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Does the Hotel Industry Need a Travel Czar?

The American hotel industry is poised to earn a record $27.4 billion in profits this year, nearly $5 billion more than in 2005, but some travel business groups are pressing Congress to pass legislation that could yield even higher profits for the hospitality sector.

A proposed law would create a federal office to encourage travel to the United States by overseas visitors, and a $100 million promotional campaign financed in part through entry fees imposed on some international travelers.

But at least one powerful industry group opposes the measure, and some Congressional critics call it “corporate welfare.” A Senate committee approved the bill in June, but it has yet to be voted on by Congress.

“The Senate Commerce Committee has taken an important first step to reversing the 17% decline in overseas travel to the United States [since September, 2001],” says Stevan Porter, chairman of the Discover America Partnership lobby and president of InterContinental Hotels' Americas section in a statement.

The Travel Promotion Act of 2007 would create a federal travel office headed by an Under Secretary of Commerce. The program to explain U.S. travel policy abroad would be financed through a $10 fee paid in part by travelers from 27 countries participating in the United States' Visa Waiver Program. Nationals of waiver countries such as France, Germany and Australia may travel in the United States up to 90 days without a visa.

The promotion would pay for itself, says Jay Rasulo, chairman of the Travel Industry Association and chairman of Walt Disney Parks and Resorts. It could bring 1.6 million new visitors and $8 billion in annual spending, a study shows.

But the proposal doesn't sit well with Joseph McInerney, president and CEO of the American Hotel & Lodging Association. “Business is at an all-time high. The hotel industry is going to make more money this year than it's ever made in its history,” he says.

While the percentage of European visitors has declined since 2001, an influx of tourists from Canada and Mexico has offset the deficit. The real problem, McInerney says, is that many Europeans boycott the U.S. for political reasons.

“Our Iraq war policy plays into the image of this country. Our friends in France and Italy and Germany boycotted us going to war, and their people aren't supporting us either. Nobody is going to change the way the Europeans think about us until there's a change in the administration,” McInerney asserts.

The Travel Industry of America, which supports the legislation, says the number of visitors from France dropped 28% from 2000 to 2006, while the number from Germany fell 22%.

An average of 2.6 million rooms were occupied daily in 2000. The occupancy forecast for 2007 is 2.8 million, says Bjorn Hanson, a partner with PricewaterhouseCoopers. “To the extent that since 2000 we have lost international visitors, yes, we've made up for it.”

Foreign travelers accounted for 12.8% of occupied hotel rooms in 2000. But this year, only 9.3% of occupied rooms are forecast to be used by foreign visitors, excluding those from Canada and Mexico.

It's a shame to have so few European travelers, in view of the low dollar value, says Hanson. In mid-August, the euro was valued at $1.35. “Imagine how great things would be if we also had international, inbound travelers.”

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