Katrina Hurts Travel Industry

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Airlines, hotels and casinos were set to take the biggest economic hit from Hurricane Katrina (search) as it roared along the Gulf of Mexico Monday, but insurers, oil producers and home-improvement retailers may actually benefit in the long run as business returns to normal, analysts said.

Katrina forced the shut down of almost half of oil production in the Gulf area, pushing crude oil prices to a new high. That is bad news for airlines that are already suffering from inflated fuel prices.

"Oil prices were already very bad, this new rise is going to make it very rough," Standard & Poor's analyst Jim Corridore said. "The airline industry will see pretty high losses in the third quarter."

Shares of Delta Air Lines Inc. (DAL) and Southwest Airlines Inc. (LUV) slid in morning trading, along with Hilton Hotels Corp. (HIL) and casino operator Harrah's Entertainment Inc (HET).

The storm forced the cancellation of flights to the Gulf Coast region and the closure of many casinos around New Orleans and on the Mississippi coast. Significant damage could keep visitors away from the area for some time, analysts said, likely hurting the hotel business.

Oil companies may benefit from higher oil prices, and oilfield services companies can look forward to lucrative contracts to repair damage to rigs and refineries.

As of Monday morning, nearly half of the oil production in the Gulf had been temporarily shut down. About a quarter of U.S. domestic oil and gas output comes from that area.

"The threat of scarcity and the potential for infrastructure or throughput damage to refining should cause oil and natural gas prices to spike," Merrill Lynch analyst John Herrlin said.

Companies with significant shut-off Gulf production on Monday included Exxon Mobil Corp. (XOM), Royal Dutch Shell , Chevron Corp. (CVX), Total and BP .

While damage to rigs and pipelines would cause a temporary delay in production, most damage and lost revenue will be covered by insurance, analysts said.

Oil companies with no operations in the Gulf, such as Amerada Hess Corp. and Occidental Petroleum Corp. (OXY), are set to benefit because they can keep pumping at high prices without interruption.

Shares of oilfield service companies BJ Services Co. and McDermott International Inc. rose in expectation of repair work on oil facilities.

Even though Katrina did not devastate New Orleans, it may cost insurers as much as $25 billion, making it the most expensive hurricane ever to hit the United States, forecasters said on Monday.

The silver lining is that large storms usually spur the purchase of policies and give insurers leverage to raise premium rates.

Shares of Allstate Corp. (ALL), the No. 2 property insurer and rival Hartford Financial Services Group Inc. (HIG) fell in. American International Group Inc. (AIG) turned positive in the hope of rising premiums.

In Europe, large reinsurers such as Munich Re and Swiss Re, which sell insurance to insurers, traded lower.

Home improvement retailers Home Depot Inc. (HD) and Lowe's Cos. (LOW) are set to benefit from sales of building materials as people start repairing storm damage.

Home Depot and Lowe's said sales of plywood, flashlights and other emergency supplies had already risen along the Gulf Coast ahead of Katrina's arrival, and Florida stores — where the hurricane hit last week — were still busy. Shares of both were higher in Monday trading.

Wal-Mart Stores Inc. (WMT), the country's largest store chain, fell slightly as analysts feared higher gas prices may trim retail spending overall.