Tuesday, October 7, 2008

Vienna Hotels See 20% Drop in U.S. Visitors as Markets Collapse

...take note Thailand

By Matthias Wabl and Zoe Schneeweiss

Oct. 7 (Bloomberg) -- Oscar del Campo, the manager of Vienna's five-star Hotel Imperial, says that when he heard Lehman Brothers Holdings Inc. had collapsed last month, he immediately started counting the cost to the business.

``Lehman and UBS are important customers, and they have either evaporated or cut back on travel and expenses,'' said del Campo, 40, speaking at the hotel's Cafe Imperial in the Austrian capital. ``Business is clearly slowing.''

The Imperial, a favorite with Mick Jagger and Vladimir Putin and located in the center of the world's busiest city for international conferences, is suffering as the seizure in global credit markets hurts its customers. U.S. visits to Vienna fell 20 percent in August, threatening the 4.1 billion euros ($5.6 billion) contributed by tourism and conferences to the city's economy.

Occupancy at the Imperial may drop as much as four percentage points to 61 percent this year, said del Campo.

``The boom years are over,'' said Vera Schweder, a spokeswoman at thecity's tourist board, which uses the slogan ``Vienna Waits For You.''

After the fall of the Berlin wall almost 20 years ago, Vienna, perched between Western and Eastern Europe, became a gateway from the West into countries such as Hungary, the Czech Republic, Poland and Russia.

Overnight stays in Vienna soared to 9.68 million in 2007, a 26 percent advance from 2002. For the last three years, Vienna held the most international conferences of any city in the world, according to the Amsterdam-based International Congress and Convention Association.

Financial Crises

``The financial crises started to hurt us in August,'' Schweder said. Sixty-five percent of the city's hotel beds were filled that month, down from 71 percent a year earlier, according to the city's tourist authority.

Americans make up the city's third-biggest group of visitors, behind Germans and Italians. Tourism accounts for 9 percent of Austria's economy, according to the country's statistics office.

``You don't travel when you're not sure whether the value of your house and your investments might plunge overnight,'' said Elisabeth Guertler, whose family owns the Sacher hotel opposite the State Opera. ``Decisions are driven by anxiety over the future.''

At the Sacher, best-known for its chocolate torte, visits from the U.S. have dropped 36 percent through August, and ``the trend has accelerated in September and October,'' Guertler said. The Sacher is resorting to offering fixed room-rates in dollars to attract U.S. visitors who are hesitating to book.

Old Town Tickets

Stocks tumbled around the world yesterday as the yearlong credit market seizure caused bank bailouts to spread through Europe. Austria's economy will expand 2 percent this year, compared with 3.1 percent last year, according to the country's Institute of Economic Research. Growth will slow to 0.9 percent next year, a six-year low, the organization said.

Souvenir shops and concert ticket sellers in Vienna's old town say fewer Americans are strolling in the pedestrian zones between the former Imperial Palace and St. Stephen's Cathedral.

``In the last few months there have been hardly any Americans at all,'' said Ismael Rama, 33, who sells tickets for classical concerts in historic dress featuring a wig. His tickets range from 19 to 72 euros. ``If they buy tickets, they now opt for the cheaper ones, whereas money didn't matter a year ago.''

Distraction

Vienna is also attracting visitors from eastern Europe, Russia and the Middle East, helping to offset declining numbers of U.S. visitors. Bookings from Russia have jumped 49 percent in August, according to statistics from the tourist board.

Some Americans can still be found in Vienna's 19th century neo-classical boulevards and squares and cobbled streets. Elizabeth Brown, 45, from New York, visited Vienna for four days with her husband, Jeremy, 48, to get some relief from the financial turmoil back home. They stayed at the Grand Hotel, where rates for a room start at 390 euros a night.

``It may seem slightly frivolous to be going on vacation at a time like this,'' Brown said, speaking in Vienna's main pedestrian street, Kaerntner Strasse. ``But it sure is good to get away and be distracted from your portfolio for a few days.''

Brown may be an exception. The city's tourist board says visitor numbers may fall this year for the first time since 2001.

``It's impossible to say whether we'll be able to post another record year in 2008 after five years of growth,'' Schweder said. ``2009 will be even more difficult.''

Back at the Hotel Imperial, sitting between golden lamps and chairs decorated in blue and gold brocade, manager del Campo is confident visitors will eventually return.

``Typically people want to travel again after a period of eight to 12 months of restraint,'' del Campo said. ``This will also be the case after the current crisis.''

To contact the reporter on this story: Zoe Schneeweiss in Vienna atzschneeweiss@bloomberg.netMatthias Wabl in Vienna atmwabl@bloomberg.net.

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