The Slowdown Hits Holiday Travel

To entice reluctant spenders, hoteliers offer new discounts for the winter

There's still hope for travelers who haven't made Thanksgiving or Christmas reservations.

Waiting too long to book a hotel room or a cruise for the holidays is a nightmare, as procrastinators and bargain-seekers know. Popular hotels sell out months in advance, many impose strict minimum-stay requirements and rates are at their highest. But this year, many resorts still have rooms available during the usually packed weeks of Thanksgiving, Christmas and New Year's. A number of them are easing up on requirements or tossing in extras to entice travelers to book now. Some are even discounting rates, and many cruise lines are offering cruise deals. and holiday cruises at reasonable rates.

More people this year are waiting to book. Resorts from Rocky Mountain ski slopes to Bora Bora report the 2008 holiday season is off to a slow start and hope discounts and freebies will prod reluctant travelers to act. "We should have been chockablock full and totally buttoned up for the holidays" by now, says Donna Michaels, senior director of product development at World Travel Holdings, with companies including Trips of Distinction and Vacation Outlet that sell packages to places like Hawaii and Mexico. Instead, she says, she has been inundated with discount offers and relaxed restrictions from hotels and tour operators looking to fill empty spaces.

Online travel agency Cheaptickets.com says average daily hotel rates have dropped in some of its most popular holiday destinations for stays in the Nov. 24-to-Dec. 31 period. Compared with last year, hotel rates have come down an average of 19% in Fort Lauderdale, Fla., and 12% in Puerto Vallarta, Mexico.

In California, the Avalon at Beverly Hills hotel is discounting rooms by 30% and offering a daily $30 hotel credit from Nov. 28 to Dec. 28. Wyoming's Four Seasons at Jackson Hole is throwing in a fourth night free for stays between Dec. 18 and Dec. 26 (they offered that deal last year only after New Year's Day). In Jamaica, the Ritz-Carlton Rose Hall has a $250 resort credit for Christmas guests who book by the end of October; travelers can spend it on golf rounds, spa treatments or "Ritz Kids" activities, such as cookie-decorating with the resort's pastry chefs or making s'mores with Santa's elves on the beach.

Many hoteliers and travel agents still think the most popular resorts will fill up for Christmas and Hanukkah, which starts Dec. 21 this year; they figure travelers are just waiting longer to lock in their plans. The Frenchman's Reef & Morning Star Marriott Beach Resort, on St. Thomas in the U.S. Virgin Islands, still expects to sell out for Christmas week, even though bookings for that week and for New Year's are running 28% below last year at this time, says Viktoria Kuglics, director of sales and marketing. Just to be sure, the beachfront property is offering fifth and sixth nights free, plus free breakfast daily, to guests staying between Dec. 20 and Jan. 5.

Although few hotels are reporting cancellations, that could change as late-October deadlines for refunds approach. (Most high-demand hotels will refund holiday bookings only with 30 to 60 days' notice.) And Caribbean and Florida resorts have an extra layer of worry: Although hurricanes rarely strike in the region after November, the activity earlier this year made many travelers skittish and may prompt some to spend the holidays elsewhere.

Jeff Krudop, a travel agent with Travel Leaders in Fort Wayne, Ind., says that within the past two weeks he was able to find clients hotel rooms in the Dominican resort area Punta Cana and in Jamaica -- places that ordinarily are either booked solid or much pricier by now. "I'm surprised at the sheer number of people that are still planning now for Christmas," he says. "Normally people have it figured out six months in advance."

There is, of course, a catch. Airfares, which always peak during the holidays, will be even higher this year than in previous seasons. Nationally, airline ticket prices for Thanksgiving are up 27% from 2007, according to travel search engine Farecast.com. And since carriers cut back on flight capacity to many popular destinations this fall, seats in the U.S. are expected to book up faster. The Official Airline Guide says the number of domestic airline seats will decline by almost 10% in November and December compared with last year. Travelers willing to fly on off-peak days -- traveling home on the Monday or Tuesday after Thanksgiving, instead of Sunday -- are likely to have better luck finding flights at reasonable prices.

With airfares rising, the Horseshoe Bay Resort in Texas' Hill Country is getting a larger share of visitors driving in from Dallas and Austin this year. Overall, Thanksgiving bookings are down 9% from last year at this time, says Martha Heagany, chief marketing officer. The resort, which has three golf courses, is offering a holiday package with room rates at about 20% less than last year (it includes a $200 resort credit and daily breakfast).

Even some of the most in-demand holiday destinations are feeling the slowdown. Holiday bookings at Vail Resorts are currently behind those of last year, says Chief Executive Rob Katz. A few weeks ago, the company started offering customers one night free during a five-night stay over a holiday such as Christmas or Presidents Day. The promotion is good at all Vail Resorts and RockResorts properties, including those in places like Santa Fe and St. Lucia. "In the past, you've seen more deals at more of the off-peak times," says Mr. Katz. But this year, the deal-making has extended to peak weeks as the booking window shrinks.

The calendar isn't making things easier. With Christmas and New Year's Day falling on successive Thursdays this year, many travelers have decided they will take one long weekend or the other, rather than a full seven to 10 days. And among those opting for a full week, many want to travel during the second week, spending Christmas or Hanukkah at home.

Several of Club Med's all-inclusive properties, where most stays are Saturday to Saturday, are full or almost full for the week of New Year's. But there are plenty of availabilities in the week before. "Last year at this time people probably wouldn't have found anything," says Kate Moeller, director of public relations. This year, "it's much more of a wait-and-see mode." In places like Bora Bora and Ixtapa, Mexico, Club Med is offering two nights free during seven-night stays during holiday weeks between Nov. 22 and Feb. 14.

Other resorts are easing up on minimum-night requirements. The Radisson Resort in Aruba has reduced its usual holiday requirement of seven nights to five. In central London, the May Fair hotel is offering its holiday "bed and breakfast" package on every day of the week; last year, it was available only on weekends. Christmas-week rooms start at $350 a night, the same rate as last year.

The resort is offering Christmas guests who book early a credit that can be used for golf rounds, spa treatments or kids' activities.

Theme parks are doling out bargains, too. Silver Dollar City in Branson, Mo., is running about 80,000 visitors behind last year at this time, says Lisa Rau, director of public relations. The 5% decline came mostly among people traveling 300 miles or more. Christmas -- with live performances of "A Dickens Christmas Carol," a holiday light parade and a living nativity scene -- usually brings an influx of out-of-towners, but marketers say this year they've had to ramp up discounts and deals, like 2008 season passes available at last year's lowest price. Universal Orlando Resort, in Florida, says kids can stay free with a paid adult at five nearby hotels and get a free "unlimited" admission ticket.

Bill Thompson, director of sales and marketing for the Westin St. John Resort & Villas, in the Virgin Islands, says this summer he noticed resort guests were cutting back on the extras while vacationing. Parents came to the pool with coolers full of juice boxes and snacks for the kids. "Affluent people generally don't give [vacations] up, but they're not sitting at the bar having four or five drinks," he says. "They're having one drink and going back to their room and opening up their own bottle of wine."

The hotel is about 80% booked for the holidays as of this week, Mr. Thompson says; usually it would be sold out. The result is a "Santa Savings" deal, with room rates starting at $435 a night from Dec. 19 to 25, about 30% below last year.

By: Candace Jackson
Wall Street Journal; October 5, 2008

Kohl's Makes Grab for Market Share

As Holiday Season Nears, Retailer Opens More Stores And Plans Aggressive Discount Pricing

Kohl's Corp. is opening 46 stores Wednesday as part of an aggressive effort to take market share from competitors just as the holiday season gets under way and U.S. consumer spending is stagnating.

"We've been in a period now for over a year where the customer is shopping less," says Kevin Mansell, who became chief executive of the Menomonee Falls, Wis., retailer in August. "You'd better start figuring out how you're going to take more from the other guy."

Kohl's will open 46 stores today, including this one in Burlington, Wis.

The middle-market chain, which competes head-on with J.C. Penney Co. plans to open a total of 75 new stores in 2008, Mr. Mansell says. After the new openings this fall, which include one more in November, the total Kohl's store count will be 1,004, or just shy of J.C. Penney's 1,083.

Kohl's has scaled back plans announced last year to have 1,400 stores by 2012, which would have worked out to just over 100 new stores a year on average. The company is aiming for 50 stores next year, and Mr. Mansell declines to make further projections.

As part of its market-share offensive, Kohl's also plans to boost spending on holiday-season marketing -- especially online advertising -- and trim inventory to cut costs.

Despite the efforts, Mr. Mansell is already predicting that sales at stores open at least a year will be down 2% to 4% during the holiday season compared with last year. "For the foreseeable future, we see a tough economy, a tough environment," he says. "We have to be focused on outperforming the competition and gaining share at their expense." Kohl's offers many different inds of kids shoes and children's shoes

Industry analysts say Kohl's expansion is likely to help it pick up market share from vulnerable competitors like Mervyn's, which filed for bankruptcy protection in the summer and has announced plans to close 26 stores in five states. Regional department-store chains Boscov's and Bon-Ton are also considered likely to give up share to Kohl's.

"If they don't have a good Christmas, they're going to have a hard time making ends meet," says J.P. Morgan Chase analyst Charles Grom. "It's a good time for Kohl's to have an offensive growth strategy." He believes Kohl's is likely to capture 20% to 40% of the sales from the closing Mervyn's stores.

Bill Dreher, an analyst with Deutsche Bank Securities, notes that Kohl's has a big opportunity to snag market share in California, where Mervyn's is closing 11 stores this fall. Kohl's, which has 88 stores there, is opening two more Wednesday. "Where they've got stores in California, they've overlapped with Mervyn's markets," Mr. Dreher says. "Mervyn's is likely to be a donor of market share to Kohl's."

Penney and Macy's also compete with Kohl's, but both are more financially stable than the regional chains, presenting less opportunity for Kohl's to move in.

The holiday season is expected to be especially brutal for retailers this year. The National Retail Federation forecasts sales between November and December will rise only 2.2%, their smallest increase since 2002. Other projections are even worse: Market researcher TNS Retail Forward Inc. expects sales to rise just 1.5% in the fourth quarter, below the tepid sales gains in the third period. And analysts are already predicting that stores will put merchandise on sale early, cutting into profits.

Kohl's plans to tout its lower prices in its holiday marketing early in the season. "We're very focused on making sure that we can show [customers] that their dollar is going further," Mr. Mansell says. He adds that deep discounts are likely even before the holiday shopping season officially kicks off on the Friday after Thanksgiving, or Black Friday. "This is going to be a good holiday season to be a consumer," he says. "There are going to be some incredible deals."

Like other retailers, Kohl's has struggled as consumers have cut spending. In its fiscal second quarter ended Aug. 2, profit fell 12%, and Kohl's has forecast a decline in second-half sales at stores open at least a year.

In addition to its planned store openings next year, Mr. Mansell says, Kohl's will concentrate on renovating 60 existing locations -- almost double the number it is refurbishing this year and the most ever.

And despite tightening credit, Kohl's is well positioned to continue its expansion, Mr. Mansell says. "Our strong balance sheet and financial position continue to give us tremendous flexibility to make the right long-term decision and avoid being short-term focused." For example, he says, Kohl's, which owns 35% of its stores and leases the rest, looks for "the best location first, not the cheapest," when deciding where to open new locations.

By: Cheryl Lu-Lien Tan
Wall Street Journal; October 1, 2008

RIM Shares Fall on Sales Worries

Profit Rises, but Investors Fear BlackBerry Maker Will Find Holiday Season Tough

Fears that Research In Motion Ltd. is spending heavily to push a new slate of sleek BlackBerry devices to holiday shoppers outweighed news of higher sales and profit, sending shares plunging.

Second-quarter earnings released Thursday showed RIM growing strongly, but weak earnings guidance for the third quarter spooked investors already worried that the economic downturn will erode the profits of do-it-all phones known as smart phones.

RIM posted net income for its second quarter ended Aug. 30 of $495.5 million, or 86 cents a share, up from $287.7 million, or 50 cents a share. Sales rose 88% to $2.58 billion. Shares of RIM fell 24% in early trading Friday to $74.07 on the Nasdaq Stock Market.

The Waterloo, Ontario-based company forecast fiscal third-quarter earnings of 89 cents to 97 cents a share, based on a lower-than-expected gross margin of 47%. Analysts polled by Thomson Reuters had forecast earnings of 98 cents a share.

"There is fear that this is a segment where you have to spend a lot on marketing to attract customers, and this is what is eating into profits," said Tero Kuittinen, a telecom-equipment analyst at Global Crown Capital LLC.

RIM has been investing heavily with its carrier partners to push its brand to consumers around the world. So far, it has captured 17.4% of the global market for smart phones, according to market firm Gartner Inc., and 54% of the U.S. smart-phone market, according to the research firm IDC.

To sustain this momentum, RIM needs to ship in bulk to carrier stores in the coming weeks before the start of the holiday season. In the U.S., the company is expecting to debut the Bold, a model with improved Internet and multimedia capabilities; the touch-screen Storm, a model designed to ward off the allure of Apple Inc.'s iPhone; and the Pearl Flip phone with a smaller keyboard.

The company is also working to bring new messaging, social networking and retail applications to its devices, through partnerships with Ticketmaster, Microsoft Corp., Time Warner Inc.'s AOL, TiVo Inc. and others. It is also marketing aggressively to increase the global distribution of its products, which are sold in 150 countries. The company added 2.6 million subscribers in the second quarter for a total of 19 million.

But the cost of adding so many new models, applications, distributors and subscribers is expensive. Analysts worry that the new promotions could be undercutting the rich subscription fees from its core business users.

Jim Balsillie, co-chief executive, expressed confidence that this investment would pay off as consumers replace basic cellphones with smart phones and start doing more with them. He also said that its increasing scale would help it bring down the cost of production and that adding suppliers would help it reduce the cost of key components. "If there was one thing that I would do if I had more latitude is...invest more," Mr. Balsillie said in a call with investors.

How consumers react to the new devices won't be known for six months, after RIM reports results for its fourth quarter, which ends in February. And it will be several months before the impact of the credit crisis, and layoffs among users in financial services, can be seen in subscriber numbers.

By: Sara Silver
Wall Street Journal; September 26, 2008

Neiman Marcus Sees Bleak Holiday

Luxury-Goods Retailer Reports a Doubling of Its Quarterly Loss And Warns the Wealthy Are Cutting Back

Upscale retailer Neiman Marcus Inc. offered a bleak outlook for the holidays and said its quarterly loss more than doubled from a year earlier, signaling a further downturn in the U.S. luxury-goods market.

Neiman, which posted a $35.7 million loss for its fiscal quarter ended Aug. 2, warned that the American luxury market is likely to be hit hard by the recent financial crisis as wealthy and upper-middle-class consumers change their attitudes toward spending.
[Neiman Marcus Sees Bleak Holiday] Najlah Feanny for The Wall Street Journal

A Neiman Marcus at New Jersey's Garden State Plaza Mall on Wednesday

James Skinner, Neiman's chief financial officer, said that news of the financial turmoil is ubiquitous and that is negatively affecting the mood of consumers, who otherwise can still afford expensive clothes, shoes and jewelry. "The best customers never lose the ability to spend," Mr. Skinner added. But "there's an emotional impact" because of the coverage.

Carol Brodie, a branding adviser from Fairfield, Conn., said she splurges every fall on high-end coats and shoes. But this year, though she is doing well financially, she didn't shop. "I don't feel comfortable going all out," she said.

In a conference call, Neiman Marcus Group Chief Executive Burt Tansky said that "we anticipate that the months ahead will be difficult," including the crucial holiday season. He noted that many of the company's customers are heavily invested in the stock market.

Neiman's results came after analysts last week began reducing their full-year earnings forecasts for Saks Inc., which generates more than 20% of its annual sales at its flagship store in New York. Shares of Saks hit a 52-week low Wednesday in intraday trading before closing at $9. "Obviously, it's a very difficult time in the U.S.," said Saks CEO Steve Sadove Wednesday at a fashion-industry event in Milan.

As recently as the summer, some key categories of the U.S. luxury market were showing surprising resilience, including high-end jewelry, Swiss watches and products from such European brands as Hermès and Louis Vuitton.

But many luxury retailers saw sales start to weaken as the summer wore on. Nordstrom Inc., for example, cut its outlook for the second half in mid-August. Saks reported a 5.9% decline in August same-store sales and a $32 million loss for its fiscal quarter ended Aug. 2. Tiffany & Co., which sells everything from $200 silver pendants to $1 million-plus diamond rings, said same-store sales in the U.S. declined 4% in the quarter ended July 31.

Then came last week's meltdown on Wall Street, which industry executives say could dry up any lingering demand in the U.S. for luxury goods, including the last pockets of strength.

At the fashion shows under way in Milan this week, many European luxury-goods executives didn't hide their concern that affluent consumers will quit buying designer clothes, handbags and shoes. Francois Henri Pinault, chief executive of PPR SA, which owns Gucci, Bottega Veneta and Balenciaga, said he doesn't expect the U.S. market to recover until mid-2009.

"There will always be rich people, but it's the mindset" that drives their spending, Mr. Pinault said. He is particularly concerned about whether Asian consumers, a key market for the sector, will continue buying given the financial turmoil.

The financial crisis, coming only a month before many retailers put up their holiday-gift displays, couldn't come at a worse time. Neiman Marcus, for example, will unveil its annual holiday catalog Oct. 7. While most retailers were already expecting sales to slow and were keeping inventories lean, they are now bracing for an even tougher season.

Neiman, which is owned by private-equity funds TPG and Warburg Pincus, posted revenue of $4.6 billion in the fiscal year ended Aug. 2, up from $4.4 billion the previous year. But heavier discounting and free shipping eroded gross margins by 1.1 percentage points, the company said, and sales at stores open at least a year fell 1.4%. Results were helped by a 53-week fiscal year, which tacked on an additional $50 million of revenue.

Mr. Tansky said that high-end jewelry, in particular the most expensive pieces, as well as handbags, shoes and fragrances performed well in the quarter. Lower-priced items aimed at the "aspirational" or "occasional" shopper didn't sell as well. He also said the company's most loyal customers "haven't traded down."

Retailers that are heavily reliant on the New York City market will probably experience significant sales declines in coming months, analysts say, citing both the financial crisis and a likely dropoff in foreign tourists as the crisis spreads abroad.

"Saks and Tiffany are at the center of Wall Street's woes," because their businesses are so reliant on both New Yorkers and foreign tourists, said Goldman Sachs analyst Adrianne Shapira in an interview.

Tiffany's New York flagship accounts for 10% of the company's sales, Ms. Shapira said. On Friday, she reduced her 2008 earnings estimate for Saks three cents to 16 cents a share and cut Tiffany's guidance by a penny, to 31 cents a share.

Neiman's New York City outpost Bergdorf Goodman, which accounted for 12.6% of revenue in 2008, could also be hit hard.

By: Rachel Dodes
Wall Street Journal; September 25, 2008