trained and properly compensated for the critical work they do. Screeners

in Europe receive on average five times the amount of training that screeners in

the U.S. are given. The yearly turnover rate at many U.S. airports can exceed 140%.

No matter who ultimately employs the screeners, the federal government must use

its oversight to insist on turning this unacceptable state of affairs around—and

quickly.

Our survey suggests that those who travel most would look favorably on some

form of voluntary travel identification system that could streamline air travel for

those who choose to participate. Seventy-one percent of those who have traveled five

or more times in the last year told us that they are likely to apply for a national

travel ID card if it were implemented. Our customers are telling us that they are

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willing to make reasonable tradeoffs regarding privacy if they can expect a streamlined travel process in return. Biometric technologies, such as fingerprints and iris

scans, could be part of such an ID card solution.

Security is not only confined to airports, it also involves the airplanes. Of the

more than half dozen actions that we listed, Travelocity customers said that the two

measures that would have the greatest impact on improving security on U.S. flights

were reinforcing cockpit doors and deploying sky marshals, measures that are in

fact being implemented today.

In addition to passing meaningful security legislation as soon as possible, I believe

Congress, as part of an economic stimulus package, must take specific, targeted action to convince Americans to travel again. Travel and tourism is not only one of

the largest industries in the United States, it is also a linchpin to the economy as

a whole. We have already seen countless stories in the newspapers about the ripple

effects from the dramatic slowdown in travel spending.

As many companies and individuals reduce or eliminate their spending on travel,

the airlines now fly fewer flights, and because they have fewer passengers, they

must lay off employees. Those out of work employees take steps to cut back their

own spending. But it doesn’t end there. The airports that now have fewer flights

must in turn curtail retail operations, and the employees of these stores cut back

spending in their own lives. The taxis that serve the airport have fewer riders. Hotels and resorts receive many fewer visitors and host fewer conventions and events,

causing them to cut back on their own staffing levels and the services they sell to

their customers. And those that depend on airlines and hotels for tourist dollars— including car rental companies and cruise lines—react similarly.

The trouble for us is that all travel services are perishable. The new car or truck

that is not purchased today can still be purchased tomorrow. But the hotel room,

airline seat or available rental car that goes empty represents a permanent loss to

the economy, and the compounding nature of these losses for the rest of the economy should be of the highest concern to Congress. That is why it is essential that

Congress act quickly to stimulate travel purchases. Unless things change, there will

be dramatically less choice for those who want to travel.

We support the Travel America Now Act, H.R. 3041, sponsored by Congressman

Shadegg. This bill provides much needed incentives to get America traveling again.

Most importantly, this legislation provides immediate relief through a targeted temporary tax credit ($500 for individuals; $1000 for couples) for personal vacation travel. In addition, it would temporarily restore the full tax deductibility of meals and

entertainment expenses and help travel and tourism companies sustain losses that

occurred since September 11. This measure is designed to rebuild a vibrant travel

and tourism industry, to keep working people working and to stimulate economic

growth. I commend Congressman Shadegg for his leadership on this issue.

I believe this is the right way to proceed. Rather than giving direct aid to companies and putting the government in an awkward position of deciding who deserves

aid and who does not, a tourism tax credit puts money into the hands of consumers

who will choose who deserves their support. It makes economic sense to stimulate

travel and tourism now, before the ripple effects of this downturn grow wider and

the travel and tourism sector plunges the economy into a deep and costly recession.

We at Travelocity feel so strongly about this bill that over the weekend we contacted millions of Travelocity members across the country, urging them to contact

their Senators and Representatives to urge them to cosponsor and support this legislation. These are your constituents, and if you haven’t heard from them already,

I expect you will soon. And in the meantime, I hope you’ll consider my request to

support this critical measure.

A few weeks ago Congress took steps to provide relief to the airline industry—

an important and necessary first step. But that relief package, which provided direct

aid and facilitated loans to airlines, did not address the underlying problem of a

lack of demand. Such packages have only the effect of making up losses or, in some

instances, forestalling bankruptcy. If we want to get America flying again, we

should spend the money on revenue stimulating activities.

Mr. Chairman, this is a tough time for our nation and its people. It’s a particularly tough time for the travel and tourism industry. With carefully considered government help, I believe we will come through it with the traveling public feeling a

greater sense of security and a renewed passion for travel. Travelocity.com looks forward to working with you and your colleagues, and with our colleagues in the industry, to help make this happen.

I look forward to answering your questions.

Mr. STEARNS. I thank you for your opening statement. I will start

with my questions. And Mr. Marriott, just to commend you and

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your employees for your commitment to having the Marriott Center, which was severely damaged on September 11, opened in the

next 4 or 5 months, and I think you are trying to send a message

to the rest of America that we are going to try to continue business

as usual. I guess a question is, when do you think the new Marriott

World Trade Center will sort of be a Phoenix and rise from the

ashes?

Mr. MARRIOTT. Well, we don’t know. As soon as the Port Authority decides what they are going to do with the land, I guess, and

as soon as there is a master plan developed for the property, including office buildings as well as hotels. I would hope the sooner

the better.

Mr. STEARNS. I think in your opening statement you said that if

something is not done immediately to get people traveling again,

the long-term consequences for our economy are disastrous and

that sort of goes in with what the CEO of United Air Lines said,

that he might, his company might vanish next year if we don’t get

this going. And we mention, all of us, Mr. Shadegg’s bill. If you

were President of the United States, can you just tell me what you

would do, beyond maybe what, including the Shadegg bill and Senator Kyl’s, what would you do to get this economy going so that

long term the consequences are not disastrous?

Mr. MARRIOTT. Well, we need an immediate stimulus, and I

think the Shadegg bill gives that immediate stimulus. We need to

get through the sound barrier here. There are a lot of people holding back from travel because of the reasons that have been stated

by so many here about fear, about long lines at airports, just a general malaise. Let’s stay home this year. Let’s not get out and travel. We need to encourage people to travel and it needs to be immediate. We can’t wait for a year or 2 years for some drawn out program. We don’t need to have a lot of meetings. We really need to

get an individual tax credit passed so that business travel can get

a tax credit for encouraging their people to travel and we can also

get the personal travel started again because we really have got to

get this started.

If we don’t, we are going into the worst time of the year for the

hotel business. December, January and February months are just

really really bad months, and usually all the money you make in

September, October and November gets you through December,

January and February, and we are not making any money in September, October or November. So we really have to spike this and

get it moving.

Mr. STEARNS. I think a lot of businesses are not as much dependent as the hotel business on the capital that you have to pay the

debt service on, and so when a lot of people realize that a lot of

the hotel industry and many other businesses are leveraged out because of the mortgage payment, that when this amount of money

is not provided in the busy season then this has a huge impact on

paying that capital expense.

In your opinion, Mr. Marriott, do you think that the people that

you are laying off part-time, or full-time—will some of these jobs

be lost permanently? Or do you think, assuming that we had an

economic tax package, including one that includes a $500 tax credit

for airlines, do you think then these jobs would come back then?

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Mr. MARRIOTT. I do. I think that if we can get people flying again

and traveling again and get back to normal. Right now we are running 20 percent below where we should be in occupancy, and if we

could get those people traveling back again to get up to a normal

occupancy rate the jobs would be filled and people would be put

back to work. Now, there would be some jobs probably that would

be eliminated, but I think they would be a small number compared

to what they are now.

Mr. STEARNS. Mr. Norman, the puzzling question I have is, you

explained that business travel is down more than leisure travel.

Are businesses cutting travel for economic reasons or because of security concerns?

Mr. NORMAN. I think it is a combination of both, but we have

started to see some recoveries, as I indicated earlier. But we think

that is very, very fragile in terms of what is happening now. If you

bear in mind that leisure travel, which may not be as much, but

it is depended upon in filling the airlines and the biggest quantity

of yield is coming from that. And we have seen the difference, as

Mr. Marriott has indicated, in some of the upscale hotels versus

the lower ones, but the overall effect of all of it is that we have

started to see some recovery. But the net effect is that they are

going to have a disastrous fourth quarter and it is probably going

to be by the middle of next year before we start seeing some recovery done. And with that recovery it still will be below the record

levels of 2000.

Mr. STEARNS. Mr. Crye, what ports and States are experiencing

the biggest impact from cancellation in the cruise lines industry?

Mr. CRYE. Mr. Chairman, the long distance air carriage exotic locations are experiencing the most adverse impact. The further

away you are from the customer, the more difficult it is.

Mr. STEARNS. And Mr. Jones, with Travelocity.com, you are probably—what you are saying is because people book 45 days in advance that you can see it. What are you doing besides laying off

employees? Are you advertising more? I mean, like some of the bargains that have been mentioned here by the Members of Congress,

I mean the fact that for $395 I could go on an 8-day package to

Hawaii from San Fransisco. I mean that is the first I heard about

it. And I think if somehow, like Governor Bush did with his package in Florida, if somehow, not saying the government or the Commerce Department, but somehow all these packages could be made

known, I think people would say, by golly, I am going off to Hawaii

for 8 days for $400.

Mr. JONES. Well, that is important, and our advertising is back

and we are also talking to our 30 million members through e-mail.

We communicated with 11 million last week, telling them about

these bargains. But I think in addition, you know our surveys

showed that infrequent travelers, 58 percent, are most worried

about security. So people are on the edge, and pricing will help. Advertising will help and I think an industrywide program will be

good. But I think also a stimulus has to be there, and we have to

get the security bill passed because it is the infrequent traveler,

the leisure traveler, who is kind of on the edge about this whole

thing and they have to believe it is safe.

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Mr. STEARNS. When I am back in my district talking to different

people, what they say is it looks like a hassle to me, Cliff. I don’t

want to go on the airlines. This is on the leisure side.

Mr. JONES. Right.

Mr. STEARNS. I don’t want to stand in line and it is just too much

of a hassle. I will go when things calm down. So, speeding up airline security would be a big plus. Is that possible?

Mr. JONES. Yeah, I think it is. I think if we have consistent procedures—it varies wildly from airport to airport. I flew seven times

last week. It was different every time. Sometimes I needed a boarding pass, sometimes I didn’t, and that wasn’t because of an enhanced security. Obviously we should have random checks and we

shouldn’t be exactly the same. But I think today because it is up

to the individual airport and airline to decide that it is not efficient

everywhere and it could certainly be made more efficient through

effective application of national policy.

Mr. STEARNS. Your survey showed that the travel I.D. Card or

something on the order of that, some travel identification system,

would expedite; and I don’t think Americans have taken that approach before September 11, but now I am starting to hear more

about people saying more than showing your license, which anybody can fraudulently alter.

Mr. JONES. Apparently.

Mr. STEARNS. So how do you feel about that?

Mr. JONES. I think this is something like the success the immigration services had with an INS pass. The INS pass is very difficult to get. When you use one, you use hand geometry, that is a

good identifier; and I can’t get an INS pass because I lost my passport once.

That is good. It is hard to get. I think if we have something that

is hard to get, but it does speed you through security and that

leaves the security screeners time to perform good checks on the

people who don’t have that hard-to-get I.D. Card, I think it makes

sense and so do our members.

Mr. STEARNS. I would be curious if anybody else on the panel has

some feelings about this new I.D. Card that would replace identification for the airlines for people traveling. If anyone else——

Mr. CRYE. Mr. Chairman, in the Cruise Lines we have a system

that most of our members are using now that has a card that you

use to purchase goods on board the ship. This particular card is

also used to go on and off the ship. When you first present it, there

is a picture identification taken of you, and then every other time

you present this card into the machine, the operator of the machine

sees a picture of you, and that prevents anybody from obtaining

that card and then using it to try to identify themselves otherwise.

Mr. STEARNS. We are down to, I think, less than 5 minutes on

the vote, so I am going to temporarily adjourn. John Shimkus is

going to come back and reconvene.

I guess there are two votes, but we will have someone come back

in a little over 15 minutes. So we appreciate your patience here

while we temporarily adjourn and then the ranking member, Mr.

Towns, will have questions.

[Brief recess.]

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Mr. STEARNS. We will have the committee reconvene here. I had

finished up with my 5 minutes of questions, and we have our colleague John Shadegg from Colorado here.

So, John, you are welcome with your questions.

Mr. SHADEGG. Thank you, Mr. Chairman. I presume—if the

ranking member returns, I will be happy to stop and start again.

Mr. Chairman, thank you for holding this hearing. I greatly appreciate it, as I am sure the witnesses do. I apologize that I was

not able to be here in the beginning. I was in a markup downstairs

in the Health Subcommittee, where I had an amendment of my

own to carry. So that is the reason for my not arriving in a timely

fashion.

I also want to thank each of the witnesses for being here today

and for their thoughtful testimony and for all of your efforts on behalf of the industry.

I want to make comments about three different issues and ask

a few questions going to each of them. The first, of course, is the

Travel America Now Act. I will say that to the extent that some

of you weren’t consulted before it was introduced and to the extent

that, Mr. Chairman, we didn’t work closely with you before it was

introduced, Senator Kyl and I moved very quickly between concept

and introduction for various, obvious reasons.

As Mr. Marriott has said, this is not something we need to do

6 months from now or a year from now; this is something we need

to do right now. So whereas in the normal course of legislation we

might have consulted further with people in the industry, we might

have consulted further with other Members of Congress, we felt it

was important to move very quickly. And there really were just

four conversations that occurred, conversations between Senator

Kyl and myself, those between myself and Mr. Abercrombie to get

a bipartisan cosponsor on this side, and those between Senator Kyl

and Senator Zell Miller from Georgia to make the bill bipartisan

on his side.

I am very pleased with the response we are getting from members, the cosponsorships that are coming in. Though I appreciate

Travelocity and everyone else in the industry for urging their Congressional delegation to get on the bill, things around this place

happen or don’t happen based on the amount of velocity force you

can build behind them.

This is an issue where you are contacting, for example, at

Travelocity, Mr. Jones, all of your members saying, Call your Member of Congress and tell him or her to get on this bill to give us

a leg up.

As you know, one thought, and the thought I prefer is that it be

made a part of the economic stimulus package. There is some sentiment that there should be no, quote, ‘‘industry-specific legislation’’

in that stimulus bill. Rest assured we will oppose that and try to

get it in the stimulus package, notwithstanding other sentiments.

But for those who oppose the idea, rest assured if we don’t get

it into the economic stimulus package, we will try to get it as a

freestanding bill. And my commitment is not just from now until

the economic stimulus package moves, but from now until we get

this enacted, because I think in a brief period of time virtually

every Member of Congress is going to realize this is a prudent step

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in the right direction, that it does affect their district, that it does

affect the economy of their district; and the notion that this just

goes to hotel or motel or aircraft or rental car companies and that

it has some narrow focus is simply wrong.

At our press conference, when we announced the introduction of

the bill, Senator Kyl went at that issue by pointing out that he had

the day before been speaking with Phelps Dodge industry representatives and had said to them, I assume with the war economy,

you are feeling good about things going on. And I believe it was the

CEO of Phelps Dodge, which as you know produces copper, said,

No, quite frankly, we sell a huge amount of product to the Boeing

Aircraft Company, and the downturn in the travel industry and the

cancellation of those orders is having a huge impact on us.

So it is not a narrow piece of legislation. It is intended to be an

economic stimulus.

I think it is important to focus on the fact that it is a tax credit,

so it goes to everybody equally. It is not a deduction favoring people who will benefit by deduction because they are in a higher

bracket; it is the same amount for everybody.

I also want to talk about airport security. I am very aggressively

working on the airport security issue. I think we do have to rebuild

that confidence. Regrettably, Mr. Jones, that bill has some danger

of being embroiled in a partisan fight over who pays the paycheck;

and I debated one of the advocates on the other side of that issue

last night on ‘‘Crossfire.’’ and the reality is, the issue isn’t who

writes the paycheck; the issue is the competency of the people involved, their training—may well be their pay, their supervision.

Of course, there should be law enforcement personnel at every

single gate. The question is, is it necessary to make everyone at

every gate and everyone in every baggage inspection facility a Federal employee. If we can’t resolve that political divide quickly, then

the President ought to move by executive order. We could then perhaps legislate in that area 6 months or a year from now when

things are calmer.

And so I do agree with you, there needs to be consistency, although I think things are improving, the changes you see in inconsistency, or the inconsistencies you see, are because they are trying

to do two things—make the airports more secure and also more efficient.

I have flown a lot since September 11. I have been in about half

the airports you named, and you named a pretty good list, not just

the airports in Phoenix or Washington. I have been in a number

of airports across the country, including California and New York

and Illinois and Texas. I noticed the first time I went to board a

plane I had to present my I.D. To get my ticket and boarding pass,

but when I went through security I did not have to re-produce a

picture I.D. That gave me grave concern.

The second time I went through, I noticed they had changed

that, and now they are requiring that you show your I.D. Not only

when you get the boarding pass, but when you go through security;

and that gives me some level of confidence because obviously it

would be fairly easy to get your boarding pass, be paid $1,000 or

$2,500, get a boarding pass it and hand it off to somebody else, and

a stranger goes on the plane.

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We have to do a great deal in that area, and I agree, consistency

is an incredibly important part of it.

I also want to talk about the airline relief package because I

think that is certainly critical for the industry. I believe it will do

grave damage if some of these airlines go under, and in that regard, Mr. Warren, I want to ask you—I applaud what has happened so far, but it is my understanding that at the Treasury Department we are getting a little bit of a slow walk in the processing

of the loans, and that there is some sentiment that they have to

wait until they hire a staff, even though the legislation says they

should be using Treasury Department staff in the interim.

And there is some resistance to the funding of the loans, and I

would like to ask you if you heard that; and second, I would like

to ask everybody on the panel, if they hear that or if they hear that

in the near future, that we might all agree to pressure to get that

job done. Because some of those loans are vitally important, and we

can’t stall and pass them out 6 months or a year from now after

the urgency of their need occurs.

Mr. Warren.

Mr. WARREN. Yes. I agree with you 100 percent that they are vitally important for the industry and for every one of the carriers

that ATA represents, as well as the regional airline association and

others who are members of that organization.

I am, as I sit here today, not privy to exactly how many members

have applied or what particular obstacles they are encountering at

the moment, but certainly if there is a problem, it should be

brought to your attention.

Mr. SHADEGG. I would ask each of you to please monitor that,

and if in fact we get a slow roll because the executive branch does

not want to process those loans, perhaps everyone in the travel industry join us in trying to get that concluded.

I am sure my time has run out, but with your indulgence, Mr.

Chairman, I would like to ask one other question.

Mr. STEARNS. Sure.

Mr. SHADEGG. Mr. Warren, you made reference to the airline security package and I don’t know if you looked at the Senate bill,

but I see some problems with the Senate bill as passed and I was

encouraged that the House member I debated last night was not

urging us to just pass the Senate bill. One of the things that I have

heard about the Senate bill, for example, is that it does not define

the term ‘‘screening,’’ and so it is left uncertain whether screening

meant just the people at the metal detector that we walk through

or also baggage and also the question about what food goes on the

airplanes and cleaning crews.

Have you looked at that issue, Mr. Jones? Did I say Mr. Warren?

Mr. JONES. Yes.

Mr. SHADEGG. I meant Mr. Jones.

Mr. JONES. No. I have not looked at that issue and it is important that we define that. We need very good security everywhere

in the airport—the perimeter, the food service, the baggage. We

also need to understand that the screening positions are kind of a

symbol to the traveler. That is what they see. So we need to understand there is a psychological impact of that that needs to be hanVerDate 11-MAY-2000 09:50 Apr 16, 2002 Jkt 010199 PO 00000 Frm 00085 Fmt 6633 Sfmt 6602 E:\HEARINGS\76303 pfrm02 PsN: 76303
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dled in addition to making sure that everything is correct in all of

those places, including the doors. They are all important.

Mr. SHADEGG. I certainly agree with you that there needs to be

Federal supervision of all aspects and there needs to be consistency.

Another issue that I am concerned about with regard to the Senate is that the Sentate bill apparently draws a line between larger

airports and smaller airports and perhaps imposes a different set

of standards and a different supervision over those airports. I can

tell you that in my home State of Arizona we have some large airports. Phoenix and Tucson would probably fit in that that category.

But I can go to Flagstaff and Prescott and Page, I can get on an

airline and then I fly into a secure area, that is, Sky Harbor, much

as the terrorists did here and go from—once I am inside the secure

area, go from that plane to a plane that is flying to Reagan or Baltimore or anywhere in the country, and I think that is another flaw

in the Senate bill.

Mr. JONES. Absolutely. We saw the photographs of the hijackers

going through a small airport, and it is exactly that. So I think it

is very clear that we shouldn’t have different standards and it

needs to be consistent.

Mr. SHADEGG. I would just conclude, Mr. Chairman, by noting

that in Europe there are 16 major airports in Europe and virtually

every country in Europe at one time an all-government employee

staff and they have now gone to a mix of government and private

sector employees, and that should not just be rejected out of hand

as politics. We need to look at this issue seriously, and if we can’t

get the politics out of it, we need to encourage the President to act

by executive order and legislate perhaps when emotions are a little

calmer.

With that I yield back my time.

Mr. STEARNS. I thank the gentleman.

Just to comment, in the Ben Gurion Airport, Israel has taken the

private/public approach with the work force for the airlines as well

as in most of the airlines in Europe. In the 1970’s and 1980’s, they

had to change that, and they went to private because they found

it a more suitable way to go.

So I think the case can be made clearly for a public/private work

force in airlines, and experience has borne that out. I don’t think

we have any additional members—— Mr. SHADEGG. Mr. Chairman, apparently Mr. Shimkus could not

be here, and a representative of the International Association of

Amusement Parks and Attractions also could not be here, but they

asked if we could offer—they did——

Mr. STEARNS. We will be glad to put that in, and all the opening

statements will be obviously part of the record.

Mr. SHADEGG. Thank you, Mr. Chairman.

Mr. STEARNS. I would say to Ms. Conlin, from what you have

heard today, is there something you could take back to your boss

that you would communicate to him, based upon what you heard,

where the administration could be creative and work out not only

just tax credit but other ways to get us back to a normal situation

with the airlines and in the long term make sure we don’t have

consequences that are disastrous for this economy?

83

And the other thing is, is there something you could do without

Congressional support that would expedite this without Congressional initiative; I mean, you could do on your own, sort of like an

executive order that the White House has?

Ms. CONLIN. Thank you, Mr. Chairman.

First of all, I compliment the members of the industry that have

come forward not only to express their concern, but to share their

ideas and recommendations. And I really feel—and this is something that Mr. Norman said earlier—the heart of this is making

sure the system is safe and secure; making sure that travelers are

aware that the system is safe and secure; and No. 3, make sure

that people in the government, whether it is the Secretary of Commerce, whether it is Members of Congress, whether it is the President, that we all work together to convey the message that everything is being done to ensure passenger safety and to help restore

consumer confidence.

I also think that the work of the Tourism Policy Council, which

is going to start a week from today, is very important to make sure

that all Federal agencies and departments are coordinating Federal

policy vis-a-vis travel and tourism. In response to your question,

Mr. Chairman, that is something that can be done immediately to

help short term and long term. And I invite the members of the

industry to convey to me concerns that they have, whether it is

issues with the Treasury Department, as Congressman Shadegg

mentioned, so that these issues can be raised in that forum; and

conversely, I will make every effort on behalf of the Secretary to

make sure we convey the information that is shared in this forum

to members of the industry.

So in response to your question, that is something we are doing

absolutely immediately that is very important and that I think will

have real value.

Mr. STEARNS. Let me conclude by saying I think it has been very

helpful to all of you to take your valuable time to speak. It is being

put together in a package and it will be reviewed. Your time is very

valuable, but I think you made an impact in a much broader way

than you believe.

The message is, we need to get back to normality, to business

here in America. And, more importantly, in the disastrous effects

to our economy, if we do not do this, the consequences thereof are

something we want to mitigate and obviate.

So I again thank you for your time and the hearing is adjourned.

[Whereupon, at 12:32 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF CALIFORNIA

Thank you Mr. Chairman. I would like unanimous consent to have my complete

opening statement included in the record.

The events of September 11th have been felt throughout the Palm Springs region

and Southern California. Although California is nearly 3000 miles away from both

the World Trade Center and the Pentagon, the impacts of this tragedy have been

profound throughout the state.

Tourism is the single largest industry in the greater Palm Springs desert resort

community and a significant portion of the non-tourist businesses rely on the tourist

industry for their well being.

84

With over 500 restaurants, 300 hotels, and 100 golf courses, the Palm Springs

area is the destination of over 3 million people a year.

The warm and dry climate attracts people from all 50 states and over 100 countries throughout the world. In calendar year 2000, tourism accounted for more than

$42,000,000 in spending into our local economy. In Palm Springs alone, it is estimated that tourism is down 25% since the events of September 11th. I have heard

reports of hotels suffering anywhere from $100,000 to $1 million in cancellations immediately after the attacks.

However, the biggest threat to the tourist industry in Palm Springs is the financial status of the Palm Springs International Airport. Without our local airport

bringing tourists from across the country into Palm Springs, our tourist industry

would collapse completely. In light of the recent financial problems with our nations’

airline industry, secondary commercial airports such as Palm Springs are currently

suffering severe revenue shortages.

Immediately after the terrorist attacks on September 11, the Federal Aviation Administration (FAA) understandably required airports to deploy more law enforcement officers and spend more funds to improve security at our nation’s airports.

These new security requirements will cost airports across the country billions of dollars.

However, smaller airports such as Palm Springs do not have the funds to pay for

these increased security costs. Unlike America’s major hub airports that have billions of dollars in reserve funds, secondary commercial airports do not have the

funds to sustain themselves during a time of declining passenger taxes and reductions in airline landing fees.

Therefore, I am encouraged that the Chairman of the House Transportation and

Infrastructure Committee has been in conversations with smaller commercial airports, such as Palm Springs, and is aware of the recent financial shortfalls at these

air facilities. I believe that for the financial well-being of this nation’s smaller commercial airports, airport improvement program dollars should be used at the discretion of each airport for one year in order to cover much needed increases in operational costs.

I am pleased that our President and Congress have done so much to revive our

tourist economy. The passage of H.R. 2926, the ‘‘Air Transportation Safety and System Stabilization Act’’ is a great first step in keeping our nation’s civilian airline

system, and its tourism industry, running during a time of fiscal crisis. I would like

to thank Chairman Stearns for this opportunity to study this issue in greater detail.

Thank you.

PREPARED STATEMENT OF INTERNATIONAL ASSOCIATION OF AMUSEMENT PARKS AND

ATTRACTIONS

The International Association of Amusement Parks and Attractions (IAAPA)

thanks the Committee for holding this hearing focusing on the travel and tourism

industry. IAAPA appreciates the opportunity to inform the Committee of the situation faced by its members following the tragic events of September 11, 2001. IAAPA

is the world’s largest association of permanently situated amusement parks, family

entertainment centers, waterparks, attractions, and industry suppliers. IAAPA represents more than 5,000 members in 101 countries.

Our members in the United States face both short-term and long-term consequences following the September 11 attacks. In the short term, the shut-down of

America’s air transportation system following the attacks resulted in a drastic reduction in attendance at destination parks, particularly in Florida and California.

On September 28, the Orlando Sentinel had the following to say about the status

of tourism in that city:

‘‘The marketing campaigns can’t come soon enough for many in the tourism industry.

‘‘Immediately after the terrorist strikes, the number of tourists and business travelers flying to Central Florida fell swiftly.

‘‘Hotel occupancy, ordinarily about 60 percent in September, plunged below 10

percent at some properties.

‘‘Lines at popular theme-park attractions such as Space Mountain at Disney’s

Magic Kingdom practically disappeared.

‘‘Since then, business has picked up, but only a little, and then mostly on weekends. Hotel occupancy has climbed to the 20 percent to 40 percent range, but that

still is far below the 55 percent innkeepers generally need to break even.

‘‘And with business down, thousands of service- and hospitality-industry workers

had their work hours reduced or lost their jobs outright.’’

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Because many IAAPA member facilities are closed for the season or operating

only on weekends, the long-term effects of the impact of the events of September

11 on the industry are more difficult to determine. It is clear, though, that if potential guests are afraid to travel and this continues into 2002, the entire industry will

be severely affected.

With these considerations in mind, IAAPA makes the following recommendations:

• Make travel safe again. Most importantly, the federal government should do whatever is necessary to make air, and all other forms of travel safe for Americans

and for those visiting the United States. Air marshals and the highest security

precautions should be added to airports that serve major tourist destinations.

• Restore confidence in travel safety. Once every effort is made to ensure that travel

is safe, the government needs to take a leading role in informing the public that

it is safe to travel. Americans’ confidence with the safety of travel has been so

shaken that we believe it will take the government’s credibility to bring confidence back to the public.

• Promote the travel and tourism industry. The federal government should directly

support promotional campaigns overseas, urging travel to the United States.

Within the United States, federal-state matching grant program should be set

up to fund state-run travel and tourism promotional campaigns. A matching

grant program would provide the resources, scale, encouragement and credibility needed to kick-start an effective campaign to get Americans feeling good

about traveling again.

Economic Stimulus Recommendations

IAAPA commends Congress and the Administration on the work being done to

pass legislation to stimulate the economy. The industry would greatly benefit by any

legislation that encourages consumer and business spending and gets the economy

back on its feet as quickly as possible.

Temporary changes to tax law should include the following:

• Temporary payroll tax credit for both employees and employers applied towards

taxes paid this year. It is important that this provision be either retroactive to

the beginning of the year or the total allowed be an average for 2001.

• Accelerated or bonus depreciation retroactive to January 2001.

• Extension of the work opportunity tax credit for an additional year, through the

end of 2002.

Finally, we would like to lend our support to the proposals being promoted by the

Travel Industry Association of America (TIA). Among those proposals, IAAPA would

highlight the following:

• $500 tax credit per person ($1,000 for a couple filing jointly) for personal travel

expenses for travel originating and within North America.

• Expanded allowance of carry back of net operating losses for taxpayers in the

travel and tourism industry beyond the current two-year limit to five years for

losses attributable to the period between September 11, 2001 and December 31,

2002.

Additionally, the industry supports any efforts the government may take to ensure that parks continue to be able to obtain their usual reinsurance coverage at

rates that are not cost prohibitive and that acts of terrorism are not excluded from

insurance coverage.

IAAPA thanks you for inviting our comments as the United States House of Representatives continues its important work to move our country ahead.