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A big blow for travel industry

By Jenn Abelson and Robert Gavin
Globe Staff / April 28, 2009
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The bruised US economy, which had shown a few signs of life, took another beating yesterday with global concerns over the swine flu outbreak expected to hit travel and tourism the hardest.

The virus, which has sickened people across the United States and Europe and resulted in 149 deaths in Mexico, prompted the European Union's health commissioner to advise Europeans to avoid non-essential travel to Mexico and parts of the United States.

The warning yesterday could have a devastating effect on New England, where 95 percent of overseas travelers come from Europe.

Patrick Moscaritolo, chief executive of the Greater Boston Convention & Visitors Bureau, said just a 10 percent drop in travelers to New England would mean a loss of more than $60 million, but it is too early to predict the fallout. The bureau had already expected a 5 percent to 9 percent drop in travel to New England because of the sour economy.

"This is like the perfect storm. We had people who were already holding onto their pounds and euros because of concerns about what is going on in their economy and now we have a major European body saying don't travel to America," Moscaritolo said. "It doesn't get much worse than that."

Travel and tourism business is one of Massachusetts' key industries. It is the fifth-biggest in terms of employment with 300,000 workers, according to the US Department of Labor.

Already, some companies are advising employees to rethink travel needs.

"We're encouraging employees if travel is not mandatory, to carefully consider their travel plans," said Sarah Alspach, a spokeswoman for GlaxoSmithKline, the British pharmaceutical giant that last year acquired Sirtris Pharmaceuticals Inc. of Cambridge. But the company has not made any formal travel restrictions, Alspach said.

Amy Peterson, spokeswoman at Avid Technology Inc., a Tewksbury-based video and audio editing software maker, said the company is taking steps after the US government cautioned Americans against nonessential travel to Mexico.

"In addition to communicating a reminder to the Avid staff about the swine flu and precautionary measures that they can take, we're also working with our corporate travel department to potentially hold back any employees that were slated to travel to Mexico on business."

John Dragoon, chief marketing officer of Novell Inc., a Linux software maker in Waltham, said the company was already investing in high-definition teleconferencing gear, as a substitute for costly plane trips. But the swine flu outbreak has given Novell one more reason to rely more on video technology.

"We're not putting a hold on travel. If you have to travel for business reasons, do so, but take extra precautions," he said.

The flu outbreak, coming weeks before the busy summer travel season, is another setback for the struggling travel industry, which was expecting the volume of total overseas visits to the United States to fall 3.1 percent from last year, according to the US Travel Association, an industry trade group.

Several airlines are waiving fees for passengers who were scheduled to fly through certain cities in Mexico and want to change their tickets.

Shares of travel companies suffered yesterday. The Amex Airline Index sank 11 percent and shares of Delta Air Lines Inc., the world's largest carrier, fell $1.13 to $6.75.

"The travel advisory from Europe would have a significant and detrimental impact on the travel community and moreover on the American economy when we can least afford it," said Geoff Freeman, senior vice president of the US Travel Association. "Now is time to urge measured restraint rather than panic."

Throughout yesterday, European leaders shifted positions on whether it was safe to travel to the United States and Mexico. But the contradictory advice left travelers confused.

Freeman said the panic caused by the outbreak of SARS, or severe acute respiratory syndrome, in 2003, resulted in $18 billion in economic losses. Travel in the first month of the outbreak declined anywhere from 20 percent to 70 percent, he said.

Beyond hurting the travel industry, the swine flu outbreak could also slow the massive trade between US and Mexico as goods from plum tomatoes to coffee to electronics receive heightened scrutiny crossing the border, according to economists and international trade analysts. Mexico is the country's third-largest trading partner and the seventh-largest for Massachusetts.

Mark Zandi, chief economist at Moody's Economy.com, said if the swine flu outbreak lasted for two months, and spread to US cities, then it could severely damage the US economy.

If countries move to curtail trade and travel, it would be similar to putting up trade barriers, which would hurt the global economy, Zandi said.

"Confidence is already at all time lows, and that would just shatter it," Zandi said. "The recession would last into next year."

Hiawatha Bray, Steven Syre, and Robert Weisman of the Globe staff contributed to this report. Jenn Abelson can be reached at abelson@globe.com; Rob Gavin at gavin@globe.com.