FT: US hotels and airlines slash prices as Trump policies hit tourism

Hotels and airlines in the US are cutting prices as tourists avoid the country in response to Donald Trump's immigration policies, according to the world's biggest travel company.

Dara Khosrowshahi, chief executive of Expedia, the largest online travel agent by gross bookings, warned the US travel industry is preparing for a turbulent year amid falling international interest in visiting the country.
American groups are responding to the strong dollar, he said, but another factor was the Trump administration's effort to impose a travel ban on visitors from some countries.
"I think that because of some of the perceived positions coming out of the current administration, the US as a destination is potentially looking less attractive as a product," said Mr Khosrowshahi, speaking to the Financial Times during a visit to London.
"One of two things is going to happen. Either the US has to go on sale in order to keep volumes up, or volumes are going to come down. When we look at our business, the leading indicator is pricing. Pricing has come down."
Expedia said it will reveal the full picture behind the pricing shifts when it reports its first-quarter results next month. But Mr Khosrowshahi's warning comes after the World Travel and Tourism Council (WTTC), an industry trade body, said there are "early signs" of growing "anti-US sentiment" among tourists.

Airline bookings down

Flight search data collected by ForwardKeys, a travel software group, showed airline bookings to the US were down 6.5 per cent in the week after President Trump in January issued his first executive order against the entry of citizens of seven Muslim-majority countries, which was later blocked by the courts.
On Thursday, a federal court in Hawaii extended its freeze of the US administration's revised travel ban indefinitely. One of the arguments against the ban raised by the state of Hawaii was the expected damage to its tourist industry.
The WTTC has forecast that the travel and tourism sector, which contributed $1.5tn to the US economy, or 8.1 per cent of its GDP, will grow at 2.3 per cent in 2017 - a contraction of 0.5 percentage points compared with last year.
In February of this year, the three largest US airlines, United, Delta and American Airlines, saw an average drop in revenue passenger miles of 2.5 per cent, compared with the same period last year. In response, all three airlines reduced seat supply by up to 6 per cent.
"The message that we are giving to the administration is… it's very much in our economic interest to present an open and friendly face to the world," said Mr Khosrowshahi.

Diversity to the board

Mr Khosrowshahi, who moved to the US with his family from Iran in 1978, has been a vocal critic of the US government's immigration policies, but insisted that his concern stems from the impact it could have on Expedia's business.
"After the order was announced, there was panic in my family and it affected a bunch of folks in my family," he says."There was a lot of confusion. But that's personal. I don't want to let the personal come into [running] the company."
Earlier this month, regulatory filings revealed that Chelsea Clinton. daughter of Bill and Hillary Clinton, has been appointed to Expedia's board.
Mr Khosrowshahi suggested Ms Clinton would provide diversity to its male-dominated board, while her relative youth, "global perspective" and work at her family's international charity, the Clinton Foundation, provide a "pretty extraordinary" background.
However, he said her appointment was "in no way, shape or form a political statement".
In the highly competitive online travel market, Expedia faces rivals such as Priceline and Tripadvisor. But the company is enjoying rapid global growth.

Mobile service

Reporting results for the year to December 31 2016, revenues were $8.78bn, representing a $2.1bn increase from a year earlier. Profits were close to $700m, rising just over $200m from a year earlier.
Mr Khosrowshahi said Expedia plans to build on its search engine for flights and hotels, with its goal of owning every leg of a traveller's journey. Last year, it launched a rail-ticket service in the UK with plans to train search service internationally.
He said that Expedia is looking to adapt as people increasingly use their mobile devices to book journeys and grow more comfortable making travel decisions at the last minute.
"When you land and we tell you your luggage is coming out of baggage claim, we should offer you 'do you want an Uber to your hotel?' Or, 'If you click right now, you can get a Hertz rental car for 20 per cent off, because Hertz has some extra cars in its parking lot'," he said. "We're talking to everybody right now but stringing it together is pretty challenging."
The company is also looking to break into the next platform where their customers are spending the most time. Mobile phones are now responsible for more than half of Expedia's traffic, and the company is experimenting with voice and chatbots on Amazon's voice-controlled speaker, Echo, Skype and Facebook Messenger.
"These technologies aren't linear so I expect it to start small, [but] this is an investment that will be material to us in the five to 10-year timeframe," Mr Khosrowshahi said. "Those types of opportunities, for me, are pretty darn exciting."
Copyright The Financial Times Limited 2017

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