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87–483PS 2003

TRAVEL AND TOURISM IN AMERICA TODAY

HEARING

BEFORE THE

SUBCOMMITTEE ON

COMMERCE, TRADE, AND CONSUMER PROTECTION

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

APRIL 30, 2003

Serial No. 108–15

Printed for the use of the Committee on Energy and Commerce

(

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

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

RICHARD BURR, North Carolina

Vice Chairman

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

ERNIE FLETCHER, Kentucky

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN D. DINGELL, Michigan

Ranking Member

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

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

TOM ALLEN, Maine

JIM DAVIS, Florida

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, 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

FRED UPTON, Michigan

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

Vice Chairman

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

LEE TERRY, Nebraska

ERNIE FLETCHER, Kentucky

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

JAN SCHAKOWSKY, Illinois

Ranking Member

HILDA L. SOLIS, California

EDWARD J. MARKEY, Massachusetts

EDOLPHUS TOWNS, New York

SHERROD BROWN, Ohio

JIM DAVIS, Florida

PETER DEUTSCH, Florida

BART STUPAK, Michigan

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

Edwards, William H., Jr., Vice President and General Manager, Hilton

Washington & Towers .................................................................................. 16

Lundberg, Rolf, Senior Vice President, Congressional and Public Affairs,

U.S., Chamber of Commerce ........................................................................ 8

May, James C., President, Air Transport Association ................................... 13

Robinson, J. Clark, President, International Association of Amusement

Parks and Attractions ................................................................................... 21

Ruden, Paul M., Senior Vice President for Legal and Industry Affairs,

American Society of Travel Agents ............................................................. 28

Sternberg, Michael, Chief Executive Officer, Sam & Harry’s, The Caucus

Room .............................................................................................................. 25

Walker, Matthew S., General Vice President, Hotel Employees & Restaurant Employees International Union ..................................................... 32

Additional material submitted for the record:

Porter, Hon. Jon, a Representative in Congress from the State of Nevada,

prepared statement of ................................................................................... 43

Travel Business Roundtable, prepared statement of ..................................... 47

Travel Industry Association of America, prepared statement of .................. 44

(III)

(1)

TRAVEL AND TOURISM IN AMERICA TODAY

WEDNESDAY, APRIL 30, 2003

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON COMMERCE, TRADE,

AND CONSUMER PROTECTION,

Washington, DC.

The subcommittee met, pursuant to notice, at 1:07 p.m., in room

2123, Rayburn House Office Building, the Hon. Cliff Stearns (chairman) presiding.

Members present: Representatives Stearns, Shadegg, Bass, Issa,

Otter, Tauzin (ex officio), Schakowsky, Brown, Green, and Strickland.

Staff present: Kelly Zerzan, majority counsel; Ramsen Betfarhad,

majority counsel; Jill Latham, legislative clerk; and Jonathan J.

Cordone, minority counsel.

Mr. STEARNS. Good afternoon. Welcome to the Subcommittee on

Commerce, Trade, and Consumer Protection.

The subcommittee will come to order, and without objection the

subcommittee will proceed pursuant to Committee Rule 4(e).

So ordered.

The Chair recognizes himself for an opening statement.

Good afternoon and welcome to the Subcommittee on Commerce,

Trade, and Consumer Protection hearing on travel and tourism in

America today. I want to thank sincerely the witnesses for appearing before the committee. I know how busy you are.

This is our first hearing on this subject in the 108th Congress,

but I am confident this will not be our last.

Beginning with our hearing less than a month after the horrific,

terrible events of September 11, 2001, myself and our staff have

been examining the state of the U.S. travel and tourism industry

as it continues to recover from the downturn in travel since September 11. During this recovery period, the industry has faced

other challenges, such as the war in Iraq and most recently the

SARS epidemic.

I noted the U.S. News & World Report. On the cover of their

issue it says, ‘‘SARS Hits Home: How it spreads, where it came

from and how to fight it.’’ This type of publicity is not good for the

tourist industry.

So at a time when the industry faces serious challenges, most not

of its own doing, we are holding this hearing first to highlight the

significance of the industry to our economy so that Americans understand.

2

Second, I hope that the hearing creates a good record as to what

are the problems in the industry today and what, of course, specifically needs to be done to cure these ills. I hope to learn what we

as Federal policymakers can do to make the United States a travel

destination of choice for international travelers.

Now, permit me to cite some sobering facts that clearly underline

why this industry is very significant and, as such, worthy of careful

consideration by Federal policymakers like ourselves. The travel

and tourism industry employs both directly and indirectly nearly 1

in every 7 Americans, some 18 million people. It generates over $5

billion in economic activity every year.

Travel and tourism is one of the top 3 industries in 29 States,

including my home State of Florida. In fact, the more than 40 million visitors a year to Florida generate about $40 billion, the single

largest source of income from our State.

Making the United States a travel destination of choice for international tourists is extremely important. One fact illustrates the

significance of international travel best. In the United States, an

international visitor spends four times as much as a domestic traveler. That is one reason we have a balance of trade surplus in travel and tourism.

While the trade deficit of the United States has steadily risen to where it is in 2002, the imbalance reached an all time high of $435

billion. The travel and tourism industry has consistently been the

largest sectorial contributor to our balance of trade surpluses in

services.

Yet our balance of trade surplus for travel and tourism, indeed, has fallen from the high of $26 billion in 1996 to $8.6 billion in the

year 2001, still representing 12.5 percent of the total services surplus.

The fact that the industry generates a balance of trade surplus,

yet we see a 70 percent decline in that surplus in a period of just

5 years is a very telling story, underscoring the need for the serious

attention I believe by Members of Congress.

The bottom line is that international visitors are a key to the

health of the industry and, indeed, our balance of trade. The

United States is now the third most visited travel destination in

the world, behind France and Spain. There is no reason, my colleagues, why it cannot be the first.

Just this session of Congress, we appropriated $50 million to the

Department of Commerce for a comprehensive international destination marketing campaign. In my view this is an important first

step. If those funds are used effectively with an input from industry through the legislatively mandated United States Travel and

Tourism Promotion Advisory Board, I think that Congress should

make the one time appropriation an annual one.

Spain, just for example, in 1997 spent 3 times as much, $150

million, promoting itself as an international travel destination. As

the Spanish economy is less than 5 percent of our economy, I think

if well spent, $50 million is a small sum to pay for touting the natural beauty, cultural richness of our country to these international

travelers.

And finally, my colleagues, I think we need greater coordination

at least at the Federal level with respect to the development and

3

execution of a national tourism policy. Therefore, I have written to

the Commerce Secretary Evans in support of the creation of a Presidential Advisory Council on Travel and Tourism. The council

would be comprised of experts from the private, public, and nonprofit sectors, and would serve in an advisory capacity to the Secretary and the President on national tourism policy and development.

The council’s key role, in my view, should be fostering a cohesive

tourism policy at the Federal level. The experience of my own State

of Florida in developing cohesive tourism promotional policies has

been most instructive.

So I want to thank the witnesses again and look forward to their

testimony, and with that I recognize the distinguished Ranking

Member from Illinois for an opening statement.

Mr. SCHAKOWSKY. Thank you, Mr. Chairman.

I appreciate your convening this hearing today to examine one

aspect of the faltering U.S. economy, the travel and tourism industry. The workers who depend on this industry for their livelihood

and the consumers who depend on this industry for their business

and personal travel needs justify the serious attention of the Congress to this important issue.

I come from Chicago, and it is an area and a city that welcomes

tourists from all over the world, and we certainly want to see a

strong travel and tourism industry.

I am disappointed that we do not have a witness here to specifically address the impact of the current economy on consumers. I

am looking forward to hearing from each one of you who is here

today.

I believe there are several factors contributing to the decline in

business and tourism travel in the United States and the downturn

in the U.S. economy in general. Clearly, September 11 had a dramatic impact on the travel industry. SARS has had a chilling effect

on travel. The war in Iraq has also had an impact on the flying

public and the traveling public. Understandably, many Americans

believe that our preemptive military action in Iraq has added to

the resolve of those who wish to harm us.

I have heard from constituents who have found the courage to return to the skies after 9/11, but are again fearful of the potential

response to our military action in the Middle East.

Many of us oppose the administration’s war against Iraq because

we did not believe that America would be better off in many respects as a result. As the Chairman indicates, international tourists in the United States spend 4 times the amount domestic travelers spend.

It is not entirely surprising to me that residents of some countries are not eager to come to the United States today, one, because

of the widely perceived idea that the United States disrespected

world opinion and, two, because of the assault on civil liberties and

immigrants and visitors from certain foreign countries that have

been initiated by this administration.

One of the casualties, I believe, of the Iraq war and other Bush

administration policies appears to be the travel and tourism industry. While 9/11 and the war in Iraq have hurt the U.S. economy,

4

the one single factor that has led to the economic decline, in my

view, is the President’s tax cut.

I realize that the tax cut is not the subject of today’s hearing,

and I will not belabor the point, but I do want to say that I think

any complete discussion of factors contributing to our current economic conditions should include a discussion of the negative impact

the President’s tax policy has had on our economy and outlook for

a strong recovery, including the industry that we are focusing on

today.

I appreciate the opportunity to hear from our witnesses. I am

eager to discuss ways that we can help the workers and consumers

who rely on the travel and tourism industry for their livelihood and

other important needs.

Thank you, Mr. Chairman.

Mr. STEARNS. I thank you.

And the gentleman from New Hampshire, Mr. Bass, is recognized.

Mr. BASS. Thank you very much, Mr. Chairman, and I appreciate

your holding this hearing, which I think is the second one that we

have had since I have been on the subcommittee, and it is a very

relevant and important topic.

I recall in the last hearing a discussion about the impact of 9/

11 on tourism in various parts of the country, and I noted at that

time that my home State of New Hampshire actually was doing

possibly better as a result because there were few people flying

longer distances. New Hampshire is a destination for people who

do not have to fly or move great distances, and our tourism is doing

pretty well.

And as I mentioned then, New Hampshire’s economy ranked 7th

in our reliance on travel and tourism, and it brings in close to $9

billion a year. So certainly this is an important and relevant subject for me.

However, I do believe that the SARS epidemic or the potential

to have one is going to be quite different in its impact on various

regions of the country. It may hurt us all the same, but I hope that

we as policymakers and those of you who are testifying today could

be very sensitive to the fact that this is an issue that is going to

affect every sector of the economy potentially in this country if we

cannot move together with a unified plan to deal with it, and the

tourism industry may be hurt first more than anybody else.

So thank you for holding this hearing, Mr. Chairman. I look forward to hearing the words of our witnesses.

I yield back.

Mr. STEARNS. I thank my colleague.

The gentleman from Ohio is recognized.

Mr. BROWN. Thank you, Mr. Chairman, for scheduling today’s

hearing.

Thanks to our witnesses for joining us.

I share the sentiments of our Ranking Member, Ms. Schakowsky,

and her concerns that the President’s tax cut is causing even larger

budget deficits. Tax cuts that go overwhelmingly to the wealthiest

of our citizens while cutting vital programs can have a negative impact on travel and tourism, as on much of the rest of the economy.

5

Tourism provides in my own State of Ohio hundreds of thousands of jobs. Travelers spend billions of dollars in Ohio every year.

That is one reason I share the concern of the Chairman and our

witnesses today about the condition of America’s travel and tourism industries.

Another reason is because many of the issues that have become

critical to the economic health of tourism and travel are also critical to public health and public safety. I am thinking here of issues

like homeland security and infectious diseases and bioterrorism

and food safety and security.

Mr. Sternberg, I was pleased to hear the comments that you are

raising in your testimony about food safety and food security on behalf of the National Restaurant Association. As the ranking Democrat on the Health Subcommittee, I work closely with the Majority

in bipartisan bioterrorism legislation. I consider food security provisions an essential component of the public health security in the

Bioterrorism Preparedness and Response Act.

Like many advocates of effective food safety, I was troubled to

learn that some of America’s food companies had been working to

actually weaken food security rules proposed by the U.S. Food and

Drug Administration, characterizing them as proposals for efficiency and flexibility.

Some in the food industry have recommended that shipments of

imported foods be welcomed into the United States with practically

no advanced notice and with no assurance at all that a shipment’s

contents match the manifest provided to Federal officials, in direct

contradiction to legislation this subcommittee, the full committee,

and the House and Senate passed last year.

That does not sound to me like the sort of food security system

that would give visiting diners or American families traveling or

American homes very much confidence.

This committee has a responsibility to insure that Americans are

protected by an effective food security system, and unlike tax proposals and other remedies recommended by some of our witnesses,

insuring an effective food security system is something that this

committee can do.

Mr. Chairman, I think the Energy and Commerce Committee

needs to take a close look at the implementation of the bioterrorism

law’s food safety provisions. I hope you will join me in calling for

oversight hearings on this important issue.

I yield back the balance of my time.

Mr. STEARNS. I thank my colleague.

And the distinguished vice chairman of the subcommittee, the

gentleman from Arizona, Mr. Shadegg.

Mr. SHADEGG. Mr. Chairman, in deference to our witnesses and

having complimented you for holding an important hearing, and a

hearing I talked about this morning on television, talking about the

impact on this industry and its importance to our Nation, as well

as my State of Arizona, I will waive an opening statement.

Mr. STEARNS. I thank my colleague.

And the gentleman, Mr. Green.

Mr. GREEN. Thank you, Mr. Chairman.

I would like to get on to the witnesses, and I would like to put

a statement into the record. I appreciate you calling this hearing,

6

and our Ranking Member, because of the concern I think all of us

have not only nationally, but locally.

Thank you.

[The prepared statement of Hon. Gene Green follows:]

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you Chairman Stearns and Ranking Member Schakowsky for holding this

hearing and giving us the opportunity to discuss the situation facing America’s travel and tourism industry.

The travel and tourism industry has historically been one of the stronger sectors of our economy, creating an $8.6 billion annual surplus in the balance of trade. This industry also employs nearly 18 million Americans and provides about $100

billion in federal, state and local tax revenues.

In my state of Texas alone, travel and tourism generate approximately $40 billion

in direct spending, which accounts for more than 5 percent of the state’s GSP.

In fact, Texas currently ranks third among all states in total domestic spending

on travel and tourism, trailing only California and Florida.

It is difficult to overemphasize the importance of travel and tourism to our economic health, since effects on the industry reverberate throughout the nation’s economy.

When visitors travel less, our transportation systems certainly feel a shock, but

our restaurants, hotels, parks, small businesses and their employees also take a

huge hit.

Unfortunately, the travel and tourism industry is still reeling from the economic

consequences associated with September 11th.

That tragic event created tremendous uncertainty in the minds of Americans—a

feeling that has only been exacerbated by a weakened economy, a war in Iraq and

now the outbreak of Severe Acute Respiratory Syndrome, or SARS.

The result has been a dropoff in travel by Americans and international visitors

alike, who have chosen to postpone their trips for better times.

We in Congress have responded by granting the airlines financial relief, both after

September 11th and, more recently, in the supplemental appropriations bill passed

earlier this month.

That bill also contained funding to market the United States as a premier travel

destination.

But more needs to be done.

The United States continues to be a world-class destination for travel.

No other country can boast the diverse set of attractions that we are so fortunate

to possess.

From our coasts to our mountain ranges, from our national parks to our first-rate

metropolitan cities, America has it all.

And America is safe.

Our task now is to determine how best to lure visitors to our country’s tourist

attractions and get this industry moving again.

I thank each of you for appearing today before the subcommittee to inform us of

your experiences and suggestions for recovery, and I look forward to hearing your

testimony.

I yield back the balance of my time.

Mr. STEARNS. I thank my colleague.

[Additional statement submitted for the record follows:]

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

Thank you, Mr. Chairman, for holding this timely hearing.

I would like to welcome the distinguished panel of witnesses. Your insight today

will be a valuable contribution to the ongoing examination of our country’s tourism

industry and efforts to continue to remedy the situation.

Our country is operating under never before seen circumstances. The impact of

recent events has been felt in every realm of life as we know it. Necessary steps

have been taken in response to these events; now further action of a proactive and

stimulative nature is needed.

Every state can identify specific ways in which they have felt the strain on their

economies due to a decline in travel and tourism. This issue is something that

unites the diverse demographics of our country.

7

In my home state of Wyoming, the easy-going lifestyle and wide-open beautiful

spaces are attractive to travelers who seek a respite from the hectic daily live that

so many lead. Once they cross the state line into Wyoming there are numerous options available for recreation, entertainment and accommodation. Getting here is

where patrons tend to encounter difficulties.

While many travelers take to the open road when visiting Wyoming, there are

those who prefer to fly. We are all aware of the tumultuous state of affairs in the

airline industry. Allow me to briefly shed some light on the tremendous hurdles patrons of and residents in my home state continually face.

The limited availability of carriers who even operate in Wyoming is the first hurdle encountered. Finding a seat on these few flights is the second and compounding

all of these factors is the outrageous price one must pay for the ‘‘convenience’’ of

flying.

Another area of particular concern to me involves members of Wyoming’s small

business communities—travel agencies. In general, small businesses are the backbone of so many rural communities in my state. The devastating affect that declines

in both international and domestic tourism have had on them deserves our attention

and commitment to remedy.

It is my hope that today’s hearing will shed some light on ways the entire country

can encourage international and domestic travelers alike to visit our many attractions.

Thank you, Mr. Chairman and I yield back the remainder of my time.

Mr. STEARNS. I think what I would like to do before I introduce

the panel is the Travel Business Roundtable has put together a little commercial which is geared toward encouraging Americans to

take domestic travel. I would like to play this commercial for the

benefit of my colleagues and the witnesses, who probably have already seen it.

If we can, let’s play this, and the people you will see are the Lone

Star Band. It is a country and western band who is introducing

this. So without further ado, we will have this small commercial

before we start.

The Lone Star Band is one of President Bush’s favorite groups.

[A video was shown.]

Mr. STEARNS. Well, that was very nice. I think most of us were

looking to see if our State was adequately represented.

I want to thank staff for having this to work so well. Sometimes

when you start these movies they do not work for some reason. So

I want to thank staff.

Now we will go to our panel here, and we are going to go from

my right to my left. So I welcome Mr. Rolf Lundberg, who is Senior

Vice President, Congressional and Public Affairs for the U.S.

Chamber of Commerce.

I want to welcome my good friend, Mr. Jim May, who is President of Air Transport Association, his new position.

Mr. Bill Edwards, Jr., Vice President and General Manager of

the Washington Hilton and Towers. He is also chair of the Government Affairs Committee of the American Hotel and Lodging Association.

Mr. Clark Robinson, President, International Association of

Amusement Parks and Attractions.

Mr. Michael Sternberg, Chief Executive Officer of Sam & Harry’s, the Caucus Room. All of us know where that is and have been

to those facilities here in Washington. He is also representing the

National Restaurant Association.

And Mr. Paul Ruden, Senior Vice President for Legal and Industry Affairs, the American Society of Travel Agents.

8

And Mr. Matthew Walker, General Vice President, Hotel Employees and Restaurant Employees International Union.

Let me welcome all of you, and we will start with you, Mr.

Lundberg, for your opening statement.

STATEMENTS OF ROLF LUNDBERG, SENIOR VICE PRESIDENT,

CONGRESSIONAL AND PUBLIC AFFAIRS, U.S., CHAMBER OF

COMMERCE; JAMES C. MAY, PRESIDENT, AIR TRANSPORT

ASSOCIATION; WILLIAM H. EDWARDS, JR., VICE PRESIDENT

AND GENERAL MANAGER, HILTON WASHINGTON & TOWERS;

J. CLARK ROBINSON, PRESIDENT, INTERNATIONAL ASSOCIATION OF AMUSEMENT PARKS AND ATTRACTIONS; MICHAEL STERNBERG, CHIEF EXECUTIVE OFFICER, SAM &

HARRY’S, THE CAUCUS ROOM; PAUL M. RUDEN, SENIOR VICE

PRESIDENT FOR LEGAL AND INDUSTRY AFFAIRS, AMERICAN

SOCIETY OF TRAVEL AGENTS; AND MATTHEW S. WALKER,

GENERAL VICE PRESIDENT, HOTEL EMPLOYEES & RESTAURANT EMPLOYEES INTERNATIONAL UNION

Mr. LUNDBERG. Thank you, Mr. Chairman, Ranking Member

Schakowsky, members of the subcommittee.

My name is Rolf Lundberg. I am Senior Vice President for Congressional and Public Affairs at the U.S. Chamber of Commerce.

The U.S. Chamber of Commerce would like to thank the subcommittee for holding this important hearing, and we are, indeed,

pleased to have the opportunity to testify. If I may submit my full

statement for the record, I will just summarize.

Mr. STEARNS. By unanimous consent, so ordered.

Mr. LUNDBERG. Thank you, Mr. Chairman.

The U.S. Chamber is the world’s largest business federation, representing over 3 million businesses of every size, sector, and region

across the country.

Just this past April 9, the U.S. Chamber of Commerce co-hosted

with the Travel Business Roundtable, who produced the video that

we just saw, a major travel and tourism summit entitled ‘‘Reigniting Growth in Travel and Tourism.’’ It was an effort to focus

a very bright spotlight on one of the most urgent economic issues

of our time, the revitalization and growth of travel and tourism

within the United States and around the world.

That summit, which was the largest of its kind in nearly a decade included participants from all over the various sectors of the

travel and tourism industry and brought together more than 200

CEO, senior level executives, along with 3 cabinet members, congressional leaders, mayors from cities across the country, and senior administration officials.

The U.S. Chamber will continue to devote significant resources

in this way to finding a solution for the travel and tourism industry’s difficulties because travel and tourism is an indispensable

component of the overall U.S. economy. Indeed, the stakes are high

and the challenge is very clear.

The travel and tourism industry, which includes airlines, hotels,

restaurants, resorts, theme parks, museums, rental car companies,

travel agencies, on and on, contributes nearly $100 billion in tax

revenue at the Federal, State, and local government level and, as

9

you noted, Mr. Chairman, employs nearly 18 million persons in the

United States.

Additionally, the U.S. economy realized an annual balance of trade surplus from travel and tourism of $8.6 billion in 2001, which

as you noted also, Mr. Chairman, declined significantly from the

surplus that was recorded in 1996, which was as high as $26 billion, which is a 70 percent decline.

It is, however, one of the few industries that consistently generates multibillion dollar surpluses for this country in the balance

of trade account.

As the travel and tourism industry faces unprecedented challenges in the wake of September 11, economic uncertainty, the war

in Iraq, and most recently the outbreak of SARS, the serious difficulties facing the various sectors of travel and tourism are obvious.

Another victim of the sluggish travel and tourism industry is the

small business sector, which is directly and indirectly affected from

the lull in travel and tourism. Small businesses, those with under

100 employees, account for more than 96 percent of the membership of the U.S. Chamber of Commerce.

With the contributions of the small business sector to the economy, the Chamber wishes to note the dramatic impact that the decline of travel and tourism has had on small businesses that service and supply the travel and tourism industry. When travel slows,

small businesses suffer the most because they do not have the ability to weather a long decline in business.

Let me just summarize some of the recommendations, Mr. Chairman, that the U.S. Chamber would make.

First of all, we believe that the first step to revitalizing the

slowed travel and tourism industry is simply to restore confidence

in American travel and confidence in people to travel.

Second, the Chamber supports an increase in the promotion of

America in other countries. The Chamber applauds the Congress

and President Bush for the appropriation of that $50 million to the

Department of Commerce for fiscal year 2003 for the comprehensive international destination marketing campaign.

We look forward to the work of the Advisory Board at the Department of Commerce, and we also support the establishment of

a separate Presidential advisory council on travel and tourism.

And we thank you, Mr. Chairman, for your letter to Secretary

Evans on that subject.

Yet another factor that will assist the recovery of the travel and

tourism industry is the strengthening of the American work force.

We are supportive of legislation signed by President Bush reauthorizing the work opportunity tax credit through the end of this

year. Doing so continues to help employers provide work for unskilled and disadvantaged workers.

And then another means of encouraging travel within the United

States would be the passage of legislation in this Congress that

would fully restore the business meal and entertainment tax deduction, which currently sits at 50 percent. The reduction of this

tax deduction has negatively affected the restaurant and entertainment industries and travel and tourism overall and has been particularly punitive to the small business community.

10

So in conclusion, Mr. Chairman, the Chamber remains committed to working with the Congress, with all sectors of the travel

and tourism industry in an effort to revitalize the industry as a

whole. We would like to thank the subcommittee for focusing attention, again, on the economic impact of the industry, the United

States, and we want to work with the subcommittee as it continues

to examine issues related to the growth of the industry and considers policies to stimulate the revival of travel and tourism.

And I would, of course, be happy to answer any questions, Mr.

Chairman.

Thank you.

[The prepared statement of Rolf Lundberg follows.]

PREPARED STATEMENT OF ROLF LUNDBERG, SENIOR VICE PRESIDENT,

CONGRESSIONAL AND PUBLIC AFFAIRS, U.S. CHAMBER OF COMMERCE

OVERVIEW

Good afternoon Chairman Stearns and Ranking Member Schakowsky, and members of the Subcommittee on Commerce, Trade, and Consumer Protection. My name

is Rolf Th. Lundberg, Jr., and I am Senior Vice President for Congressional and

Public Affairs at the U.S. Chamber of Commerce. The U.S. Chamber of Commerce

would like to thank the Subcommittee for holding this important hearing, and we

are pleased to have the opportunity to testify on the current state of the U.S. travel

and tourism industry.

The U.S. Chamber of Commerce is the world’s largest business federation representing over three million businesses of every size, sector and region. Our member

companies and their millions of employees have suffered the burden of a weakened

economy. Since the events of September 11, that burden has been particularly felt

in the travel, tourism, and hospitality sectors, many of which are small businesses.

The stakes are high and the challenge is clear. Few domestic industries generate

jobs and economic growth like travel and tourism. One out of every seven people

(or nearly 18 million people) in the U.S. private-sector workforce is employed directly or indirectly in travel and tourism related jobs. On April 9, 2003, the U.S.

Chamber of Commerce co-hosted, with the Travel Business Roundtable, a major

travel and tourism summit titled Re-Igniting Growth in Travel and Tourism. We

used the summit to bring people together to help focus a very bright spotlight on

one of the most urgent economic issues of our time: the revitalization and growth

of travel and tourism in the U.S. and around the world. The summit—the largest

of its kind in almost a decade—included participants from all sectors of the travel

and tourism industry and brought together more than 200 CEO and senior level executives along with three Cabinet Secretaries, congressional leaders, mayors from

cities across the country and senior Administration officials. Our summit helped all

of us recognize and highlight the fact that drop offs in travel and tourism are affecting broader elements of our economy. State and local governments are losing tax

revenue, small businesses are hurting, and our balance of trade is suffering.

The travel and tourism industry includes airlines, hotels, restaurants, resorts,

theme parks and museums, rental car companies, travel agencies, and other industries and contributes nearly $100 billion in tax revenue to federal, state, and local

governments. With states and localities suffering their worst budget deficits in half

a century, travel and tourism-generated funds are critical for providing essential

services such as health care, education, and transportation system improvements.

Additionally, the U.S. economy realized an annual balance of trade surplus from

travel and tourism of $8.6 billion in 2001, however that surplus was a 70 percent

decline from a $26 billion trade surplus in 1996. It is one of the few industries that

consistently generate multi-billion dollar trade surpluses.

As the travel and tourism industry faces unprecedented challenges in the wake

of the September 11 tragedy, economic uncertainty, the war in Iraq, and most recently the outbreak of the Severe Acute Respiratory Syndrome (SARS), the serious

difficulties facing the airlines, hotels, cruise lines, and theme parks are obvious.

Another victim of a sluggish travel and tourism industry is the small business

sector directly and indirectly affected from a lull in travel and tourism. Small businesses represent more than 96 percent of the U.S. Chamber’s membership. In fact,

75 percent of these companies have fewer than 50 employees. Small businesses play

a crucial part in the United States’ economy, as there are roughly 22.4 million nonVerDate 11-MAY-2000 13:38 Jul 16, 2003 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 87483.TXT HCOM1 PsN: HCOM1
11

farm firms in the U.S. representing more than 99 percent of all employers. Additionally, they employ 51 percent of private-sector workers, and 38 percent of workers

in high-tech jobs. Small businesses account for nearly all of the self-employed,

produce sixty to eighty percent of all the net new jobs and they account for 44.5

percent of total U.S. payroll. They are the fastest growing segment within this economy and women and minority entrepreneurs head many of these.

With the contributions of the small business sector to the economy, the Chamber

would like to point out the dramatic impact the decline of travel and tourism in the

United States has on small businesses that service and supply the travel and tourism industry. When travel slows, small businesses suffer the most because they

often do not have the ability to weather a long decline in business. Small businesses

such as independent hotel owners and operators, taxi cab drivers, and local restaurants are immediately impacted by a slowed travel and tourism economy. When

small businesses directly impacted by the travel and tourism industry are in decline, the flow of downstream revenues to other small businesses in a community,

such as dry-cleaners and local retailers, are negatively impacted as well.

The impact on communities is illustrated by the significance of small business to

the communities that surround and serve our National Parks. At the Chamber’s

Travel and Tourism Summit, Secretary of the U.S. Department of the Interior Gale

A. Norton, told the audience that in 2002, the National Park System attracted nearly 280 million visitors with 40 million of those visitors coming from foreign countries. Additionally, the Bureau of Land Management drew 54 million visitors while

the National Wildlife Refuge System hosted more than 35 million visitors.

Those millions of visitors were responsible for significant economic support of the

local communities surrounding those tourist destinations. A survey conducted in the

mid-1990s by the Fish and Wildlife Service found that Americans spend more than

$100 billion a year on wildlife-related recreation including hunting, fishing, and hiking. Such activities are supported by local small businesses that cater to those activities. Thus, when travel and tourism is slowed, so is business for numerous small

businesses in local communities.

RECOMMENDATIONS

The Chamber believes that the first step to revitalizing our slowed travel and

tourism industry is to restore confidence in American travel. We fully support the

President’s initiatives within the Department of Homeland Security to secure our

nation’s borders and protect our citizens. Simultaneously, we believe it imperative

that our borders remain open to legitimate visitors.

Secondly, the Chamber supports an increase in the promotion of America in other

countries. Currently, the United States does not do enough to promote itself as a

travel destination for international visitors. As other countries are promoting their

countries, the United States continues to lose market share to foreign competitors

for international tourists. According to the World Tourism Organization, travel and

tourism economic activity represented 11.7 percent of world GDP in 1999 with global tourism receipts reaching $463 billion in 2001. With such staggering figures, it

is clear that competition for tourist dollars is on the rise and the United States must

promote itself in order to compete.

The Chamber applauds President Bush, the Congress, and Senator Ted Stevens

(R-AK) in particular, for the appropriation of $50 million to the United States Department of Commerce in fiscal year 2003 for a comprehensive international destination marketing campaign. These funds will allow the Secretary of Commerce,

advised by the United States Travel and Tourism Promotion Advisory Board, to

begin a campaign to promote the United States globally as a tourist destination.

While the appropriation to the Department of Commerce is an excellent first step

in organizing a Travel and Tourism advisory board for the Administration, the U.S.

Chamber also supports establishment of a separate Presidential Advisory Council

on travel and tourism. The Council would be created by Executive Order as a federal advisory committee under the Federal Advisory Committee Act (FACA) and

should be comprised of members from the private, public and non-profit sectors.

Over 130 countries have assigned cabinet-level tourism officials or created some

form of government-sponsored tourism office. These nations have recognized the essential need for organization and promotion of their countries as travel destinations

as they compete for the global tourist market. If we are to effectively compete, the

creation of a Presidential Advisory Council is imperative to both cultivate policy development within the federal government as well as to measure tourism policy success.

Yet another factor that will assist the recovery of the travel and tourism industry

is the strengthening of the American workforce. President Bush signed legislation

12

reauthorizing the work opportunity tax credit (WOTC) through December 31, 2003

and in doing so continues to help employers provide work for unskilled and disadvantaged workers. As the WOTC gives employers a federal income tax credit of

up to $2,400 for each WOTC-eligible employee they hire, approximately one-fourth

of the restaurants in the United States are reaping the benefit of the tax credit

while providing jobs for needy employees.

Another means of encouraging travel within the United States would be passage

of legislation in the 108th Congress that would fully restore the business meal and

entertainment tax deduction. In the Omnibus Budget Reconciliation Act of 1993, the

allowable deduction for business meals and entertainment expenses was reduced to

50 percent. The reduction of this tax deduction has negatively affected the restaurant and entertainment industries and has been particularly punitive to the

small business community. Research completed in 1998 by some members of the

Travel Business Roundtable showed that one-fifth of business meal users were selfemployed with more than two-thirds of business meal users having incomes of less

than $60,000 and 37 percent having incomes below $40,000. As such, to assist small

business owners as well as boost the travel and tourism economic industry, the

Chamber supports an increase in the level of deductibility of business meals and

entertainment expenses.

CONCLUSION

The U.S. Chamber of Commerce remains committed to working with all sectors

of the travel and tourism industry in an effort to revitalize the industry as a whole.

We will continue working with the industry, Congress and the administration until

we are once again the number one global travel destination.

The U.S. Chamber of Commerce would like to thank the Subcommittee for focusing attention on the economic impact of the travel and tourism industry to the

United States. We appreciate the Subcommittee’s review of our recommendations for

re-igniting travel and tourism in the U.S. We look forward to working with the Subcommittee as it continues to examine issues related to the growth of the industry

and considers policy to stimulate the revival of travel and tourism.

Mr. STEARNS. I thank the gentleman.

Before we go the chairman of the full committee, the distinguished Chairman, Mr. Tauzin, has arrived, and I would certainly

welcome any comments that the Chairman has.

Chairman. TAUZIN. I thank the gentleman. I appreciate the indulgence of the committee.

I simply wanted to stop by and welcome you all and thank you

for agreeing to come and testify. I particularly wanted to welcome

Jim May in his new role representing a whole new industry and

yet one that has just as much importance for New Orleans as does

broadcasting and music and all of the good things he represented

before.

I do not have to tell you how critical it is that we keep a vibrant

and strong tourist economy in our country, and travel has seen

some tough times since 9/11, and tourism in various parts of our

country has seen, you know, its ups and downs as a result of some

of the concerns we have had.

But it is still a uniquely clean, vibrant, great source of economy.

I know Florida, and the Chairman has a great interest in it from

a personal standing, the Florida standing with tourism, but you

know, we do not take second place to anybody. Jazz Fest is going

on right now in New Orleans. It is the best time in the world to

be in New Orleans right now.

And I talked to my son and daughter who were there celebrating

this last weekend, and the weather was beautiful and the crowds

were as big as ever.

We sometimes forget how critical it is to the health of the economies that, like ours in Louisiana, is sometimes up and down with

the oil and gas industry. There are times when we are really down

13

in the ditch, and yet tourism is as strong or stronger than ever,

and it provides incredible jobs and support for families and to small

businesses across my State and across the country.

And the fact that we are going to make an international push to

remind people about the great places in America to see and to come

and visit is something that there is a great interest in, Mr. Chairman, and I want to help you make sure that we do everything possible to build this country up to the status it once enjoyed as the

No. 1 tourist landing spot in the world.

There is no reason why France ought to be ahead of us at anything right now, and this is one good example of why we ought to

be leading from a position of strength again.

Thank you all for coming. Know that you are in a friendly room

here. This room supports the travel industry. It supports tourism,

and anything we can do to make this industry more vibrant and

add to its strength and growth in the years to come we take very

personal, and we will do everything we can for you.

Welcome, again, Jim, in your new assignment and new role. As

I said, know that you are in good hands when you come to this

committee, and we wish you well.

And, Mr. Chairman, thank you for letting me speak.

Mr. STEARNS. I thank the distinguished Chairman for his encouragement, and I appreciate his participation.

And, Mr. May, you are next with your opening statement.

STATEMENT OF JAMES C. MAY

Mr. MAY. Thank you, Mr. Chairman, and thank you to the Chairman of the full committee for his kind words.

It is a delight for me to appear before this committee in a very

different capacity than I am used to. I am here representing 22

member carriers of the Air Transport Association who carry 95 percent of the Nation’s passengers and cargos.

Before addressing the broader state of the industry issues, I

think it is very appropriate for me to begin by thanking this committee and, in fact, the entire Congress for the refund of airline security expenses and revenues foregone in the recently passed costof-war supplemental appropriation.

While the question of how these costs are appropriately allocated

in the future remains to be addressed, this short-term cash infusion has given this industry a very essential boost to help preserve

air service and jobs.

Now, the Nation’s airlines are clearly a key component of travel

and tourism and the travel and tourism industry and, of course,

the overall economy. The importance of civil aviation was made

very readily apparent by the events of 9/11. Layoffs and financial

losses in civil aviation, its supplier industries and the tourism industry and the broader economy rose sharply.

In fact, half of the jobs lost in the economy since 9/11 have been

in the travel and tourism sector.

The prolonged effect of high fuel prices, escalating security and

insurance costs, spiraling labor expenses, among others, have combined with a particular vengeance in an under performing economy

exacerbated by the aftermath of 9/11. The war in Iraq and the outbreak of SARS have worsened that situation.

14

U.S. airlines lost an estimated $18 billion in 2001-2002, leaving

them very vulnerable to further shocks and sustained economic

weakness. To continue operations, most airlines have taken on a

staggering debt load leaving them, on average, more than 90 percent leverage. Several large carriers have sought Chapter 11, as

many of you in this room are well aware. Others are teetering on

the edge.

In 2003, the industry is expected to record another multibillion

dollar loss, despite the cost-of-war supplemental relief. Profits industry wide are not expected until at least 2005.

The pricing environment is particularly weak. The industry has

experienced 20 consecutive months of double digit yield declines,

and nominal domestic fares are at their lowest levels since 1987.

Now, despite these prices, traffic remains roughly 10 percent

below 2000 levels. Pacific traffic, in particular, has plummeted 40

percent below last year’s already depressed levels, and we know

the reason why, and the trend line remains down.

Atlantic traffic is not too far behind at a negative 25 percent.

Now, to cope with the smaller revenue pool now running below

1995 levels, carriers have reduced their work force by over 111,000

positions. We have parked nearly 13 percent of our overall industry

fleet. Thousand more furloughs are expected. Orders for airlines

are down sharply as planned retirements accelerate.

Consumer and CEO confidence indices have sunk in recent

months leaving projections for summer and business travel gloomy.

Now, these traffic declines undermine the traditional relationship

between passenger demand and the U.S. economy. Avoidance of air

travel on this scale suggests that classical forecast models need to

be recalibrated and that a robust return of even modestly growing

traffic levels should not be expected within the near future.

The airline industry does not operate in isolation. Most certainly

air transportation powers our national economy. It links communities together. It delivers vital, high value goods. It produces jobs

across the spectrum, including our largest sector of employment,

travel, and it drives just-in-time delivery, which is vital to our productivity.

There is quite literally no aspect of life in these United States

that does not benefit from aviation, and unfortunately, when aviation experiences economic difficulties, those difficulties reverberate

across the economy. When aviation thrives, it enhances other sectors of the economy significantly.

Now, since the advent of airline deregulation, air travelers have

enjoyed a 38 percent decline in real average fares through 2000

and nearly 80 percent more service. That is as measured by departures concurrent with increase in revenue passenger miles of a couple of hundred percent. Civil aviation’s total impact in the year

2000, the last full measured year amounted to about 9 percent of

GDP. Directly $343 billion and 4.2 million jobs were produced in

civil aviation or in industries related to civil aviation, such as travel and tourism.

Indirectly $255 billion and 3.2 million jobs are created in other

industries in the civil aviation supply chain and related industries.

For every job in the aviation industry, airlines industry an estimated 15 jobs are produced in the broader economy.

15

1 ATA member airlines include: Airborne Express, Alaska Airlines, Aloha Airlines, America

West Airlines, American Airlines, ATA Airlines (formerly American Trans Air), Atlas Air, Continental Airlines, Delta Air Lines, DHL Airways, Emery Worldwide, Evergreen International Airlines, Federal Express, Hawaiian Airlines, JetBlue Airways, Midwest Airlines, Northwest Airlines, Polar Air Cargo, Southwest Airlines, United Airlines, United Parcel Service, and US Airways. Associate members are: Aerovias de Mexico, Air Canada, Air Jamaica, KLM-Royal Dutch

Airlines, and Mexicana de Aviacion.

The airline industry recognizes its importance not only to travel

and tourism, but to this national economy. It is evidenced by the

tremendous growth in the industry prior to 9/11 when service was

expanded and fares were cut. The industry continues to seek ways

to emerge from current struggles. We have undertaken extraordinary self-help measures and are working closely with the Federal

Government concerning matters of taxation, security, and funding

for infrastructure enhancements.

We want passengers to again embrace air travel as the preferred

mode of transportation instead of being fearful of potential dangers.

Vacations should be enjoyed, not dreaded. Passengers should have

several options from which to choose, and air travel should be welcomed as efficient and economical, not laborious and expensive.

And most importantly, traveling by air should be safe.

The travel and tourism sector depends on the air transportation

system for its economic vitality. The ATA and its member airlines

are committed to meeting demands placed on our industry by virtue of its importance to the national economy and, therefore, are

committed to fulfilling our role as the engine that drives travel and

tourism.

In doing so, we look forward to working with both the Congress

and the administration to establish policies that foster critical economic growth.

Thank you, again, Mr. Chairman, for the opportunity to appear.

[The prepared statement of James C. May follows:]

PREPARED STATEMENT OF JAMES C. MAY, PRESIDENT AND CEO, AIR TRANSPORT

ASSOCIATION OF AMERICA, INC.

Mr. Chairman and members of the Subcommittee, thank you for inviting me here

today to discuss the state of the travel and tourism industry. I appear before you

representing the 22 member carriers 1 of the Air Transport Association, who carry

95 percent of the nation’s passengers and cargo.

Before addressing the broader state of the industry issues, let me begin by thanking this Committee, and the entire Congress, for the refund of airline security expenses and revenues foregone in the recent cost of war supplemental appropriations.

While the question of how these costs are appropriately allocated in the future remains to be addressed, this short-term cash infusion has given the industry an essential boost to help preserve air service and jobs.

The nation’s airlines are a key component of the travel and tourism industry, and

of the overall economy. The importance of civil aviation was made readily apparent

by the events of 9/11. Layoffs and financial losses in civil aviation, its supplier industries, the tourism industry and the broader economy rose sharply. In fact, half

of the jobs lost in the economy since 9/11 have been in the travel and tourism sector.

The prolonged effect of high fuel prices, escalating security and insurance costs

and spiraling labor expenses, among other things, have combined with a particular

vengeance in an underperforming economy exacerbated by the aftermath of 9/11.

The war in Iraq and the outbreak of SARS have worsened the situation. U.S. airlines lost an estimated $18 billion in the 2001-2002 period, leaving them extremely

vulnerable to further shocks or sustained economic weakness. We have had both.

To continue operations, most airlines have taken on a staggering debt load, leaving them on average more than 90 percent leveraged. Several large carriers have

sought Chapter 11 bankruptcy protection, and another is teetering. In 2003, the inVerDate 11-MAY-2000 13:38 Jul 16, 2003 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 87483.TXT HCOM1 PsN: HCOM1
16

dustry is expected to record another multi-billion dollar loss, despite the cost of war

supplemental relief. Profits industry-wide are not expected until at least 2005.

The pricing environment is particularly weak. The industry has experienced 20

consecutive months of double-digit yield declines, and nominal domestic fares are at

their lowest levels since 1987. Despite those prices, traffic remains roughly 10 percent below 2000 levels. Pacific traffic has plummeted to 40 percent below last year’s

already depressed levels—and the trend line remains down. Atlantic traffic is not

too far behind at a negative 25 percent. To cope with the smaller revenue pool, now

running below 1995 levels, carriers have reduced their workforce by 111,000 positions and parked 13 percent of the industry’s fleet. Thousands more furloughs are

expected. Orders for airplanes are down sharply as planned retirements accelerate.

Consumer and CEO confidence indices have sunk in recent months, leaving projections for summer and business travel gloomy in 2003.

These traffic declines undermine the traditional relationship between passenger

demand and the U.S. economy. Avoidance of air travel on this scale suggests that

classical forecast models must be recalibrated and that a robust return of even modestly growing traffic levels should not be expected within the near future.

The airline industry does not operate in isolation. Most certainly, air transportation powers our national economy. It links our communities together. It delivers

vital, high-value goods. It produces jobs across the spectrum—including our largest

sector of employment, travel and tourism. And, it drives just-in-time delivery vital

to our productivity. There is quite literally no aspect of life in the United States that

does not benefit from aviation. When aviation experiences economic difficulties,

those difficulties reverberate across the economy. But, when aviation thrives, it enhances other sectors of the economy significantly.

Since the advent of airline deregulation, air travelers enjoyed a 38 percent decline

in real average fares through 2000 and 79 percent more service, as measured by

departures, concurrent with an increase in revenue passenger miles of 200 percent.

Civil aviation’s total impact in 2000 amounted to about 9 percent of GDP. Directly,

$343 billion and 4.2 million jobs were produced in civil aviation or in industries related to civil aviation, such as travel and tourism. Indirectly, $255 billion and 3.2

million jobs arose in the other industries in the supply chain to civil aviation and

related industries. For every job in the airline industry, an estimated 15 jobs are

produced in the broader economy.

The airline industry recognizes its importance not only to travel and tourism, but

also to the national economy. This is evidenced by the tremendous growth in the

industry prior to 9/11, when service was expanded and fares were cut. The industry

continues to seek out ways to emerge from current struggles, undertaking self-help

measures and working closely with the federal government concerning matters of

taxation, security and funding for infrastructure enhancements. We want passengers to again embrace air travel as the preferred mode of transportation, instead

of being fearful of potential dangers. Vacations should be enjoyed, not dreaded. Passengers should have several options from which to choose. Air travel should be welcomed as efficient and economical, not laborious and expensive. And, most importantly, traveling by air should be safe.

The travel and tourism sector depends on the air transportation system its for

economic vitality. The Air Transport Association and its member airlines are committed to meeting the demands placed on the industry by virtue of its importance

to the national economy, and therefore are committed to fulfilling our role as the

engine that drives travel and tourism. In doing so, we look forward to working with

both the Congress and the Administration to establish policies that foster critical

economic growth.

Mr. Chairman, I again thank you for the opportunity to appear today.

Mr. STEARNS. I thank the gentleman.

Mr. Edwards.

STATEMENT OF WILLIAM H. EDWARDS, JR.

Mr. EDWARDS. Thank you, Mr. Chairman, Ranking Member

Schakowsky, members of the committee.

My name is Bill Edwards. For the record, my title is the Area

Vice President of the Mid-Atlantic of Hilton Hotels Corporation in

Washington, DC.

17

I would first like to thank you, Mr. Chairman, for your opening

statement. It hit every point right on the head. I think it was an

outstanding summary.

As per the request, I am not going to go through a long written

document. I am going to do bullet points to possibly present our position, generate questions and answers should that be necessary at

the end of the day.

I am also here as the chairman of the Government Affairs Committee representing the American hotel and lodging industry.

I think what you are going to hear redundantly today is that if

you look across this table as connecting the dots, where the economy goes goes the airlines. Where the airlines go, hotel guests go.

Where the hotel guest goes, amusement parks go. Where our hotel

guests and amusement parks go, so do restaurants.

And at the end of the day, down the road we have the unions

and other employing agencies that are all tied together. So this is

a set of dominos in the industry.

We are representing today more than 43,000 lodging units

throughout the country. We represent over 2 million employees

working in every congressional district.

The interesting point and probably the warming point I should

bring across is if I take just the Hilton Washington that you have

all been in, that represents 800. About 80 percent of our employees

are unskilled. Thirty-eight different languages. We are usually the

first front line employers for new immigrants to our country or people who need skill training.

So when we talk about layoffs and devastation in the industry,

we are talking about individuals, not the MBAs from Harvard. We

are talking about individuals who the day they are laid off, the

next day they are hungry. They do not pay rent or bills.

So I would like to emphasize that as being critical in this discussion.

What is the state of the industry? I am going to give you bullet

points. I think you have the statistics, and your staff would say all

that we would say here, but so far I can tell you we have already

cut 100,000, 130,000 jobs. And again, remember the people I said

to focus with.

Why? Because we have fewer people traveling. Since 2000 domestic travel to us is down 9 percent; international at least 17; and

those numbers are still falling.

If I take a peek at New York, I am looking at 36 percent drop

since the year 2000 in daily rate. That is a 100 percent flow

through to profit line, depreciation of profit line. I’m looking at occupancy of 83 percent to 69. That is individuals. We say heads in

beds. That is employment; that is jobs.

If I go to the other side of the ocean, as far away as Hawaii, I

can look at 30 percent drop over there, and Hilton has a major

presence, and it is still dropping, obviously tied into the SARS

issue.

What I would like to do for the entire committee and staff is

focus on something that I think is important for a hotel, and that

is measurement. Someone will say, ‘‘Oh, occupancy is up.’’ Well,

that may be the case, but that is not a measuring device of success

in hotels.

18

If they look at our portfolio, we own Hampton Inns, Doubletrees,

Embassy Suites, Hilton Hotels, whatever. We own Bally’s, Caesars,

all of this stuff. The measuring device is RevPAR, revenue per

available room, and you have to look at that in its total picture.

If I sell a room for $10, I will have 100 percent occupancy, especially in Washington. I will not make any money.

You want to look at the total package of revenue per available

room, which is what your hotel corporations look at, which is what

your developers look at.

So if we talk RevPAR, everyone says that while leisure destinations are up or suburban State or rural States are up in occupancy,

well, fine, but they are also heavily discounting to obtain that occupancy.

I think we have to be very cautious about discounting, which

does not necessarily produce RevPAR, which definitely does not

produce profits. So I think the occupancy argument in any discussions in this committee should be guarded, and the question should

be asked: what about RevPAR, revenue per available room?

If we look at profits, if we take it back to the year 2000, we are

down easily a third. The average in the industry this year, for example, is we dropped 19.4 percent in 2001 and another 9.6 percent

in 2002. And as you very eloquently stated in your opening comments, 2003 is not exactly headed in the right direction.

This is the first time in 2001 and 2002, by the way, that this industry has showed consecutive year depreciation of business since

1982 or 1983. One of the spinoffs of this situation is the delinquency rate in hotels and the lack of development of jobs in many

of our inner cities.

For example, I had the privilege of growing up in the great city

of Chicago. My home as a child was the 17th floor of the Farmer

House. This is a plug.

But growing up there, I understand that Chicago, in fact, is the

convention capital of the United States. We can argue that between

New York and Washington and other cities, but let’s face it. That

is where the life blood is. That industry goes down; that city goes

down.

So when we start talking about hotel development, you can take

Washington, DC. We have a brand new Convention Center. Guess

what. We do not have a hotel down because they cannot get finance. What is going to happen to this new Convention Center? It

is going to be a longer haul.

So what happens when profits go down? What do managers of

units usually do? Well, they start closing restaurants. They start

cutting staff. They start looking at marketing efforts at secondary

or discounted markets, which depresses RevPAR further.

I can tell you right now my brother works for a major competing

firm I will not mention here. They are on a 4-day work week for

executives. I just announced for the Mid-Atlantic, which covers

from Pittsburgh down, that they are going to forced vacation starting in May. These are the executive branch.

Do not think for a minute that we are putting on the shoulders

of all of our team members these layoffs. It is going right from the

management on down.

19

But profits are not just down on rooms division. You know, you

have banquets in the big hotels, be it Chicago, the Chicago Hilton,

the Palmer House, in Washington this one, the Marriott Wardman,

all of these big banquets. I got a call 4 days in advance of the radio

and television correspondents that they had to cancel it as a result

of the war. Four days for a dinner of 2,800 people that is worth

over $200,000. That is 210 waiters, 80 chefs, again, not working

that night.

So this is the kind of action/reaction we have.

The other element that is of concern is the cities and States and

local governments want to increase taxes for their own benefit.

That is a dangerous task. So we want two things. We want to endorse your efforts with the $50 million. We also want to work together as a team to open doors, to bring people to this country, and

help Americans travel easier.

[The prepared statement of William H. Edwards, Jr. follows:]

PREPARED STATEMENT OF WILLIAM H. EDWARDS, JR. CHAIRMAN, GOVERNMENTAL AFFAIRS COMMITTEE, AMERICAN HOTEL & LODGING ASSOCIATION AND AREA VICE

PRESIDENT, HILTON HOTELS CORPORATION AND GENERAL MANAGER, HILTON

WASHINGTON

INTRODUCTION

Mr. Chairman, Ranking Member Schakowsky, members of the Subcommittee,

thank you for the opportunity to testify on travel and tourism in America today,

particularly on the state of the U.S. lodging industry. In many ways, these are the

most difficult and unpredictable times we have seen in more than a generation so

this hearing and this opportunity to testify is critically important.

I am here in my capacity as Chairman of the Governmental Affairs Committee

of the American Hotel & Lodging Association (AH&LA). AH&LA represents the nation’s $100 billion lodging industry. Nationwide, there are more than 43,000 lodging

properties. These properties represent roughly 2,000,000 employees and voters in

every Congressional District.

Now, let me tell you a bit about my background. I have been a hotel general manager for 25 years, in the industry for over 30 years, and in my present position as

Vice President with Hilton Hotels for eight years. In addition to my long involvement with AH&LA, I am a past President and Chairman of the Hotel Association

of Washington, D.C. and the Washington Convention & Visitors Association as well

as similar positions in San Diego.

STATE OF THE LODGING INDUSTRY

As I mentioned earlier, the lodging industry is facing very challenging times. The

poor economy, traveler fears, post-9/11 security measures, SARS, and other factors

have played a part. Here are some basic statistics to support my characterization:

We have had to cut approximately 130,000 jobs since mid-2001. This figure masks

the efforts made by many hoteliers to retain employees by shifting some to parttime work until business improves.

Fewer people are staying at our hotels. As has been noted, since 2000, domestic

business travel is down almost 9% and international arrivals are down 17%, so it

is not surprising that some properties have fared differently than others. In general,

drive-to destinations have done better than fly-to destinations, and leisure destinations, better than business destinations. For example:

• The average room rate in NYC has fallen 36% from 2000, while occupancy has

dropped from 83% to 69%.

• Visitors to Hawaii are down 30% from last year.

For the year 2002, occupancy, average room rate, and Revenue Per Available

Room or RevPAR were all down from 2001, and we experienced more of the same

trend during the first quarter of this year: occupancy, average room rate, and

RevPAR all were down.

I should note that RevPAR is a better gauge of the health of the industry than

occupancy rates, which seem to get more play in the media. I could get to 100% occupancy quite quickly if I charged $10 a night. I also would lose my job. RevPAR

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factors in the rate at which I’m selling my rooms, which gives you and the hotel’s

owner a much better idea if the property is profitable or not.

One of the main reasons leisure destinations are doing as well in occupancy is

that hotels and airlines have been cutting prices. That has helped boost occupancy,

but has not helped RevPAR. So please don’t assume that all is well when you hear

that ‘‘occupancy is up’’ in a certain city or hotel.

Speaking of profits, overall, the industry is profitable, but those profits have fallen

considerably and not all hotels are profitable. Industry profits are down one third

since 2000 and are projected to fall again this year.

At the individual property level, the operating profit of the average US hotel

dropped 9.6% in 2002 after dropping 19.4% in 2001. This is the first time profits

have dropped in two consecutive years since 1982-83.

What profitability our industry is enjoying is not being enjoyed by all. Hotel loan

delinquencies are at their highest since the early 1990s. Perhaps this explains why

the number of hotel development projects that started construction in the first quarter of 2003 was the lowest quarterly total since the early 1990s, following Operation

Desert Storm.

To stay in the black, the industry has taken some extraordinary measures, for example: closing restaurants, cutting staff, shifting marketing efforts, and getting control of the Internet market, which has driven down rates to alarming levels. In their

cutbacks, hotel operators have tried mightily to focus on areas that the guest will

not notice and to a large degree we have succeeded. But there is little left to cut

that would not affect guest service.

It is not just the room rate. Hotels derive income from much more than the rate

charged for a night’s sleep. There are restaurants and shops in the lobby, in-room

movies and mini-bar, and resort activities to name a few. When the number of

guests declines, the number of customers for these activities declines as well.

Further, many hotels do considerable banquet business as part of conventions or

as a stand-alone event. This business too has dropped. In some instances, this is

due to the weak economy, but in others there is a direct correlation to changes in

the Department of Homeland Security Advisory System’s terror threat level. Obviously, we feel this acutely here in Washington.

In addition to these issues, we are beginning to face another challenge: cash

strapped state and local governments are looking for ways to raise money and some

of them are looking at the travel industry.

Some governments are seeking to raise their occupancy taxes. Anyone who travels

can tell you that hotels are not undertaxed. Others are cutting their state tourism

promotion budgets, a self-defeating act if ever there was one. Still others are getting

more creative in taxing such items as phone service, parking, and mixed drinks.

RECOMMENDATIONS

Rather than give you a long list of measures that the industry would like to see

enacted, let me focus on two recommendations.

America needs a sustained international marketing campaign supported by the

federal government.

As I noted earlier, international arrivals are down 17% since 2000. The international economy is partly to blame, but we also must acknowledge that steps taken

since 9/11 to make America more secure have given many potential foreign visitors

the impression that America is not a welcoming destination.

Keeping out those who wish us harm is critical to the health of the travel industry. No sector was hurt more by the terrorist attacks and none would be damaged

as much by a second strike. But it is imperative that we also work hard to facilitate

the flow of legitimate travelers to the US. A sustained US marketing initiative can

help.

As we all know, Congress has appropriated $50 million for such an effort. First

of all, thank you.

Secondly, we at AH&LA pledge to do what we can to ensure that this money is

well spent: that it will demonstrate that marketing can significantly increase the

number of visitors to the US, generating more jobs for American workers, more income for domestic businesses, and more tax revenue for all levels of our government.

We are working closely with the Department of Commerce to achieve these goals.

As a team—the hotel industry, the Department of Commerce, and the Congress can

turn this around.

Grow the Economy

No single factor has a greater impact on the health of the lodging industry than

the current state of the economy. When times are tough, companies tighten up their

travel policies: limiting attendees at a meeting, cutting per diems, or banning travel

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entirely. Some industry analysts are predicting that the combination of 9/11 and the

recession have permanently changed business travel, with more and more companies turning to videoconferencing and other alternatives.

The health of the economy also has significant impact on leisure travel. People

worried about their jobs cut back on their vacation, that is if they take vacations

at all.

AH&LA supports a tax cut package big enough to grow the economy, create jobs,

and therefore stimulate travel. The President has a broad plan that AH&LA supports, but it is clear that both the House and Senate have ideas of their own. We

are less concerned about the specifics of the bill than about its impact. We have expressed this viewpoint consistently and lobbied for it during our recent legislative

conference. We urge Congress to approve a substantial measure that will achieve

significant economic growth.

CONCLUSION

Again, Chairman Stearns, Representative Schakowsky, thank you for this opportunity to testify at the important hearing. I would be happy to answer any questions

you may have.

Mr. STEARNS. I thank the gentleman.

Mr. Robinson.

STATEMENT OF J. CLARK ROBINSON

Mr. ROBINSON. Thank you, Mr. Chairman, Ms. Schakowsky, and

other members of the committee.

Mr. STEARNS. Just pull it a little closer maybe if it reaches there.

Good. Thanks.

Mr. ROBINSON. There we go.

In behalf of the members of the International Association of

Amusement Parks and Attractions, also known as IAAPA, I would

like to thank you for this opportunity to testify today.

Also, if I may, Mr. Chairman, I would like to submit the full

written testimony to the committee.

Mr. STEARNS. By unanimous consent, so ordered.

Mr. ROBINSON. Thank you.

IAAPA is the largest international trade association for amusement parks worldwide. In fact, we represent more than 5,000

amusement and theme parks, attractions, and suppliers from over

85 countries.

Now, let me turn to the state of the industry. Overall the U.S.

travel and tourism industry has been adversely affected by the reduction of visitors from overseas. The U.S. share of international

travel has declined 30 percent over the last 10 years while worldwide outward tourism has increased by 50 percent.

Additionally, the travel and tourism industry accounts for 6 percent of all U.S. employment. However, 30 percent of all post 9/11

job losses were in the travel and tourism industry.

From September 2001 through December 2002, 387,000 jobs have

been lost. The tragic events of September 11, have had an immediate and continuing impact on destination parks that were still

open in the fall of 2001. The post 9/11 drop in international visitors

led to an overall attendance decrease of 6 to 8 percent in the Orlando theme park market during 2002.

Total international arrivals in the U.S. declined 7 percent in

2002. Overseas guests are among the most valuable customers for

destination facilities. Visitors spend more, stay longer, and return

often. The average overseas visitor to Orlando stays 10 nights compared to 5 for domestic visitors.

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In Los Angeles, the average overseas visitor stays 6 and 7 nights

versus the average domestic visitor’s stay of less than 4 nights.

While the impact of a decrease in overseas visitors is felt to varying degrees in other types of parks and attractions, attendance in

regional parks in 2002 was mixed, and attendance at local parks

has generally increased.

At year’s end, America’s amusement parks and attractions

played host to over 300 million visitors and generated revenues of

more than $9 billion. Attendance growth in the industry has averaged 2 to 3 percent annually for the past 2 decades, while revenues

have increase 5 to 6 percent annually on average during the same

period.

In terms of wider economic impact, studies have determined that

for every $1 spent inside a park or attraction, another $2 to $4 are

spent outside its gates. Thus, last year $18 to $36 billion was spent

in related communities across the United States.

IAAPA joins other segments of the travel and tourism industry

in gratitude to Congress for appropriating $50 million for United

States Travel and Tourism Promotion Advisory Board. We believe

this appropriation should be used for a comprehensive international destination marketing campaign to bring overseas travelers back to the United States. The funds should not be broken

up and used in several projects, but rather applied to a measurable, unified campaign.

And to move even further in promoting tourism, a Presidential

advisory council should be considered to provide additional guidance to the Federal Government on tourism issues.

IAAPA and its members of the travel and tourism industry support the need for secure U.S. borders. At the same time, we urge

you that all steps be taken to ease the entry into this country for

visitors who wish to experience the United States. IAAPA members, along with many other segments of the travel and tourism industry make extensive use of the J-1 visa program, as well as other

visa programs. While international students provide a valuable

work force, they also return home with a better understanding of

the values and cultures of America.

IAAPA joins others in the travel industry in encouraging the Department of Homeland Security to partner with industry to find

ways to protect our borders against those who would do us harm,

while not making access to the U.S. overly difficult for those who

want to visit.

Efforts to market the U.S. internationally will be for naught if

we make it too difficult for visitors to enter our country.

In conclusion, we believe our success is our own, but we ask the

government to support us by helping promote our Nation as the

wonderful destination that it is.

Thank you for this opportunity share our concerns, and I would

welcome any questions.

[The prepared statement of J. Clark Robinson follows:]

PREPARED STATEMENT OF J. CLARK ROBINSON, PRESIDENT, INTERNATIONAL

ASSOCIATION OF AMUSEMENT PARKS AND ATTRACTIONS

Mr. Chairman, Ranking Member Schakowsky, and Members of the Subcommittee,

on behalf of the members of the International Association of Amusement Parks and

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Attractions, also known as IAAPA, I want to thank you for the opportunity to testify

on the current state of our industry.

Let me begin with a brief description of IAAPA. IAAPA is the largest international trade association for permanently situated amusement facilities worldwide.

In fact, we represent over 5,000 amusement and theme parks, attractions, and suppliers from over 85 countries. While 40% of our amusement facility members are

amusement and theme parks, the rest is a mix of family entertainment centers

(35%), waterparks (7%), zoos and aquariums (5%), and other attractions (13%).

The IAAPA annual convention and trade show is the largest event in the amusement industry. More than 30,000 attendees experience all elements of the amusement and attractions industry. International exhibitors make up approximately 20%

of the show, and 19% of the attendees are international. International visitors come

from as far away as Dubai and Korea, or from as close as Mexico and Canada. In

2002, exhibitors came from China, Saudi Arabia, Australia, Italy, Scotland, and

many other countries.

IAAPA’s goal is to help our members improve their safety, efficiency, marketing,

and profitability while at the same time, maintaining the highest possible professional standards in the industry.

2002 SEASON

Now, let me turn to the state of the industry today.

Travel and Tourism Industry: Overall, the U.S. travel and tourism industry

has been adversely affected by the reduction in visitors from overseas. The U.S.

share of international travel has declined by 30% over the last ten years, while

worldwide outbound tourism has increased by 50%. According to the Travel Industry

Association of America, the travel and tourism industry accounts for 6% of total US

employment. However, 30% of all post-9/11 job losses were in the travel and tourism

industry. The travel and tourism industry has lost 387,000 jobs from September

2001 through December 2002.

Amusement Parks and Attractions: Amusement parks and attractions, national landmarks, historic sites, and many other tourist destinations in our country

are major drivers in the travel and tourism industry. They provide incentives for

families and travel groups, both domestic and international, to board airplanes,

cruise lines or trains, or jump into their cars and stay in hotels. When attendance

at our facilities and the other wonderful tourist destinations around the country begins to decline, a ripple effect is felt throughout the economy.

The tragic events of September 11, 2001, had an immediate and lasting impact

on our destination parks that were open in the fall of 2001. Destination parks are

typically facilities where a sizeable portion of business is derived from guests who

travel considerable distances specifically to visit the park and stay for several days,

enjoying a facility’s additional offerings, such as a second park or waterpark, hotels,

restaurants, or shopping in the region. Destination parks include numerous facilities

within the Disney, Universal, and Anheuser-Busch park companies. The post-9/11

drop in foreign visitors led to an overall attendance decrease of 6-8 percent in the

Orlando theme park market during 2002. Total international arrivals in the U.S.

declined 7 percent to 41.9 million in 2002 compared to 2001, according to figures

just released by the Department of Commerce, Office of Travel and Tourism Industries.

Overseas guests are among the most valuable customers for these facilities. They

spend more, stay the longest, and come back often. The average overseas visitor to

Orlando stays ten nights, compared to five for domestic visitors. In Los Angeles, the

average overseas visitor stays between six and seven nights versus the average domestic visitor’s stay of less than four nights. 72% of overseas visitors to Orlando and

66% of overseas visitors to Los Angeles are repeat visitors. Events of the past 19

months have had the biggest impact on these overseas visitors and have increased

the awareness of the 10-year trend in market share decline in overseas visitors to

the U.S.

While the impact of a decrease in overseas visitors is felt to varying degrees in

other types of parks and attractions, attendance at regional parks in 2002 was

mixed and attendance at local parks was generally increased. Regional parks are

those whose guests are drawn from within a 150-200 mile radius of the park, and

local parks draw their guests mostly from a particular community and its immediate surroundings. In some cases, attendance declines have been offset by an increase in average customer spending. At year’s end, despite the decline in overseas

visitors, America’s amusement parks and attractions hosted over 300 million visitors

and generated revenues of more than $9 billion.

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Summary: Attendance growth in the U.S. amusement parks and attractions industry overall has averaged 2-3% annually for the past two decades, while revenues

have increased 5-6% annually on average during the same period. We want to continue or increase this growth trend with the accompanying benefits that will result

for local economies in which facilities are located.

The size of this growing industry makes its economic health of interest to more

than just the owners and operators of these parks and attractions. Recent industry

analyses have forecast that, without unusual events such as the terrorist attacks

of September 11, steady attendance and revenue growth will continue at U.S. parks

and attractions over the next five years. In terms of wider economic impact, studies have determined that for every $1

spent inside a park or attraction, another $2-4 is spent outside its gates. Thus last

year, at least $18 to $36 billion were spent in communities of which these facilities

are members. In addition, the U.S. amusement industry employs upwards of half

a million people, including the manufacturer base and seasonal park employment.

A lower growth rate in the industry will have a seriously negative impact on the

many local economies around the country that include an amusement park or attraction.

GOVERNMENT EFFORTS THAT WOULD AID THE TRAVEL AND TOURISM INDUSTRY

As I have already noted, the U.S. travel and tourism industry has not yet recovered from the impact of the September 11 tragedy. The lingering effects of the economic downturn and the war have exacerbated an already difficult situation. Government assistance similar to that provided to travel and tourism by other governments around the world can play an important part in the industry’s recovery.

United States Travel and Tourism Promotion

IAAPA joins other segments of the travel and tourism industry in gratitude to

Congress for appropriating $50 million to promote the United States as a destination for foreign travelers. The United States Travel and Tourism Promotion Advisory Board will advise the Department of Commerce on these efforts. As I have already noted, visitors from overseas constitute an important portion of the guests at

destination parks. These visitors travel to other parts of the country, as well, visiting other attractions. These are difficult times for the U.S. travel and tourism industry, and it is heartening to see the federal government step in and allocate these

funds to assist the industry.

We believe this appropriation should be used for a comprehensive international

destination marketing campaign to bring overseas travelers back to the United

States. We feel it is important that the use of these funds is timely, targeted, and

focused on a limited number of foreign markets where the return is likely to be the

greatest. The campaign should utilize and promote a national brand.

The funds should not be broken up into several small projects, but rather applied

to a unified campaign whose results are measurable. Demonstrated success can

show the need, which we believe exists, for a long-term authorization of the program, along with an appropriate level of funding. IAAPA and its members look forward to working with the Department of Commerce as this important project gets

underway.

Presidential Advisory Council on Travel and Tourism

To move even further in promoting tourism, an advisory council should be established to provide guidance to the federal government on tourism issues. Much has

been accomplished by the Commerce Department’s reactivation of the inter-agency

Tourism Policy Council. While we are also delighted that the Department of Commerce is in the process of forming a Travel and Tourism Promotion Advisory Board,

we believe that a need remains for the establishment of an advisory council composed of members of the private, public, and non-profit sectors. Such a council would

be able to assist with development and coordination of tourism policy, as well as

developing appropriate benchmarks to measure tourism policy success. The amusement industry is a driving force in tourism, as it bridges various sectors of the

broader travel and tourism industry and therefore would be a strong asset on such

a panel.

Visa and Immigration Issues

IAAPA and all members of the travel and tourism industry support the need for

secure U.S. borders. At the same time, we would urge that all steps possible be

taken to continue to facilitate entry into our country for legitimate visitors who

want to come enjoy all that the U.S. has to offer. Striking the right balance is difficult, yet essential.

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IAAPA’s members, along with many other segments of the travel and tourism industry, make extensive use of the J-1 summer travel/work visa program, as well as

other visa programs.

International students come to experience our culture, improve English skills,

learn job skills and earn wages. Parks and attractions play a prominent role in this

program and, in turn, these students provide a valuable workforce—especially in

August, when many of our American summer employees return to school. Even

more important, the students who participate in this program learn the true nature

of the United States. They are then able to explain to others in their own countries

the values and culture of America. Firsthand knowledge goes far toward overcoming

misperceptions. Changes to the State Department summer work/travel regulations

that would limit the number of students coming into the country or eliminate the

students’ ability to build on their learning experience by participating more than

once would be detrimental to the industry and to our country.

We believe the government should focus on unwanted visitors rather than casting

too wide of a net that would adversely affect the many businesses that rely on international visitors and student workers without noticeably increasing our nation’s security. We have similar concerns regarding any possible changes to visitor visas.

IAAPA joins others in the travel industry in encouraging the Department of

Homeland Security to partner with the industry to find ways to protect our borders

against those who would do us harm, while not making access to the U.S. excessively difficult for those who legitimately want to visit our country. We are finding

that in Europe and elsewhere, the perception exists that it is already more difficult

to enter the U.S. Efforts to market the U.S. internationally will be for naught if we

make it too difficult for visitors to enter our country, or even if the perception

spreads that such difficulty exists.

CONCLUSION

We believe our success is in our own hands, but we ask that the government support us by helping promote our nation as the wonderful destination it is, and by

not imposing regulatory constraints that will deter us from maximizing our potential. This unwavering commitment to our businesses, our communities, and our

country has allowed the amusement parks and themed attractions industry to

thrive for more than a century, and will ensure that it continues to provide safe and

fun family entertainment for many years to come.

I thank you for the opportunity to share my remarks with you and would welcome

any questions.

Mr. STEARNS. Well, thank you.

Mr. Sternberg.

STATEMENT OF MICHAEL STERNBERG

Mr. STERNBERG. Thank you, Mr. Chairman and Ranking Member

Schakowsky and members of the committee.

My name is Michael Sternberg, and I am the founder and CEO

of Sam & Harry’s, Sam & Harry’s Tysons Corner, the Caucus

Room, and the soon to open Harry’s Taproom in Arlington, Virginia.

I’m testifying here today on behalf of the National Restaurant

Association, which is the leading business association for the restaurant industry, and, Ms. Schakowsky, I am also proud to say

that I am a native Chicagoan, born in Edgewater Hospital and

learned my trade at the feet of—oh, really?—and learned my trade

at the feet of Arnie Morton, who was a master at understanding

the importance of travel and tourism.

Together with the National Restaurant Association Educational

Foundation, the National Restaurant Association’s mission is to

represent, educate, and promote a rapidly growing industry that is

comprised of 870,000 restaurant and food service outlets, employing 11.7 million people around the country.

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Consumers spend nearly $1.2 billion a day in the Nation’s restaurants. Every $1 spent in the restaurants creates an additional

$2.13 in sales for other industries throughout the economy.

As a member of the board of directors of the association, I am

proud to say that our Nation’s restaurant industry is the cornerstone of the economy, careers and community involvement. Restaurants are vital components to the travel and tourism industry.

That is why I am so pleased to be here today participating in this

important discussion.

It will probably not be a surprise to many of you in the room to

hear that restaurateurs depend heavily on the tourism business,

nor will it be a surprise to learn that more than two thirds of table

service restaurants view tourists as an important component of

their business, and here is why.

About 40 percent of revenues as table service restaurants with

higher check averages come from tourists. Spending by travelers

accounts for roughly 15 to 30 percent of revenue at table service

restaurants with average check sizes of less than $25.

These figures give you some idea of the symbiotic relationship between restaurants and tourists. They also demonstrate why the

events of September 11 and the continued threat of terrorism have

been such a devastating blow to the restaurant industry, as they

do for so many of the groups represented in this room.

The economic repercussions of September 11 were great. As people holed up, glued to the television, the travel and tourism industry virtually came to a halt. In September 2001, 38,000 restaurant

jobs were eliminated. The following month, October, the number

rose to 57,000 jobs. As of March 2003, restaurant employment is

down 244,000 jobs since 2001.

The hardest hit restaurant sector was fine dining establishments

and tourist dependent restaurants, especially those in the Northeast.

The top 100 travel destinations experienced the greatest total

lost of tourism revenue, approximately $30 billion, and 4 out of the

5 top spots are all located in the northeast.

In 2002, my restaurant spent almost $120,000 in additional marketing funds just to maintain the same sales level that we saw in

2001. Most restaurants do not have the luxury of spending that

type of money on marketing.

But it also proves that marketing dollars do help and work.

The National Restaurant Association worked hard to help an industry persevere through this difficult time. Through a major multimillion dollar public relations campaign we encouraged people to

turn the tables and reminded them how vital the Nation’s restaurants were to economic security. Innovative and entrepreneurial

restaurants sought new ways to drive business and remind customers of how dining out could invigorate spirits and the economy.

As a result, individuals and businesses continue to cut back on

discretionary spending, including dining out and other travel related activities. In addition to sending a tremendous shock to our

economy, the continued threats of terrorist acts and the conflict

overseas also caused the Nation to focus on relatively new entity,

homeland security.

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We would like to outline a few suggestions today that the restaurant industry thinks will both help restore travel both inside

and to the United States. The National Restaurant Association

urges Congress to increase the business meal and entertainment

tax deduction and restore the spousal travel tax deduction. Now

more than ever, this would provide an incentive for small businesses and corporations to authorize their employees to start traveling again.

We also request Congress’ support in urging the President to create the Presidential Advisory Council on Travel and Tourism. The

council would advise the President on national tourism policies and

would help insure that travel and tourism receives a more sustained and vigorous policy focus at the Federal level.

And, finally, the National Restaurant Association applauds Congress and Senator Ted Stevens, in particular, and the President for

appropriating $50 million to the Department of Commerce in fiscal

year 2003 for the creation of a comprehensive United States destination marketing campaign. While these funds are an extremely

important first step in promoting the United States as an attractive travel destination, it is our hope that Congress will consider

a longer term authorization to capture these travelers that our

economy desperately needs.

Mr. Chairman and members of the committee, I thank you for

this opportunity to be before you, and I thank you for your interest

in the travel and tourism industry. I welcome any questions you

might have.

[The prepared statement of Michael Sternberg follows:]

PREPARED STATEMENT OF MICHAEL STERNBERG, CHIEF EXECUTIVE OFFICER, SAM &

HARRY’S, THE CAUCUS ROOM, WASHINGTON, DC, ON BEHALF OF THE NATIONAL

RESTAURANT ASSOCIATION

Thank you, Mr. Chairman. Chairman Stearns and members of the Committee, my

name is Michael Sternberg, and I am the CEO and co-owner of three fine-dining

restaurants in metropolitan Washington , Sam & Harry’s, Washington D.C. , Sam

& Harry’s, Tysons Corner and The Caucus Room. I am testifying here today on behalf of the National Restaurant Association, which is the leading business association for the restaurant industry. Together with the National Restaurant Association

Educational Foundation, the Association’s mission is to represent, educate, and promote a rapidly growing industry that is comprised of 870,000 restaurant and

foodservice outlets employing 11.7 million people around the country. Consumers

spend nearly $1.2 billion a day in the nation’s restaurants. Every one dollar spent

in a restaurant creates an additional $2.13 in sales for other industries throughout

the economy. As a member of the Board of Directors of the Association, I am proud

to say that our nation’s restaurant industry is the cornerstone of the economy, careers and community involvement.

Restaurants are a vital component of the travel and tourism industry. That is why

I am so pleased to be here participating in this important discussion today. It will

probably not be a surprise for many of you in the room to hear that restaurateurs

depend heavily on tourism business. Nor will it be a surprise to learn that more

than two-thirds of tableservice restaurants view tourists as an important component

to their business. And here’s why: About 40 percent of revenues at tableservice restaurants with higher check averages come from tourists. Spending by travelers accounts for roughly 15 to 30 percent of revenue at tableservice restaurants with average check sizes of less than $25. These figures give you some idea of the symbiotic

relationship between restaurants and tourists. They also demonstrate why the

events of September 11, and the current state of affairs have such a devastating

blow to the restaurant industry—as they do for so many of the groups represented

in this room.

The economic repercussions of September 11 were great. As people holed up,

glued to the television, the travel and tourism industry virtually came to a halt. In

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September 2001, 38,000 restaurant jobs were eliminated. The following month, October 2001, that number rose to 57,000 jobs. As of March 2003, restaurant employment is down 244,000 jobs since 2001. The hardest hit restaurant sector was fine

dining establishments and tourist dependent restaurants, especially those in the

Northeast. The top 100 travel destinations experienced the greatest total loss of

tourism revenue—4 out of the top 5 spots are all located in the Northeast. The National Restaurant Association worked hard to help the industry persevere through

this difficult time. Through a major multi-million dollar public relations campaign,

we encouraged people to ‘‘turn the tables’’ and reminded them how vital the nation’s

restaurants were to economic security. Innovative and entrepreneurial restaurateurs

sought new ways to drive business and remind consumers of how dining out could

invigorate spirits and the economy. The restaurant industry is incredibly resilient

and with the help of our Cornerstone Initiative Public Relations Campaign, the ingenuity of the restaurant industry and the American people, the industry rebounded.

Today, this very same industry faces yet another wave of challenges. The uncertainty of the nation’s economy, the war in Iraq, heightened concerns about possible

terrorist threats on U.S. soil, and international health threats, all have slowed or

reversed any recovery that was occurring in the travel and tourism industry. As a

result, individuals and businesses continue to cut back on discretionary spending,

including dining out and other travel-related activities. In addition to sending a tremendous shock to our economy, the events of September 11, and the conflict overseas also caused the nation to focus on a relatively new entity: homeland security.

The nation’s restaurants have long been committed to food safety, and have been

leading efforts to ensure that employees are trained and certified in safe food handling practices. Since September 11, the nation’s restaurants have been operating

with a heightened sense of awareness and vigilance on food security issues. We are

working closely with the Administration on this important issue—particularly as

they implement the regulations on the recently passed bioterrorism legislation.

From ensuring that food inside our borders is secure, we are also working to ensure

that imported items that consumers have come to know, love, and expect on their

favorite menu—remain on the menu.

These changes will go a long way in helping to restore confidence among the

American people, and will be tremendously helpful in encouraging normalcy and invigorating travel in this country. Other opportunities that will help restore travel

both inside and to the United States are equally important: The National Restaurant Association urges Congress to increase the business meal and entertainment tax deduction and restore the spousal travel tax deduction. Now more than

ever, this would provide an immediate incentive for small businesses and corporations to authorize their personnel to start traveling again. The reduction of the business meal and entertainment tax deduction from 100 percent to 50 percent and the

elimination of the spousal travel tax deduction negatively affected the restaurant

and entertainment industries and the business customers they serve even before

September 11, particularly harming small businesses. We also request Congress’

support in urging the President to create the Presidential Advisory Council on Travel and Tourism. The Council would advise the President on national tourism policies

and would help ensure that travel and tourism receives a more sustained and vigorous policy focus at the federal level. It would also help coordinate the activities

of the Administration and the many departments and agencies that impact travel

and tourism. And finally, The National Restaurant Association applauds Congress,

Senator Ted Stevens in particular, and the President for appropriating $50 million

to the Department of Commerce in fiscal year 2003 for the creation of a comprehensive United States destination marketing campaign. With the continuing decline in

international arrivals, the balance of trade surplus generated by travel and tourism

has plummeted from $26 billion in 1996 to $8.6 billion in 2001. While these funds

are an important first step in promoting the United States as an attractive destination, the National Restaurant Association hopes that Congress will consider a longer

term authorization to capture these travelers that our economy desperately needs.

Mr. Chairman and members of the Committee, I thank you for this opportunity

to appear before you today, and I thank you for your interest in the travel and tourism industry.

Mr. STEARNS. I thank the gentleman.

Mr. Ruden.

STATEMENT OF PAUL M. RUDEN

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

29

I am not going to consume the committee’s time repeating the

horror stories that others have told, except to say that the travel

agent industry, as most of you probably know, is mostly small business, down to the tiniest businesses of just one or two people. Even

the big brand names that people are accustomed to hearing about

are usually manifested in the marketplace through very small enterprises that are independently owned.

Suffice it to say in statistics, the air component alone of what

travel agencies sell, and they still sell most of the air that is sold

in this country, between the year 2000 and the year 2002, sales declined $20 billion. That is just one segment of what they sell.

If you want further dimensions of the horror story, I would refer

the committee to the National Commission to Insure Consumer Information and Choice in the Airline Industry report, which issued

last November, which summarizes the impact of the economy and

airline practices and other factors that have devastated many,

many small businesses in the travel agency sector of the economy.

It is also true and needs to be understood that every horror story

you hear from the airlines about how much money they are losing

and the hotels and all of the stories they tell are correct. Most of

that damage, that loss also flows down to travel agencies who are

responsible for selling most of the business that goes into those airplane seats and much of the business that goes into those hotel

rooms and even down to the restaurant level.

The public has been devastated by the four things you heard

about: the economy, SARS, the war, terrorism. And the effects continue. People are buying later, making it very difficult for anyone

in our industry to plan anything because consumers are holding

back their commitments to the very last minute in many, many

cases, and they’re traveling a lot closer to home than they used to

and spending less.

The uncertainty and fear run throughout the economy and run

very deeply. When it is all said and done, there is not going to be

any bailouts for our part of the industry. We are doing everything

we can, however, independently to stimulate travel, and I think

that ultimately, while we share all of these recommendations in

common with everyone in this panel, and I have got another one

to talk about in a minute; all of those things are good things to do,

but at the end of the day we have to conquer SARS. We have to

get confidence back that way in order for people not to be afraid.

We have done advertising programs. We put together a public

service announcement with Jim Lovell, the commander of Apollo

13, who if anyone knows about trouble traveling, he does, and that

public service announcement was seen by over 100 million people

so far, and the radio exposure is probably another 100-plus million

people.

We have got an ad campaign in USA Today every Friday afternoon featuring cruises and tours, encouraging people to travel, running contests.

There is a real interesting story of a travel agency just up the

road outside Philadelphia that is holding a museum like exposition

of travel photographs in its agency and inviting the public in to

come in and see these local photographers, who are not national

brand names, but who take pretty good pictures. They are having

30

contests. Suppliers will be present to talk to the people who are interested and so forth. Everybody is doing everything they can at a

local level, which is where all of these travel agencies are best

known, to try to stimulate interest in travel.

We are working with Sandals Resorts. Once again, that company

has come forward with a $2 million program of free travel opportunities to their resorts for people, men and women in the Service.

All of these things are being done around the country. We will

continue to do them as long as the resources exist to do it.

Our view, I think, is that the thing that is hurting us that is an

example of how we hurt ourselves, is that our government sometimes takes actions in the name of security which always has to be

first, I suppose, without apparent regard for the impact on the

travel and tourism sector, and the alerts that have no apparent

reason, none that is given anyway, have frightened people away

from traveling. You can see it in what happens in the immediate

aftermath of these announcements, and then the alerts are taken

down with no apparently explanation of why things have changed.

I am not suggesting the government has to reveal its security information. What we are suggesting is that the Department of

Homeland Security should have an office that acts as a filter, at

least an opportunity to comment on the impact on the travel and

tourism business of new regulations and new pronouncements that

the department is considering making before those things are made

so that if a decision is made that we have to harm tourism again,

at least it is made knowingly and not inadvertently.

With that I thank the committee for the opportunity to speak

today and ask that my full statement, which has a great deal more

information in it, be admitted to the record.

Thank you.

[The prepared statement of Paul M. Ruden follows:]

PREPARED STATEMENT OF PAUL M. RUDEN, SENIOR VICE PRESIDENTL LEGAL &

INDUSTRY AFFAIRS, AMERICAN SOCIETY OF TRAVEL AGENTS, INC.

The American Society of Travel Agents (‘‘ASTA’’) offers this testimony on the Subcommittee’s deliberations on the state of travel and tourism in the United States.

We will offer some background and some thoughts about what travel agencies can

and are doing to stimulate travel in the near term future. ASTA much appreciates

the opportunity to present its views, and remains at the Subcommittee’s disposal

to assist in any way it can on these subjects that are so vital to the national economy.

It is a fair statement, and no surprise in light of the ubiquitous news reports, that

the condition of the travel industry overall is dismal. Prior to the SARS outbreak,

there were some bright spots, and one or two may yet remain, but in general, for

most industry participants, and in most sectors, the picture is bleak.

There are four factors involved: (1) the economy is unhealthy, resulting in impaired consumer confidence and a reduced willingness to spend money on leisure

and many business travel pursuits; (2) the terrorist attacks of September 11, 2001,

and the government’s response to them have left long-lasting marks on the national

state of mind, (3) the war in Iraq has created additional uncertainty and fear in

the mindset of the traveling public in all sectors, and (4) finally, but by no means

least, the outbreak and spread of the Severe Acute Respiratory Syndrome (SARS)

has resulted in anti-travel measures that are unprecedented in modern times. In

order to induce people to travel, most sectors of the industry have reduced prices,

with the result that such revenue as there is does not cover costs. As a result, firms

are exiting in all sectors.

Each of these considerations would, by itself, have been enough to severely impact

travel practices, but all four together have been simply overwhelming. The effects

31

of all four are still active and in the case of the economy and SARS may be worsening.

The dollar volume of air sales by travel agencies, who considering traditional and

on-line agencies together, still account for a significant majority of sales, is in serial

decline. The chart attached to this testimony shows the details. For present purposes it is enough to observe that agency sales of air travel have declined from almost $77 billion in 2000 to $57 billion in 2002. First quarter results indicate that

the free fall is continuing. If we don’t get some good news about SARS soon, the

decline can be expected to deepen materially. It took about 18 months for air travel

to recover from the effects of the first Gulf War and the 1991 recession, so recovery

this time could be considerably longer.

The news on other fronts is similar. The National Tour Association, for example,

had seven member companies fail in 2002, with similar expectations for this year.

You will hear directly from the hotel and other sectors about the revenue problems

they face.

The cruise industry, uniquely, reports steadily increasing embarkations from

North America, but at significantly diminished yields. One of the successful initiatives was to reposition ships at new homeports within driving distance of major population centers, thereby making cruising possible without the need for air travel.

New ship introductions are planned for 2003, as the cruise industry has successfully

made the point that cruising is safe, affordable and available.

Those actions are consistent with the changed travel patterns of American consumers in the aftermath of the forces described earlier. In all sectors we are seeing

travelers booking much later than before and traveling closer to home. ASTA’s semiannual surveys of traveler ‘‘hot spots’’ continue to show Orlando, Las Vegas, New

York City as the three most popular domestic destinations booked by travel agencies. There appears to be a decided movement in favor of Mexico and Caribbean destinations for travelers on international vacations, though London, Paris and Rome

occupy three of the top four international destinations identified by travel agents

and two of the top five spots selected by consumer visitors to our web site.

So, with the notable exception of the cruise lines, the overall industry picture is

very disturbing. Some major airlines are in or on the verge of bankruptcy. Services

have been curtailed and tens of thousands of workers have lost their jobs. Travel

agencies are affected in exactly the same manner by the same causes that have depressed the airlines and other tourism institutions, because travel agencies, traditional and online, account for most of the airlines business and for substantially all

of the tour business. One bright light for us was the action of the House and Senate

small business committees and the Small Business Administration (SBA) in the

wake of September 11 to expand nationwide the SBA Economic Injury Disaster

Loan program. That action saved the businesses of at least 500 agencies, who are

now in repayment, with interest, on those loans.

That said, our part of the industry is not standing still and taking it. Since immediately after the September 11 attacks, we have been using every resource at our

and anyone else’s disposal to try to stimulate travel to safe destinations. Travel

agencies as a group are very small businesses and typically lack the capital that

larger tourism enterprises often possess. Nonetheless, they are long on creativity,

and they have been busy, working through ASTA and on their own.

In March of last year a working group of travel agent organizations and airlines,

in a program managed by ASTA on behalf of the Airlines Reporting Corporation,

launched the Flight Plan for America campaign, a nationwide public interest program designed to reassure the traveling public about the commitment made to improve air travel security and convenience. Representatives of the Association of Retail Travel Agents, Southwest Airlines and Delta Air Lines, worked together to educate the public about travel in the new security environment, to encourage Americans to travel, and to promote the use of professional travel resources. United Airlines provided important assistance as well.

The centerpiece of Flight Plan for America was a public service announcement

(PSA) featuring Captain Jim Lovell, Commander of Apollo 13, helping travelers understand what had been done to ensure their safety, what they could expect and

what they could do to make their trips comfortable. A speakers bureau of travel industry leaders was made available to address travel industry topics in the news

from the informed perspective of industry professionals. A Web site was created for

travel professionals to help those in the travel industry use their expertise to educate their clients and the general public. Finally, a brochure was produced, entitled

Tips for Today’s Air Traveler, for travel professionals to distribute to their clients,

with tips on what to pack and how to navigate the airport.

Our latest information shows that the Flight Plan PSA has been seen by about

100 million Americans and the radio exposure exceeds another 100 million persons.

32

Travel agents have united with other industry groups to promote National Tourism Week, and the SeeAmerica Program which starts next week. Agents have access

to promotional materials on ASTA’s web site and are encouraged to plan programs

with others in their communities, including hotels, restaurants, and the local convention and visitors bureau to promote travel.

In addition, agents are independently planning events to help generate interest

in travel and tourism. For example, one travel agency outside of Philadelphia is

teaming up with a group of local photographers. Over a 3-week period travel-related

photographs will be displayed at the agent’s office. The agency will prepare a compendium on the artists and offer some door prizes. The public is invited to view the

display which the agency is promoting through local advertising. Travel suppliers

(cruise lines and tour operators) will be present to explain products and promote

destinations. The beneficiary of the project is a local historic association—participants in the drawings get extra chances if they join the association.

ASTA is evaluating the feasibility of using this concept in a national promotion

or contest to help agencies share their promotional ideas with each other, with

hoped for multiplier effects in stimulating travel from communities around the country.

This summer, ASTA will be encouraging consumers to plan family reunions in domestic and international locations through a media campaign that includes video

and audio news releases to consumer media. The program will suggest that families

travel to interesting destinations for the best reunions.

ASTA’s national advertising campaign in USA Today continues to promote cruise,

vacation and travel opportunities. It has reached many millions of consumers during

its two-year life. The latest development is that ASTA and Sandals and Beaches Resorts are teaming up in USA Today advertisements which encourage consumer travel by offering an unusual incentive: complimentary vacations for service men and

women. Sandals, through travel agents, is giving away vacations valued at $1 million to those who are serving in the armed forces. If consumers book a 6-day vacation, the travel agent will be allowed to sponsor a 4-day, 3-night vacation for two

among the military personnel in their community. Sandals will directly contribute

another $1 million to service families for travel.

ASTA has continued to make the latest public relations and advertising tools

available to travel agent members on ASTA’s website, www.astanet.com. At no

charge, ASTA member agents can download press releases, as well as black and

white and color ads which encourage travel. The website now includes a Selling

Center in which suppliers share with agencies the keys to selling effectively the particular products and promotions that are needed in these difficult times.

In closing, I want to return to the issue of government response to terrorism.

Clearly the government must do everything reasonably in its power to assure the

safety of the public and of travelers. To that end a new Department of Homeland

Security has been created. We have worked in support of the National Tour Association and other industry organizations to urge the creation within DHS of an office

to provide review and comment on the potential for serious travel disruptions arising from pending DHS rules and regulations. We believe it is vital to the recovery

effort that, prior to the adoption of new rules, a full assessment of their effect on

travel be made. In the end, of course, security considerations will prevail, but we

want to be sure we don’t create a system so sterile that no one is willing to use

it.

Travel Agency Sales of Air Transportation

(In Billions of Dollars)

2000 2001 %

Change 2002 %Change

Mar-03

YTD

Prior Mar.

% Change

Domestic Air Fares ...................................... 51 42 -19 35 -16 9 -7

International Air Fares ................................. 25 22 -13 22 1 5 -14

Total Air Fares ............................................. 76 64 -17 57 -10 14 -10

Mr. STEARNS. By unanimous consent, so ordered.

And, Mr. Walker, you are last but not least, and we welcome you.

STATEMENT OF MATTHEW S. WALKER

Mr. WALKER. Thank you, Mr. Chairman.

Mr. STEARNS. Move this over here.

33

Mr. WALKER. And thank you, Ranking Member Schakowsky, and

members of the subcommittee.

My name is Matthew Walker. I am a General Vice President of

the Hotel Employees and Restaurant Employees International

Union, and I also ask if I might submit my full statement for the

record.

Mr. STEARNS. By unanimous consent, so ordered, surely.

Mr. WALKER. We represent more than 265,000 members in the

travel and tourism industry. The past 18 months have brought unprecedented hardship to this sector. Industry leaders have come to

refer to the convergence of factors as a perfect storm In the wake

of September 11, we saw at least one third of our international

union’s membership laid off and many thousands more forced to

work drastically reduced hours, and while we had begun to see

some signs of slow recovery, including healthier employment levels,

that improvement has come to an end in the past few months.

At present we would estimate that more than 10 percent of our

membership is out of work, with many more working reduced

hours.

Moreover, layoffs in several markets appear to be intensifying.

The reasons are well known. Operating profits in the hotel sector

for 2003 are projected to come in slightly below the already discouraging performance in 2002. The only reason the downturn in profitability is not more severe is that the industry is engaged in unprecedented cost cutting.

Our union’s information from markets such as Boston, New York,

Washington, DC, San Francisco, Los Angeles, Chicago, and Honolulu is that more than 10 percent of our members are laid off with

no short-term prospect of recall. Again, thousands more are working on greatly reduced hours, and as a consequence in some cases

are no longer qualifying for medical coverage.

Let me also mention by way of sobering example what has happened this morning in Toronto as a consequence of the SARS outbreak there. Downtown hotels are 30 percent occupied on average.

Typical this type of year they’re running at 70 percent occupancy

rates.

About one third of our unions’ hotel work force has been laid off

and many more are working short schedules. If the same crisis,

heaven forbid, were to befall any number of major U.S. cities where

tourism is the top or second ranking source of employment, the

consequences would be equally horrific.

The decline in travel and tourism is a critical national problem.

The hospitality industry is the largest employer of welfare to work

program participants, the largest employer of single parents, the

largest employer of new immigrants. This has driven the economic

recovery of American cities over the last decade.

Our union supports the calls from industry leaders for a stimulus

to get people traveling again, and we certainly applaud the appropriation of the $50 million for marketing the U.S. as a destination

of choice for international travelers.

We join with those industry representatives who call for the restoration of the business meal and entertainment tax deduction, and

we would also agree with the idea of restoring the spousal travel

deduction.

34

We would point out, by the way, that these two measures taken

together would cost less than 5 percent of the President’s proposed

tax cut, but at the same time, the industry’s workers need help.

These workers are one paycheck away from having hungry children, and two paychecks away from homelessness.

And most importantly, laid off hotel workers simply cannot afford health insurance. Medicaid is not positioned to absorb the burden, and given the dire physical condition of the States, there are

no remaining viable alternative sources of coverage.

Therefore, the most important thing in our view that Congress

and the administration could do for these workers is to provide

Federal payment of COBRA health care continuation costs for a defined period, and we would suggest 12 months.

We also support extending and improving on the Federal unemployment assistance program so that more workers are covered and

that those benefits do not start to expire next month.

And finally, we would support a temporary holiday from payroll

taxes for employers and employees in this industry.

The Federal response to the travel and tourism industry’s crisis

post September 11 was woefully inadequate. Nothing was done

about health care for the hundreds of thousands of displaced workers. As a result, huge numbers of newly unemployed were dumped

into the already precarious public health system.

The temporarily extended unemployment compensation program

established in March of last year offered only 13 weeks of extended

benefits for the vast majority of workers, and it will start to expire

next month at a time when the need will be as urgent as ever.

We told the poor in America to go to work, and they did in significant numbers. The hospitality industry is an industry of the

working poor. Now their jobs are disappearing and so is their safety net.

Our message has to be that if you work hard and you play by

the rules your family will be secure. Right now the message appears to be if your industry is suffering, you will suffer just as

much, if not more so.

Thank you very much for the chance to testify.

[The prepared statement of Matthew S. Walker follows:]

PREPARED STATEMENT OF MATTHEW S. WALKER, GENERAL VICE-PRESIDENT, HOTEL

EMPLOYEES & RESTAURANT EMPLOYEES INTERNATIONAL UNION

Thank you, Mr. Chairman, Ranking Member Schakowsky and members of the

Subcommittee. My name is Matthew Walker and I am a General Vice President of

the Hotel Employees and Restaurant Employees International Union. We represent

more than 265,000 workers in various parts of the travel and tourism industry. The

past 18 months have brought unprecedented hardship to this sector. Industry leaders have come to refer to the convergence of factors as a ‘‘Perfect Storm.’’ In the

wake of September 11, we saw at least one third of our International Union’s membership laid off and many thousands more forced to work drastically reduced hours.

While we had begun to see some signs of slow recovery, including healthier employment levels, the past few months have brought such improvement to an end. At

present we would estimate that more than 10% of our membership is out of work

with many more working a much shortened work week. Moreover, layoffs in several

markets appear to be intensifying.

The reasons are well known. The overall state of the US economy, the war in

Iraq, the fear of subsequent terrorist attacks and finally the alarm concerning SARS

has slowed travel dramatically. Business travel, which is among the most lucrative

for the hotel industry, is markedly down as is spending on banquets and food and

beverage generally. As a consequence, operating profits in the hotel sector for 2003

35

are projected to come in slightly below the already discouraging performance in

2002. The only reason the downturn in profitability is not more severe is that the

industry has been engaged in unprecedented cost cutting.

For example, Interstate Hotels the nation’s largest independent hotel management company announced this month that it has eliminated 15% of its 38,500 jobs

in response to the industry-wide downturn. Our Union’s information from markets

such as Boston, New York, Washington, DC, San Francisco, Los Angeles, and Honolulu is that more than 10% of our members are laid off with no short term prospect

of recall. Again, thousands more are working substantially reduced hours.

Let me also mention by way of sobering example what has happened this month

in Toronto as a consequence of the SARS outbreak there. Downtown hotels are 30%

occupied on average when typically they are 70% full this time of year. About one

third of our Union’s hotel workforce has been laid off with many more working short

schedules. If the same crisis, heaven forbid, were to befall any number of major US

cities where tourism is the top or second ranking source of employment, the consequences would be equally horrific.

The decline in travel and tourism is a critical national problem. The hospitality

industry is the largest employer of welfare-to-work program participants—the largest employer of single parents—the largest employer of immigrants. According to

the National League of Cities, the hospitality industry is cited by city leaders more

than any other industry as critical to the economic development and well-being of

their city.

Our Union supports the calls from industry leaders for stimulus to get people traveling again and certainly applauds the passage of the $50 million marketing

package to position the US as a destination of choice for international travelers.

We join with those industry representatives who call for the restoration of the

business meal and entertainment tax deduction. We would also agree with the idea

of restoring the spousal travel deduction. We would point out that these two measures taken together would cost less than 5% of the President’s proposed tax cut

plan.

But at the same time, the industry’s workers need help. These workers are one

paycheck away from having hungry children and two paychecks from being homeless.

Most importantly, laid off hotel workers simply cannot afford to continue their

health care coverage. Medicaid is not positioned to absorb this burden and, given

the dire fiscal condition of the states, there are no remaining viable sources of coverage.

Therefore, the most important thing Congress and the Administration can do for

these workers is to provide Federal payment of COBRA health care continuation

costs for a defined period of time—we suggest 12 months.

The COBRA system is an existing, simple, efficient, well-defined, private-sector

mechanism to accomplish Federal payment to health plans—both corporate and

Union plans—which agree to cover laid off workers for a defined period of time. It

does not require any new entitlement or bureaucracy. When the defined period of

time is over, the program simply ends.

We also support extending and improving on the Federal unemployment assistance program so that more workers are eligible for federal benefits and those benefits do not start to expire next month.

Finally, we would support a temporary holiday from payroll taxes for employers

and employees in this hard hit industry. If such a holiday were implemented, we

would include two caveats. Such relief should be accompanied by a substitute appropriation so as not to further jeopardize the already vulnerable Social Security Trust

Funds. Also, such a holiday does not address the dire needs of the already unemployed and should not be seen as a substitute for measures aimed at helping those

currently out of work.

The federal response to this industry’s crisis post September 11 was woefully inadequate. Nothing was done about health care for the hundreds of thousands of displaced workers. As a result, huge numbers of newly unemployed were dumped onto

the already precarious public health system. The Temporary Extended Unemployment Compensation (TEUC) program established in March of last year offered only

13 weeks of extended benefits for the vast majority of workers and it will start to

expire next month at a time when the need will be as urgent as ever.

We told the poor in America to go to work and they did in significant numbers.

The hospitality industry is an industry of the working poor. Now their jobs are disappearing and so is their safety net. Our message has to be that if you work hard

and play by the rules, your family will be secure. The message that travel and tourism workers are getting at the moment is: ‘‘If your industry is hurting, so are

you . . . only moreso.’’

36

Thank you very much for the opportunity to testify before you this afternoon.

Mr. STEARNS. I thank you, Mr. Walker, and I think to all the

folks who testified, it would probably be appropriate for them to

know that Chairman Alan Greenspan is testifying in the Financial

Services Committee today, talking about the economy. He perhaps

should have been listening to you this afternoon. He would have

had an even better and clearer picture of where the status is of this

important industry.

I think what I hear from all of you is that this letter that I’ve

written to Secretary Evans asking for a Presidential Advisory

Council on Travel and Tourism, that you agree, particularly in

light of the fact that the United States was the No. 1 tourist attraction and now follows behind Spain and France.

I think when I try to hear some of this bad news obviously that

you folks are talking about, what is the one thing as a legislator

we, my colleagues and I, could do? And going back to my opening

statement, this international tourism provides so much more than

the commercial. We want to spur on the tourism in America for

people to go within the United States, but we would like to attract

a lot of the international tourism because that provides much more,

bigger impact for the buck. And so the idea of this $50 million being made permanent as

part of the budget to help advertise the United States, and as I

pointed out Spain is spending $150 million, and they have 5 percent of our GDP. So certainly the United States certainly could

spend $50 million to see how effective it would be.

But Mr. Walker has talked about this perfect storm, the 9/11, the

economy being weak even before that, the terrorist threat that continues, the war with Iraq, homeland security, and all of the bothers

that a lot of people perceive going to the airport. Mr. May knows

from the number of airlines both for transportation as well as commercial includes all of the major airlines, American West, American Airlines, Delta, U.S. Air, Emory Freight. Even I guess you

have some associate members from Canada and Mexico, Royal

Dutch Airline.

So the problem with the airports and waiting in line, the idea of

homeland security, and then last, of course, to have SARS coming

up, this has almost created the perfect storm.

So now what can we as legislators and what can you as industry

leaders do? And I would say that the concentration should be on

that international tourism and bringing the people here to say, one,

it is not going to be a hassle in the airport because we are going

to have iris scans. We are going to have fingerprints. We are going

to have anything to expedite. So the homeland security should expedite the whole process of getting people through the airlines

quickly, and we have the technology to do it.

Two, we have got to provide safety to the international travelers

that come here that there is not a threat from SARS, there is not

a threat from the terrorist attack, and that all can be gotten now

through this $50 million that we do through the Presidential Advisory Council on Travel and Tourism.

So there are lots of things we could do, I think, to attract more

international tourists. Our immigration policy has perhaps dampened a little bit of people coming in here because it is a little bit

37

of a hassle and all of the extra interrogation and things that go

with it.

So this international tourism, it seems to me, is an indispensable

action or condition that perhaps would jump start this more quickly than anything else. So my question to you is: you’re a policymaker. What one thing, and I will just go from my right to left;

what one thing would you do if you could advise the Advisory

Council or you had the power and you were President?

Because, frankly, what we do in this travel and tourism industry

affects the economy dramatically, and the fact that we had a $26

billion surplus when we had almost a $450 billion deficit in trade,

to see this when we were the No. 1 and see now this surplus go

down to $8.6 billion in the year 2001, it is so positive; it is so clean;

it is so powerful on input that I think the President should realize

that with not a lot of work we can jump start this and the international travel.

So I guess I am asking for each of you to give the one thing you

as President think we could be doing to help your industry.

Mr. LUNDBERG. Well, from the standpoint of the U.S. Chamber,

Mr. Chairman, not to diminish the importance of the $50 million

appropriations to the Department of Commerce and the importance

of——

Mr. STEARNS. No, I need your candid opinion, you know, whatever subject or whatever way you think.

Mr. LUNDBERG. The No. 1 item that I perhaps would focus on is

given the disparity of the travel and tourism industry as a whole,

it covers, as you can see, just from the representation at this table

such a broad diversity of sectors within the travel and tourism industry. I think the establishment of the Presidential Advisory

Council is key to bringing together all of the various agencies that

have some piece and some impact on travel and tourism and bring

it together under one entity to vet issues, to vet policy, nd then to

be able to go forward and implement that policy in a unified way

from the standpoint of the administration.

Mr. STEARNS. Mr. May.

Mr. MAY. Mr. Chairman, I think that certainly within the context of this overall economy we have to do whatever we can to

strengthen the economy because that is going to add a lot to travel

and, therefore, the domino effect that people have been talking

about.

I think we have to also as a part of that help people understand

it has never been safer to fly, that our security measures are better

today than they ever have been. We have to increase and take

measures to increase consumer confidence.

And finally, I would suggest, if I can be permitted a parochial

moment, that we need to promote international travel on U.S. flag

carriers.

Mr. STEARNS. I thank the gentleman.

Mr. Edwards.

Mr. EDWARDS. Thank you.

Briefly I would suggest obviously the economy needs a jump

start. There is no question that that has to be moved on on a unilateral basis, legislative and private sector.

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No. 2, I would have to endorse a team approach. I do not mean

to sound like, you know, the NBA here, but a team approach, legislative, private sector, everyone.

This Presidential Advisory Council on Travel and Tourism is established. It is there. It is functional. It is a universal entity, and

I think your $50 million and other expenditures maybe in the future toward image making to bring the people to this country

would be a primary step and using this as your vehicle would

eliminate a lot of the ambiguities of all of the different pieces that

are moving parts and moving targets.

I think this would be the entity to use. I would pursue it very

strongly and make sure you have the top CEOs that are involved

in the industry as part of the left hand as advisors here to give direction.

Mr. STEARNS. Mr. Robinson.

Mr. ROBINSON. Yes, thank you. I think I would like to comment on this $50 million. We appreciate that that expenditure has been allocated. It is terribly important, I believe, since this is an experimental phase this first year

that it is used wisely and that we focus carefully on what it might

be used for.

And I agree entirely with you on the proposal to focus on international travel. However, historically it has been very interesting

because the majority of visitors who come to this country that really return and spend larger dollars come from certain countries, and

they are Great Britain, Mexico, Canada and Japan. And I think it

is important if we can focus on a few countries and not try to, you

know, cover the world, so to speak; that it will be a lot more effective in what we are able to bring to fruition.

Thank you.

Mr. STEARNS. That is a good idea, to focus down on where experience-wise has shown us to be where the best source of money.

Mr. ROBINSON. That is correct.

Mr. STEARNS. Yes. Mr. Sternberg.

Mr. STERNBERG. Well, Mr. Chairman, as I always tell my managers, action is always better than inaction. So now that we have

appropriated this $50 million, let’s do something with it.

And I think the first step in that is establishing the Presidential

Advisory Council so that the money can be well spent and used

wisely, but having appropriated it is the first step. Using it is the

second.

Mr. RUDEN. Mr. Chairman, I do not think I can help much on

the $50 million because I think most of that, if not all of it, is going

to be spent overseas, and that money will at best indirectly assist

the travel agency sector of the economy.

But I do think that, to go back to the point that I made at the

end of my earlier testimony, it is most important here that we not

do unto ourselves that which we are trying to stop coming from

other places, and I do not think we have established an appropriate

mechanism yet for fully evaluating all of the consequences of all

the things that are proposed to be done about security and other

related issues.

Security will always be first. No one is suggesting otherwise. But

I think the government, whether it is at the Presidential level or,

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in our view, probably closer to the ground, it should be at the Department of Homeland Security. This industry has got to work in

a unified way with the government to take account of the consequences of some of these actions that the government takes.

And as a passing thought, I would also say to my colleagues here

at this table and anyone else who might listen in the future this

industry is divided because of internal conflicts within it, and as

long as we remain divided and not talking to each other about

these things, having government places to go and talk is not going

to solve the problem. We have to get over the fractionalization and

fragmentation within our own house in order to truly solve these

problems.

Thank you.

Mr. WALKER. Thank you.

We certainly support the appropriation of funds for interim promoting the United States as a destination of choice. I think there

is no question that increased international travel will help to catalyze the recovery, as would some of the other restorations of tax deductions that we talked about.

However, there is a crisis that befalls the workers in this industry, in particular, and the crisis that the travel and tourism sector

is experiencing has been recognized by this subcommittee. I think

I would reiterate that most importantly we need to figure out some

way to have at least a short term measure for continuing health

care benefits for the workers in this industry.

The COBRA is an existing, simple, efficient, and well defined private sector mechanism for both corporate and union pension funds

that agree to continue coverage. There could be an opportunity

here for Federal coverage of those COBRA payments without any

new entitlements or bureaucracy, and after a 12 month period, it

would simply cease.

And so I would ask the subcommittee consider this.

Mr. STEARNS. I think my time has obviously expired.

The Ranking Member for questions.

Ms. SCHAKOWSKY. Thank you, Mr. Chairman.

And I thank each and every one of you for excellent testimony

and agree with many of the proposals that have been laid out.

I hope you’ll forgive me by just noting that the incredible diversity of the industry that you represent may not be best reflected

by this panel and to note that you do represent one industry which

is most diverse, particularly when you’re talking about employees

at the lower level of perhaps any industry and certainly among

consumers, people from all over the globe and almost all Americans

here at home.

And you will perhaps forgive me for this, too, but it seems to me we can spend $50 million, but when we do things like—oh, I do not

know—rename french fries and engage in name calling, I think we

will have to use some of that kind of money to make up some of

the ground that we inflict on ourselves in some of the things that

we do, and I want to further explore one of the other things that

we do.

But I also wanted to note that while, Mr. Walker, you are here

representing HERE and your union membership, you are also here

supporting the proposals that the entire industry, management and

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everyone, all of the different sectors support. What I am interested

to know from the rest of you is the specific recommendations that

Mr. Walker has mentioned for the workers in this hardest hit sector, Federal payments of COBRA health benefits, temporary holiday from payroll taxes, extension of temporary extended unemployment compensation; I am wondering if these are proposals that

your organizations and member businesses could support.

If I could hear from each of you. Mr. Lundberg.

Mr. LUNDBERG. Yes, the Chamber has, of course, looked at all of

the specific items mentioned by Mr. Walker, and we do support

closely examining COBRA, and on payroll taxes, I do not think we

have really come down on that issue yet.

We did support the extension of unemployment compensation.

Ms. SCHAKOWSKY. Thank you.

Mr. MAY. ATA as an organization has not taken any formal positions. However, we did work actively with our union partners as

part of the cost-of-war supplemental to extend unemployment benefits, and where it makes sense to do that in the future, we certainly

would.

Mr. EDWARDS. I can tell you that AH&LA, American Hotel &

Lodging Association, has in the past and do now. We do support

continuing unemployment benefits. As we experienced after 9/11,

we tried to carry it privately ourselves in the case of my company.

In others, we carried it for a number of months because of the sudden impact, but you will find that AH&LA will, in fact, continue

to support unemployment benefit extension.

Ms. SCHAKOWSKY. And what about the COBRA?

Mr. EDWARDS. I can probably answer that that we would probably extend that also and support it.

Mr. ROBINSON. As an association, we do not really establish positions with respect to those kind of issues. However, we are an industry that hires a great deal of young people and single people,

and so I think we would want to benefit them in any way that we

could.

Thank you.

Mr. STERNBERG. With an industry of 11.7 million employees, obviously employees are the heart and soul of our industry, and it is

an incredibly diverse work force that we represent. We obviously

enthusiastically support anything that helps those employees.

Mr. RUDEN. Well, in the travel agency business, of course, we

have also laid off an enormous number of workers, most of them

women who are the dominant employees, and I think probably also

the predominant owners in the business, and we have had a lot of

the small businesses simply go out of business because they cannot

make it in the current environment.

So anything that would ease the impact of that we would certainly support. I cannot really as an association address the

COBRA thing per se, but I think the principle is correct, that if you

just leave those people to suffer the consequences without any focused attention on the unique circumstances that they face, whether they are former owners of small businesses or individual employees who have nothing to fall back on, I think you meet yourself

coming the other way when you try to stimulate the economy. It

is not going to work.

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So those kinds of recommendations need to be very thoroughly

looked at.

Ms. SCHAKOWSKY. Well, in terms of stimulating the economy,

perhaps one of the most important things we could do in terms of

bang for the buck is, in fact, extending unemployment insurance

benefits, for example, which for each dollar generates about $1.73

back into the economy. So I think we could be doing the entire

economy a bit of good when we help out the workers in all of your

industries.

If I could, Mr. Chairman, I had one other area I wanted to pursue briefly.

On April 21, NPR had a story that I kind of live with every day

and you do, too. The Commerce Department reports business and

pleasure travel to the U.S. from abroad has declined 28 percent

over the past 2 years. In part, it is because of the slow international economy, but another factor and one that concerns the

travel and tourism industry is that it is becoming increasingly difficult for foreign visitors or for foreigners to visit the United States.

And several of you referred to that, and again, even if we were

to spend $50 million, I spend a lot of my time on the telephone at

very weird hours of the night and early morning calling embassies

all over the globe, trying to help relatives or friends of constituents

of mine, people who are hosting conferences in Chicago who would

like foreign visitors to be able to come, and what I have found is

particularly since September 11, that there has been a real culture

of ‘‘no’’ from these embassies.

And so what I am asking specifically is: would you support

changes to our system that welcomes visitors, that decreases the

time it takes to process a visa, and a culture where those who have

been thoroughly screened are now welcomed into this country? And

is that a priority for your organizations?

Again, just quickly or if you don’t have anything to say about it,

fine, but if you do, I would like to hear it.

Mr. EDWARDS. I guess I will start.

Mr. STEARNS. If you would, please.

Mr. EDWARDS. We had an interesting experience this past fall.

We run a trade show for the 30,000 attendees from over 100 countries, and I know we spend a good deal of time on the phone trying

to get visas to get not only attendees in, but manufacturers to

bring equipment into the country for that very reason, and it is a

difficult process. It is becoming more difficult, and we could use

some help in that area, but very definitely.

Mr. LUNDBERG. Anybody else?

Mr. RUDEN. I would offer the thought that anything that increases the actual out-of-pocket cost or the psychic cost of traveling

is devastating, especially now when everyone is kind of fragile to

begin with.

And so I travel a lot around the world and in the United States

by various methods. When you encounter the attitude of ‘‘I am here

to block you, to test you,’’ as opposed to the attitude of ‘‘I am here

to facilitate your going through, but first we have some things to

do,’’ those two differences in attitude make a huge difference in the

psychic impact on the traveler.

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And when people feel that they are going to have to run a blockade and that there is an attitude of blockage as opposed to facilitation, many people will be turned away from it. They do other

things with their time and other things with their money that will

not be as helpful to the economy.

It is very important for our government, both for Americans traveling internally and leaving the country and those who wish to

come here, to solve that problem.

Ms. SCHAKOWSKY. Thank you.

That is all of my questions. If I could just end with this though,

while all of us, I think, are dedicated to making sure that we protect the security of our people, there is a balance that needs to be

struck, and it seems to me that that balance has not been achieved

right now, and that we need to work to do that, to maximize the

opportunity of people who just want to enjoy our great country and

all that it has to offer, to be able to come here.

Thank you.

Mr. STEARNS. I thank my colleague.

The gentleman from Ohio, Mr. Strickland.

Mr. STRICKLAND. Thank you, Mr. Chairman, and I apologize that

I have not been here for everyone’s testimony because I have had

some other responsibilities.

But I represent an Appalachian rural area, and most of the small

towns of my district are not considered tourism destinations, but

I understand the value of this industry to our Nation and to our

Nation’s economy, and I understand that my colleague from Illinois

raised this issue a little earlier, but I would just like a chance to

speak to it as well.

I am concerned about how we may be perceived as a nice place

to visit, given some of the reactions that have occurred here in the

Congress, which in my judgment have been, at best, immature.

I a couple of years ago spent some time in Barcelona. Spain is

a great place to visit. I can understand why people would go there.

I have also been to Paris, and Paris is a great city. France has

much to offer.

But this country does as well, and I am wondering if we should

do more to create a friendly face for the person who may choose

to travel here.

I also have had some experience as a Member of Congress interacting with some of our foreign embassies, and if the foreign tourist

has had some of the interactions with the staff and some of our embassies that I have had, then I can understand why there could be

some perceptions that are negative.

But without a doubt, this is an important industry that you represent, and it is not, I think, a narrow interest that you are trying

to describe today, but it is a problem that is a part of this larger

economy, but a vital part of it, and I think we have to do whatever

we can in a reasonable manner to help you.

And, Mr. Walker, I was really struck by one phrase you used,

that many of your members are one paycheck away from hungry

children and two paychecks away from homelessness. I think what

we are facing is a crisis.

And other than what has already been discussed here by our

good Chairman and others, I guess my only question would be, and

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it would be a final question: is there anything that has not been

pointed out here today or you have not had an opportunity to say

in regard to what you think we can do as a Congress to be helpful

to you, or have you had your say and are you ready to call this to

an end?

[No response.]

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. STEARNS. I thank my colleague.

We have four votes. So we are going to close, and I think as a

result of the hearing today, we are going to draft legislation to

make a Presidential Advisory Council of Travel and Tourism sort

of permanent, and I think that is one of the things that has come

out of this hearing.

But I just want to ask Mr. Edwards one question. I note he has

30 years of experience with economic climate in the hotel-travel industry. Have you ever seen anything this bad or you have seen

worse before?

Mr. EDWARDS. Let’s put it this way. I have had the same question from the president of my company. I said I never realized my

job description between snipers, anthrax, wars, and I mean, I can

go through the whole litany, has ever been this way.

And the answer in all honesty is no. My father was with Hilton

in Chicago for his entire life. You have recessions. I do not want

to Osama bin Ladenize the economy. That was the final blow, but

the economy needs a kick start.

I personally have not seen a spiral of this nature, in all honesty,

and a difficulty in managing the ambiguities. If it is coming from

the left, you are getting hit from the right. I mean, it is kind of

perpetual.

And to answer your question, that is a long answer to say no.

I have not personally experienced it.

Mr. STEARNS. I think that is what I sense, and Mr. Walker mentioned a perfect storm here, and so I think my colleagues should

be very keenly aware of how important this industry is and anything we could do to help we will do it.

I think this hearing is another step forward. So I want to thank

all of you. I know how valuable your time is, and I want to thank

the participation from my colleagues, and thank you again for coming.

And the hearing is adjourned.

[Whereupon, at 2:41 p.m., the hearing was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF HON. JON PORTER, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF NEVADA

Thank you Chairman Stearns for giving me this opportunity to submit a statement for the record. Tourism is one, two, and three in every state and I am glad

to see this subcommittee focusing on its importance. We must develop a national

approach, incorporating all 50 states, to promote tourism globally. This is the beginning and not the end of many efforts to come and I am anxious to hear our witnesses’ thoughts and ideas.

Las Vegas is considered one of the most traveled to destinations in the world,

earning its designation as the Entertainment Capital of the world long ago. Las

Vegas has something to offer people of all ages. Everything from world class resortcasinos, to first class restaurants and shopping, and entertainment which includes

concerts, production shows, and magic acts. Approximately 35 million people visited

Las Vegas in just 2002 alone.

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Despite the slow economy and unprecedented challenges to the tourism industry,

the commercial gaming industry in 2001 continued to be an important contributor

to the U.S. economy, growing nearly 5 percent, providing more than 364,000 jobs

with wages of $11.5 billion and paying $3.6 billion in taxes to state and local governments.

The tragic events of September 11th affected nearly every business sector in

America, but they hit those in the hospitality industry particularly hard. We in Nevada have united and come a long way to overcome the devastating effects but we

still have a long way to go. Nevada, the gaming industry’s flagship, suffered the

most of the commercial casino states, recording its first annual revenue decrease

since 1981. Nevada’s commercial casino industry is so vital to the health and

wellbeing of the state’s economy. In 2002, the commercial casino industry grossed

$9.5 billion and paid $688 million in taxes just for the state of Nevada. This tax

revenue helps provide critical support to the state, which include funding schools,

social services, transportation needs, and parks and recreation programs.

Despite popular belief, the commercial casino industry is not the only important

money maker in town for the state’s tax revenue. Las Vegas hosts the lion’s share

of Tradeshow Week’s Top 200 largest conventions and rents more convention space

than any other city in America. In 2001, 4 million convention and trade show delegates traveled to Las Vegas, generating $4.8 billion in non-gaming revenue. Currently, Las Vegas has more than 7.5 million square feet of convention and meeting

space, including the Las Vegas Convention Center’s 1.3-million-square-foot south

hall expansion. Available convention space will increase significantly upon completion of Mandalay Bay’s 1.8 million-square-foot conference center, which opened this

year.

Lastly, I would like to discuss the health of the nation’s airline industry. As we

all know, keeping America’s airlines out of bankruptcy is critical to maintaining the

health of the tourism industry. Historically, there has been a strong correlation between room occupancy and air service, especially to Las Vegas. Of the 35 million

visitors to Las Vegas in 2002, nearly all of them traveled to Las Vegas by air. We

must ensure we are doing everything we can to help the airlines stay out of bankruptcy.

Again, Mr. Chairman, I appreciate this Subcommittee for having hearing and the

opportunity to share my thoughts on this vitally important industry to my state, as

well as the entire country.

PREPARED STATEMENT OF THE TRAVEL INDUSTRY ASSOCIATION OF AMERICA

The Travel Industry Association of America (TIA) appreciates the opportunity to

present this testimony regarding the current state of the U.S. travel and tourism

industry. Chairman Stearns, Ranking Member Schakowsky and members of the

subcommittee, TIA applauds you for holding this important hearing to more closely

examine where the travel industry stands as it strives to recover from terrorist attacks on our nation, a depressed economy and a war in Iraq.

TIA is the national, non-profit organization representing all components of the

$537 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 2,100 member organizations represent every segment of the

industry, and are dedicated to helping grow the U.S. economy and provide jobs and

economic opportunity for individuals and communities all across America.

During the past twenty months, our nation has experienced several historic

events that have had a major impact on the overall economy, and the U.S. travel

industry has been disproportionately affected. In 2002, the U.S. travel industry generated $537 billion in visitor spending, far below the record $570.5 billion in expenditures in 2000. While the travel industry employs nearly 8 million people directly

in the U.S., 387,000 jobs have been lost in the industry since September 11, 2001.

Stated more dramatically—the U.S. travel industry employs 6% of the American

workforce, but 30% of all jobs lost since 9/11 have occurred in the travel industry.

Fear of terrorist attacks, concern about traveling during wartime and a soft economy have all combined to drag down international travel to the U.S. and domestic

business travel within the U.S. The only bright spot has been domestic leisure travel, which still lags behind record levels in 2000, but has shown some positive growth

(1.7% increase in 2002 over 2001).

Americans are flying less, driving more frequently to their destinations, and are

now waiting until the last minute to book their trips. Americans are less likely to

travel overseas due to terrorism and other concerns. Reduced outbound travel may

help in some small way to boost domestic travel in the U.S., but this will not have

45

a major impact since U.S. travel abroad rarely exceeds 5% of total U.S. visitor

spending.

With the short duration of the war in Iraq most economists expect the economy

to gain momentum. Once the situation in Iraq stabilizes, businesses will likely resume spending and hiring, which will boost consumer confidence and economic

growth, as well as consumers’ willingness to spend, including for travel. In fact, on

April 28 the Conference Board reported the single largest gain in consumer confidence in the U.S. since the end of the Gulf War in 1991. In the absence of terrorist

attacks here in the U.S., Americans are likely to be anxious to resume leisure travel

as soon as possible and may even boost their travel significantly because of pentup demand.

International travel to the U.S. remains a major concern since declines in visitation from major markets continues to be significant. Over the last decade, the U.S.

share of worldwide travel has declined by 30%. The events of 9/11 have only served

to reinforce this negative trend. Total international arrivals in the U.S. declined 7

percent to 41.9 million in 2002 compared to 2001, according to figures just released

by the Department of Commerce, Office of Travel and Tourism Industries.

To highlight how dramatic the drop in international travel to the U.S. has been,

consider the following figures. Over the last two years, travel to the U.S. from the

United Kingdom has declined by nearly 19%, while Japanese travel has fallen off

28.3%. Our largest market in Latin America, Brazil, has seen a decline of 45% during this two-year time period. Total overseas arrivals (excludes Canada and Mexico)

were reduced by 26.4% during this time period. As international travelers typically

take longer trips and spend considerably more per trip than domestic travelers, this

decline has had a dramatic economic impact on many cities and states in the U.S.

We believe that several of the TIA’s top public policy goals would greatly assist

in moving the industry forward and helping to grow both international travel to the

U.S. and domestic travel within the U.S.

PROMOTING INTERNATIONAL TRAVEL TO THE U.S.

TIA and its members are delighted that Congress has recognized the value of investing in inbound tourism and appropriated $50 million appropriation as part of

the FY 2003 Omnibus Appropriations package for international tourism promotion.

We believe this initiative is an important first step in creating a multi-year sustained and coordinated national campaign to promote the U.S. as the world’s leading visitor destination. We are grateful to Congress for taking this important action.

Other nations have long recognized the value of promoting themselves throughout

the world under the banner of a single brand. Reaching out to global travelers

through a unified promotional campaign is our industry’s best hope for reversing

this decade-long decline in our nation’s share of worldwide travel. A long-term authorization and appropriation to fund a public-private partnership between industry

and government to carry out this mission remains one of TIA’s top priorities.

In order to achieve real success and increase international visitor levels to the

U.S., we believe such a promotion campaign should target a few select international

markets, be invested in a way that will achieve the highest possible return on investment and should appropriately utilize a national brand to maximize industry

participation. These principles apply to the initial campaign making use of the $50

million that has already been appropriated and any future campaigns that may be

funded by the federal government, working in partnership with the U.S. travel industry.

FACILITATING INBOUND INTERNATIONAL TRAVEL: A BALANCED POLICY APPROACH

Unfortunately, the most sophisticated and well-funded promotional campaigns

will be for naught if the U.S. adopts policies and procedures that impede inbound

international travel to the U.S. While TIA and its members have strongly supported

reasonable measures to enhance homeland security, we also believe very strongly

that U.S. government policy must strike a proper balance between national security

and economic security. Additional scrutiny that weeds out those who would seek to

enter to the U.S. to harm this nation is critical, but at the same time the federal

government must proceed with caution and not adopt policies that deter legitimate

international travelers from visiting the U.S. for leisure or business purposes.

Retention of the Visa Waiver Program remains one of the cornerstones of TIA’s

travel facilitation agenda. This program permits visitors from 27 key nations to visit

the U.S. for up to 90 days for business or pleasure without having to obtain a nonimmigrant visitor visa, and encourages inbound travel from key markets in Europe

and Asia. The General Accounting Office issued a report last year that concluded

that elimination of the program would not guarantee greater national security, but

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would surely cost the industry billions in lost revenue and would require the federal

government to spend large sums of money to restaff consulates and embassies in

these 27 Visa Waiver program countries.

A more streamlined visa issuance process is also needed to help facilitate international travel to the U.S. The number of non-immigrant visa applications worldwide fell by nearly 20% over the past 12 months, and while a soft world economy

is chiefly to blame, the travel industry is also concerned that long delays in visa

processing and issuance have also served to discourage visitors from trying to obtain

a visa in order to travel to the U.S.

FUNDING FOR SAFE AND EFFICIENT ROADS: FEDERAL HIGHWAY REAUTHORIZATION

Another major priority for TIA and its members in 2003 is support for increased

funding for the federal surface transportation program. Overall funding for highway

improvements is our industry’s number one priority for highway reauthorization.

Approximately 83 percent of all person-trips take place on U.S. roads. This includes

approximately some 70 percent of business person-trips. It is critical for all types

of travel that our nation’s highways, bridges and tunnels be safe and efficient and

that our nation’s surface transportation system be able to handle increasing

amounts of travel. National mobility is essential to ensure continued growth in travel and tourism.

TIA also supports increased funding for several key highway programs, including

the National Scenic Byways Program, Transportation Enhancements and the Federal Lands Highway Program. We are currently partnering with the Federal Highway Administration to promote increased travel along our nation’s 20 All-American

Roads and 75 National Scenic Byways through the SeeAmerica’s Byways program.

VISITOR ACCESS TO PUBLIC LANDS

As leisure domestic and international leisure travel continues to rebound in 2003,

there may be renewed calls for limiting visitor access to national parks, forests and

other public lands. These public places with their scenic and historic significance are

important destinations for both U.S. and international visitors, and TIA will continue to work with other tourism and recreation organizations to ensure open visitor

access to these important places in America.

CONCLUSION

While recent economic and international developments provide a glimmer of hope

for the U.S. travel industry, full recovery will not come for several years. Some industry leaders have even argued that September 11 and subsequent events have forever altered some aspects of travel—especially business travel. TIA will continue to

lobby vigorously for policies that will permit the U.S. travel and tourism industry

to recover, thereby providing additional jobs for Americans, economic opportunity for

both urban and rural communities and tax revenues for all levels of government.

We thank you for holding this hearing and look forward to continuing our work with

this subcommittee and all of Congress to ensure we have the support necessary to

face the challenges of rebuilding one of America’s key industries.

We respectfully request that the April 9, 2003 joint letter from TIA and TBR to

Secretary of Commerce Donald L. Evans, concerning the $50 million appropriation

for international tourism promotion, also be made a part of the record for this hearing.

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