Itineraries - Travel Industry Expects Only a Modest Recovery in 2010 - NYTimes.com For the travel industry, 2009 is a year best forgotten, or as the chairman of Southwest Airlines, Gary C. Kelly, put it in a message to customers, it was "an annus horribilis." And the prospects for 2010? This is typically when the industry issues its forecasts for the year ahead, and those forecasts are often shaded with optimism about better times ahead. But this time, many travel executives and analysts are declining to make rosy predictions. Instead, they are offering a forecast that goes like this: Although some indicators show that travel has stabilized, with tentative signs of improvement in airline bookings and hotel reservations, this trend could falter if fuel prices increase or the fragile economic recovery takes a turn for the worse. Because of the weak spots in the economy, Mr. Kelly notably contradicted some of his colleagues" predictions about an increase in business travel at a recent airline investor conference. "What we stated was we are not planning for a big return of business travel next year," said Laura Wright, Southwest's chief financial officer and senior vice president for finance. To put that in context: we don't know. We don't have a long-term view of the booking curve. Southwest and other airlines have seen encouraging signs in recent months. Southwest carried nearly 8 percent more revenue passengers in November than in the same month last year, and Virgin America recently reported its first quarterly operating profit, earning $5.1 million in the third quarter. But comparisons with late 2008 can be misleading because of the steep drop in business travel that occurred a year ago as the financial crisis deepened. "As we all know, the messages are really mixed on the economy, and employment numbers are still bad," Ms. Wright said. We're assuming business travel is not just going to rebound next year. If it does come on stronger than we expected, we'll be thrilled. That conservative assessment is in line with the most recent figures released by the Air Transport Association, the trade group representing the leading carriers in the United States. In October, passenger revenue at its member carriers fell 15 percent compared with the same month in 2008, the 12th consecutive month of declines, while the number of passengers flying dropped 3 percent. Because previous forecasts were revised as the economy floundered and travel fluctuated in response to news headlines, the association has stopped issuing forecasts, choosing instead to report monthly results based on actual performance numbers. Commenting on the mixed outlook for 2010, John P. Heimlich, the trade group's chief economist, wrote via e-mail, "What we do know is that rarely has such a cloud of uncertainty hung over any new year, and that better than 2009 isn't saying a whole lot." Still, there has been some positive news in recent performance results. Perhaps the most concrete sign of improvement is that airline ticket sales handled by the Airlines Reporting Corporation increased nearly 7 percent in November - the first monthly increase since September 2008. The company tracks transactions handled by roughly 17,000 travel agencies, including online outlets like Expedia, small retailers and travel management companies like American Express. While its figures do not include tickets purchased directly through the airlines, the company estimates it captures more than 50 percent of all air ticket transactions, and a larger percentage of business travel purchases. Besides the encouraging sales figures, the total number of transactions reported through the company in November rose 8 percent. "We're certainly pretty excited about the November numbers," Allan Mutén, a company spokesman, said, noting that even though the dollar figures represented just one month of positive news, the number of ticket transactions has shown a slightly longer upward trend. "Transactions had been going into the green for a couple months, but sales had remained in the red," he said. Now the total sales figure is in the green as well, which is very positive. Yet ticket sales, as well as other statistics, can be seen from multiple angles, leading to different conclusions about the travel industry's health. More people may travel next year but continue to pay lower prices for plane tickets and hotel rooms, stimulating the economy but not necessarily pushing airline balance sheets into the black. Brian Pearce, chief economist for the International Air Transport Association, which plans to release its 2010 forecast on Tuesday, said that although passenger numbers were moving in a positive direction, the global airline industry was still "a long way from seeing normal air travel and revenues." "It's good for passengers but not so good for airlines trying to restore revenue," he said. We're expecting airline revenues this year to be $80 billion lower than they were in 2008. Michael Boyd, president of the aviation consulting firm Boyd Group International, said he believed that American carriers were on much better financial footing than their foreign counterparts, but he did not see any economic indicators suggesting either business or leisure travel would rebound next year. "Our data show that air passenger traffic will be down 3.5 to 4 percent nationally," he said. But if oil prices don't get too frisky, we think the airline industry will do fairly well. The hotel industry, though historically more profitable than the airlines, faces a more daunting problem in attracting business. Scott Berman, hospitality practice leader for PricewaterhouseCoopers, said he expected hotel occupancy levels to edge up to 55.8 percent in 2010, from 55.2 percent for 2009. The industry's historical average is 63 percent. Rates are expected to show an 8.8 percent decline in 2009, and to drop an additional 1.8 percent next year, Mr. Berman said. But he said his conversations with hotel executives indicated that reservations had been picking up in the last two months, an encouraging sign but one he did not want to overstate. "I don't want to paint this as we've done anything but turn a corner," Mr. Berman said. Anybody who suggests that the industry has come back is not correct.