Bali Attacks Likely to Cause Shift, Not Drop, in Tourism

Published October 14, 2002

| Reuters

Roe Gruber had a moment of panic on Saturday night.

As president of Escapes Unlimited, a California travel agency that specializes in tours to Southeast Asia, Gruber heard reports of a car bomb in Bali and immediately thought of the 40 or 50 clients she'd recently sent to the island.

Gruber called one of her Bali-based employees and asked him to find all of the clients. He did, and all were safe.

As news spread of the attack's carnage, Gruber said she came to work on Monday and faced a flood of calls from people who had planned to visit Indonesia this month.

"About 50 percent of the people we've talked to so far have canceled, and about 50 percent have switched to other destinations in Asia," she said.

The bomb attacks in Bali certainly frightened many potential tourists, causing fears similar to the ones experienced after last year's attacks on New York and Washington, D.C.

But analysts said that concerns about international travel have already been weighing on the badly slumping travel industries, and they don't expect recent incidents at tourist destinations to significantly further hurt the U.S. travel industry.

"This is an unfortunate example of the kind of thing that is weighing on demand for air travel. Given that people already feared these kind of attacks, we don't expect a significant incremental impact on the U.S. carriers," said Lehman Brothers airlines analyst Gary Chase.

Both UAL Corp.'s (UAL) United Airlines and Northwest Airlines Corp. (NWAC) said the bombing in Bali, which claimed more than 180 lives, has not affected their Asian operations and that flights were running on schedule. AMR Corp.'s (AMR) American Airlines and Delta Air Lines Inc. (DAL) were not available for comment.

At a time when such attacks are increasingly dominating the news, American businesses and their customers are finding ways to adapt. Pragmatic considerations can trump fear.

"We're seeing people willing to travel," said Gruber. "But, they're switching to other places like Thailand."

AWAY FROM HOT SPOTS

On Monday, the U.S. State Department issued an advisory urging Americans to leave Bali and defer any future travel there. While a number of regions in Indonesia, and the capital Jakarta, have been hit by violence in recent years, mostly Hindu Bali had long been considered a safe haven.

While Bali is Indonesia's most popular tourist destination, the direct effects of the bombings on U.S. tourism should not be drastic. Only about 170,000 Americans went to Indonesia in 1999, compared to some 3 million who went to France in 2000.

Travel agents said American tourists were already steering their vacation plans away from global hot spots, particularly after Sept. 11.

"The Philippines has already seen a slump," said Robert Laney, president of 1st Air, a New York agency that specializes in business-class overseas travel. "Now Indonesia and Malaysia will see a slump."

"There's a trend of people traveling to places that are safer right now," like Australia, New Zealand and South Africa, he said.

Todd Jordan, an analyst at Dresdner Kleinwort Wasserstein, said the Bali incident will continue to be viewed as an isolated incident for American tourists unless such attacks occur in more common vacation spots.

"It would have more of an impact if it started to happen in Europe, or areas more popular for U.S. citizens," he said.

Among luxury hoteliers, only U.S.-traded shares of Canada's Four Seasons Hotels Inc. (FS) fell sharply on Monday, driven down by concerns about the company's exposure in Bali and other potentially risky markets, analysts said.

Four Seasons' U.S.-listed shares closed down $1.86, or 5.6 percent, at $31.24 on the New York Stock Exchange Monday. Shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) and Hilton Hotels Corp. (HLT) fell minimally, while Marriott International Corp.'s (MAR) stock rose about 0.5 percent.

Shares of UAL were unchanged, shares of AMR rose 1 percent, and the stocks of Delta and Northwest fell about 1.6 percent and 0.5 percent, respectively.

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