Seeing America First

You can't get much farther from the hurly-burly of airline price wars than Greg Honeycutt's shop in Duck, N.C., on the Outer Banks. Even so, rentals of beach umbrellas, baby cribs, bikes, and other paraphernalia are up some 15% this year--partly because low airfares are luring more tourists, who make the two-hour drive to Duck from the airport at Norfolk, Va. Drawls Honeycutt: "I'm not sure we're really feeling the effects of the weak economy at all."

Neither are most other companies that cater to vacationers' needs. Indeed, in a year when economic sluggishness is hurting nearly every business, the $350 billion tourism industry is doing just fine. The main reason: Cut-rate airfares and the sickly dollar are persuading bargain hunters from Boston to Bonn that a U.S. vacation is a deal. For Germans, an American holiday now costs less than one on the beaches of Greece, according to a Commerzbank study. And fueled by discounting, domestic airline bookings hit all-time highs in July and August (chart). The boom isn't over, either: This Labor Day weekend, predicts the American Automobile Assn., will be the heaviest-traveled since AAA estimates began in 1985. It figures 32.2 million people will hit the road, air, and rails--9.2% more than last year.

Not everything in the tourism biz is booming. The Japanese, nervous about the safety of U.S. cities, are staying away in droves. Japan Travel Bureau Inc., the nation's biggest, reports bookings to North America are off 20% this year. The Northeastern U.S. is still in a slump, too. Business at Old Orchard Beach, Me., is off as much as 50% vs. last year, says a Chamber of Commerce official. The problem? Unseasonably cool weather and Canada's lousy economy, which has crimped visits from up north.

Still, the fare wars are giving a boost to many tourist attractions. For instance, attendance at Orlando's Disney World is up 15% this summer, estimates Salomon Brothers Inc. analyst Mar-go L. Vignola. With round-trip fares from New York as low as $150, she figures, a family of four can swing a four-day stay at Disney World for about $2,000, or $600 less than before fares fell. Disney says attendance also is up at Disneyland in Anaheim, Calif.

Not that vacationers aren't pinching pennies. Bargain outfits, such as Promus Cos.' Hampton Inns Inc., are doing well--while most top-drawer hotels aren't. Camping at national parks is in vogue. Cruises also are hot, since their prices tend to be all-inclusive, making it easier to budget precisely.

`ALL CHOCK FULL.' Homey vacations are popular as well. "Our clients were basically visiting family everywhere from the Midwest to the East" rather than spending to stay at vacation spots, says Shirley Carr, manager of Atherton Travel in Redwood City, Calif. Travelers aren't going as far, either. Last year, the average pleasure trip dropped to 799 miles, 11.2% fewer than in 1989, says the U.S. Travel Data Center in Washington. "Our guest book shows more people are coming from Pennsylvania, New York, and this area," says Deirdre Mears, manager of Abbott's Lobsters in the Rough, a popular tourist eatery in Noank, Conn. "People just aren't taking the two- and three-week vacations as much right now."

Europeans and other foreign visitors aren't so tightfisted. "We really gave a boost to American commerce," says Jeanne Fagnani, a research sociologist from Paris, whose family took a U.S. vacation this summer. The Fagnanis snapped up shirts, running shoes, and compact disks--all made "incredibly cheap" by the low dollar. Leslie Faulkner of New Orleans says that when her son, daughter-in-law, and their two children visited from London, "they loaded up on everything from clothes to briefcases to candy." The family had to buy extra luggage to haul back the booty, she says: "They left with eight suitcases and four carry-on bags, all chock full."

The big question now: How long will the upswing last? The iffiness of the U.S. economy doesn't bode well. Nor do the fare increases that domestic airlines plan for this fall. But the cheap dollar will continue to draw in foreigners and keep travel-hungry Americans at home. Werner and Betty Jo Leipold, retirees from Arkansas, have vacationed the past two years in Europe. But when BUSINESS WEEK caught up with them as they motored through Leadville, Colo., they said their next trip will be a fall tour of New Hampshire. "We knew Europe would be more expensive than we cared for," says Werner. And this year, keeping costs down is tourists' prime concern.

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