Oh, The Places They'll Go

Americans aren't holding back on vacations this year. That spells profits for the travel industry

Teamwork consultant Judith Nilan is a travel agent's dream client. She has helped her father book a European summer vacation for herself and nine other family members. Undaunted by unfavorable exchange rates and security concerns, Nilan's dad is footing the $50,000 bill, says the Tacoma (Wash.) woman. "This is the big family get-together trip."

Wanderlust is back -- and airlines, hotels, cruise lines, and other travel providers are gearing up for one of the most robust summer seasons in years. Despite fears that terrorism and high gasoline prices could put a crimp on travel plans, that isn't happening so far. Some companies even expect to hike prices, bringing a lift to profits. The Travel Industry Assn., which tracks consumer interest in pleasure travel, says its index rose sharply in the first quarter; it now stands at the highest level since the summer of 2002. Even international travel is rebounding, despite the Madrid bombing and the weak dollar. "People feel they've earned a vacation," says Tom Seddon, senior vice-president of InterContinental Hotels Group PLC (IHG ).

Those plans are already translating into higher bookings. Teri L. Trettin, owner of the Carlson Wagonlit Travel Inc. agency that helped Nilan, says sales are up more than 30% for the summer. "We're seeing a lot more travel to greater distances this year," she says. Online agency Orbitz Inc. (ORBZ ) says its bookings for June 1-Sept. 15 are up 67% since last year, while CheapTickets.com says reservations are up 21%, including an 83% gain in international travel. Some companies report a return to pre-September 11 demand. Universal Parks & Resorts Chairman Thomas L. Williams is "downright giddy" that visitors at the Orlando park in the first quarter rose to 2000 levels.

The stronger traffic is likely to pay off handsomely for most industry players. Car rental rates will move up 5% to 7% in the second quarter, says Gary L. Paxton, CEO of Dollar Thrifty Automotive Group Inc. (DTG ). Likewise, Royal Caribbean Cruises Ltd. (RCL ) says it has begun to raise prices while maintaining strong bookings. Hyatt Corp. expects to start boosting rates by yearend. The exception is the beleaguered airlines. Given stiff competition and high fuel prices, most will be lucky to break even.

The bottom line for travelers: don't count on getting a better deal by waiting to make plans. "As we get closer to Memorial Day, a lot of the airfare deals will start drying up," warns Tom Parsons, CEO of the company that runs Bestfares.com. Ditto for hotels and cruises. Even tourist spots that report a slow buildup in summer business aren't giving away the store. Instead of dangling price cuts, Mary Beth Teas, who rents homes on Great Diamond Island off the coast of Maine, is offering previous renters free lobsters. "I'm totally optimistic" about the summer, she says. Too bad for the lobsters.

By Wendy Zellner in Dallas, with bureau reports

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