TESTIMONY OF

JONATHAN M. TISCH
CHAIRMAN,
THE TRAVEL BUSINESS ROUNDTABLE
CHAIRMAN AND CEO,
LOEWS HOTELS

FOR THE SUBCOMMITTEE ON TRADE, TOURISM AND ECONOMIC DEVELOPMENT COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION

UNITED STATES SENATE ON THE STATE OF THE U.S. TOURISM INDUSTRY

JUNE 22, 2006

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INTRODUCTION

Good morning. I am Jonathan Tisch, chairman and chief executive officer of Loews Hotels, and chairman of the Travel Business Roundtable. Loews Hotels, headquartered in New York City, operates 16 distinct properties across the United States and two in Canada, including The Loews Regency in New York City and our most recent addition to the Loews family, The Madison, a Loews Hotel, here in Washington, D.C. The company employs more than 7,000 people across the U.S. The Travel Business Roundtable (TBR) is a CEO-based organization originally established to continue the momentum of the 1995 White House Conference on Travel and Tourism. TBR’s mission is to educate elected officials and policymakers about the importance of our industry on the nation’s economic and social well being. Along with our strategic partner, the Travel Industry Association of America (TIA), we represent all sectors of the U.S. travel and tourism industry. Chairman Smith and Ranking Member Dorgan, thank you for holding this important hearing on the state of the U.S. travel and tourism industry. It was my honor to have testified before this subcommittee almost four years ago to report on the industry as it was beginning to recover from the horrific effects of September 11, 2001. At that time, our industry united to focus on getting travelers back on planes, in hotels and restaurants and to our theme parks, museums and shopping centers. The collective efforts of diverse travel and tourism interests have helped restore a great deal of confidence in travel to and within the U.S.

CURRENT STATE OF THE INDUSTRY

The travel and tourism industry defines the service economy across the globe, expecting to generate $6.5 trillion of economic activity around the world in 2006.¹ Our industry creates jobs and careers; we fulfill important social policy goals, such as moving people from welfare to work; we contribute more than $99 billion in tax revenue for local, state and federal governments that support essential services; and we are one of very few industries that creates a multi-billion dollar trade surplus. We are a significant presence in all 50 states and 435 congressional districts.

Though the industry is comprised of approximately 18 distinct sectors, natural disasters, government mandates and global challenges can and do create industry unity. When Hurricane Katrina debilitated an entire region and destroyed once vibrant commerce, the industry united to help New Orleans and the Mississippi Gulf Coast begin rebuilding. When the U.S. government promulgated a biometric passport deadline that the U.S. government could not meet, the industry united to ensure that Visa Waiver Program (VWP) countries had sufficient time to produce the most secure travel documents possible. When studies showed (and continue to show) that the deteriorating international opinion of America and Americans could be changed when international travelers actually visit the U.S., the industry united to offer our services as a public diplomacy tool.

Five years after 9/11, people are traveling again; industry employment is strong, directly providing 7.3 million U.S. jobs; and the industry continues to be an economic generator, accounting for roughly $645 billion in direct travel expenditures, $163 billion in direct travel-generated payroll and a $4 billion balance of trade surplus, to help offset a worsening national trade deficit.² So, you may ask, if the industry has recovered since 9/11 and is currently healthy, why are we here today to discuss the current state of the travel and tourism industry? Simply stated: We could do much more.

The real promise of travel and tourism lies not in what has occurred but rather in what can yet be achieved – for America as an interdependent part of a global economy, in dissuading an increasingly hostile and skeptical world about our country and its people, and for border security policies that can protect our homeland without discouraging essential international commerce.

International travel to the U.S., which reached its peak in 2000 with 51.2 million visitors, hit its low in 2003 with only 41.2 million visitors. Since that time, international travel has been increasing steadily, reaching 49.4 million in 2005; however, we are still uncertain if we will reach pre-9/11 numbers this year.³ In addition, the uptake in international visitation is largely attributable to Canadian travel. In 2005, Canadian travel surpassed pre-9/11 levels with an increase of 2 percent. However, travel from overseas was still far from hitting the 2000 mark, down 16.5 percent. Apparently, we have much work to do to get overseas travelers back to the U.S. In addition, our strongest travel market, Canada, faces new challenges with the impending implementation of the Western Hemisphere Travel Initiative (WHTI).

Today I would like to discuss some of the barriers that impede travel within – but especially to – the United States, their consequences for our nation’s economic, social and homeland security, and the ways in which this industry can help lift the barriers while helping to secure our borders. It may sound like a contradiction in terms, but allow me to explain further.

In April, the World Travel & Tourism Council (WTTC), in partnership with TBR and TIA, hosted the 6th Annual Global Tourism Summit here in the nation’s capital. Corporate and government travel and tourism leaders attended from all across the globe. It may surprise some of you to know that most developed countries have Cabinet-level officials focused solely on generating tourism, and more than 130 countries have official, government-sponsored tourism offices. These nations have recognized that a coordinated national tourism policy fulfills numerous domestic goals, including job creation, expanding trade surpluses and creating economic vitality on a multi-regional basis within their countries. These nations also spend hundreds of millions of dollars on tourism promotion because they see a tremendous return on investment.

During the summit, I frequently heard the question from our international counterparts, “Do you still want us to come here?” These visitors were asking in reference to the barriers – from the sometimes cumbersome visa process to the tighter requirements of WHTI to the long and unwelcoming inspections by Customs and Border Protection officials at U.S. ports-of-entry. International travelers are experiencing a certain “hassle factor” just to enter the U.S. that lends to a perception of “fortress America.”

As I enumerate the barriers that impede travel to the U.S. and hurt us in the global marketplace, please be mindful that there is no industry more committed to finding the proper balance between security at our nation’s borders and facilitating free and open commerce and travel across those borders. As we saw on 9/11, one terrorist attack can and will cripple our entire industry.

What follows should update the Subcommittee on where our industry currently stands and where it hopes to go.

BARRIERS TO TRAVEL

Western Hemisphere Travel Initiative

The travel and tourism industry fully supports the homeland security intent of the Intelligence Reform and Terrorism Prevention Act of 2004, calling for Customs and Border Protection officers to inspect fewer and more secure travel documents for those traveling across our borders. We have never questioned why or if the Western Hemisphere Travel Initiative, or WHTI, should be implemented. We are concerned with how and when.

Our greatest concern about WHTI is federal communication and cooperation. The Departments of State (State) and Homeland Security (DHS) are working together to release the Notice of Proposed Rulemaking (NPRM) on the air and sea WHTI deadline, scheduled for the end of this year. With that deadline only seven months away and cruise travelers currently booking their winter trips, we do not know what the requirements will be. The absence of this rulemaking could cost the cruise lines millions in lost business.

An even larger problem involves the January 1, 2008 deadline for land border travel. TBR and TIA support the concept of a PASS card, which was introduced jointly by State and DHS in January, as a lower-cost, easier-to-obtain and easier-to-carry variation of the passport. However, State and DHS cannot agree on what type of technology will be incorporated in the PASS card. Therefore, no procurement has been issued nor has any testing of cards or readers been conducted, and time for mounting a public education campaign and issuing the cards for the millions who will need them is running out.

As the deadline approaches with no certain timeline in place from State and DHS, the travel and tourism industry is supportive of making sure there is sufficient time to implement WHTI effectively. If our northern border is congested on January 1, 2008 due to a poorly implemented WHTI, not only will the security of our borders be compromised but our relationship with our largest trading partner will also be damaged. TBR and TIA commend Senators Ted Stevens (R-AK) and Patrick Leahy (D-VT) for their amendment to the immigration reform bill extending the statutory deadline by 17 months to June 1, 2009. We realize that a straight extension is not the entire solution to WHTI, but it is a good first step to ensure that there is enough time to “get it right.”

The U.S. government has done little to pursue a true bilateral solution to WHTI with Canadian officials. The success of the NEXUS frequent traveler program at our northern border argues for increased cooperation with the Canadian government.

The arrests of 17 terrorists in Canada on June 2 and 3 illustrates that terrorism still threatens our borders. While this incident is disheartening, it is also encouraging in that these terrorists were apprehended before they were able to attack. The capture of these men was the result of cooperative counter-terrorism investigations between U.S. and Canadian officials. This example shows us that working on a bilateral approach to WHTI with the Canadian government on the development of alternate travel documents is essential for ensuring our northern border is as secure as possible.

As with biometric passports for Visa Waiver Program (VWP) countries one year ago, we must secure the appropriate amount of time to do the job at hand properly. Our allies around the world deserve that, and our security demands it.

Perception of the Gulf Coast

Almost one year ago, the worst natural disaster this country has ever seen ripped through our nation’s Gulf Coast, destroying homes, families, businesses and a way of life. Hurricane Katrina, followed by Hurricanes Rita and Wilma also wiped out one of the nation’s most vibrant and rapidly growing travel and tourism economies. Overall, in the affected areas of Louisiana, Mississippi and Alabama, the travel and tourism industry accounted for 260,000 jobs and a payroll income of $3.7 billion. In 2004, the industry generated $18.3 billion in travel-related sales for the region. Many in our industry, like so many others, lost everything.

In Katrina’s aftermath, the industry showed great leadership and cooperation. Travel and tourism was the heart and soul of the Gulf Coast. The region is beginning its recovery; New Orleans welcomed 350,000 visitors to Jazz Fest, and three of the Mississippi Gulf Coast casinos have reopened and are operating at full capacity. Unfortunately, international travelers and Americans alike still perceive the devastation and despair immediately following Katrina as the current norm. We must erase these images. TBR and TIA, on behalf of the industry, offered policy recommendations to Congress immediately following the hurricanes. Many tax provisions were included in the hurricane relief package passed by Congress and signed by the President in December, but tax incentives for conventions and other visitors to the area, additional housing for workers to return to the area, and most importantly, a promotion campaign to let the world know the once devastated region is now open for business are still desperately needed.

The U.S. Travel and Tourism Advisory Board (USTTAB), of which I am a member, has issued recommendations to Commerce Secretary Carlos Gutierrez at his request that detail these lingering needs, and we would be happy to share them with the Subcommittee.

Entry/Exit Procedures and Visa Policy

As stated earlier, overseas visitors have been traveling to the U.S. less frequently since 2000. According to the UK Travel Barometer, since 2004, UK citizens are consistently attributing the top barrier to travel to the U.S. as entry procedures, from poor information about requirements to long visa processing times.⁴

When an overseas traveler arrives in the United States, his first point of contact is a CBP officer, and it could take up to two hours in line before this exchange even takes place. Being in the hotel business, I understand that you never get a second chance to make a first impression. When a guest arrives, he should be looked in eye, greeted with a smile and offered world-class service. If our front-desk agent does just that, I increase my odds of his returning to my hotel. The same should apply to guests of our country. CBP and Transportation Security Administration (TSA) inspectors, as well as consular officers overseas, should receive customer service training, and be evaluated based on their performance in keeping with new professionalism standards.

In addition, staffing levels must be closely monitored to utilize inspectors efficiently and avoid backlogs. As reported by USA Today on Monday, wait times in security lines still vary widely across the country. While TSA screener staffing has increased in locations such as Kahului Airport in Maui, where wait times are minimal, staffing has been decreased at Orlando International Airport, where wait times have in some cases exceeded 50 minutes.

Leaders in the industry have offered our expertise in these areas to work with DHS and State to conduct training at the Federal Law Enforcement Training Center (FLETC) and consult with airports on queue management and creating a more welcoming atmosphere. The industry is working closely with State and DHS on a Model Ports-of-Entry program using Washington Dulles and Houston as pilot airports. The objective is to begin carrying out the Rice-Chertoff Joint Vision, which I will discuss in more detail later in my testimony.

While the newly created Visa Business Centers have helped alleviate some hassles of the international traveler, the burdens on travelers due to understaffed consulates, long interview wait times and long trips to the interview are not eased. For instance, the average visa wait time in Brazil is 70 days, while the average in India is 132 days. Considering the informal goal within the State Department is not having wait times exceed 30 days, these lengthy wait times are unacceptable. Fortunately, not all the news is bad since wait times in countries like China and Korea have been reduced due to additional staffing and expansion of interview hours. Ultimately, it comes down to providing sufficient resources (staff, interview space, etc.) to both effectively screen visa applicants and efficiently process those individuals who simply wish to travel here for pleasure, business, study or exchange.

The travel and tourism industry knows about hospitality and maximizing resources and staff. Our offer to extend our services to State and DHS still stands, and we hope to be called upon soon.

Public Diplomacy

In addition to serving as an important economic generator, travel and tourism is a vehicle for diplomacy. As a nation, we are not using this vehicle effectively. At a time when the U.S. is the travel bargain of the world, we are still losing international travel market share. Worldwide international travel increased at a rate of 52 percent between 1992 and 2004, but America’s share of that lucrative travel market declined by 35 percent.⁵ America, formerly the most visited travel destination in the world, is now third, behind France and Spain and still declining. The U.S. used to be the most aspirational destination for international travelers; it is now sixth.⁶ The barriers I have enumerated not only discourage travelers from coming here, they also contribute to an ever-worsening image of the U.S. abroad. Studies consistently show that when international travelers come to the United States and experience American culture and hospitality first-hand, their perceptions of America and Americans change, almost without exception, for the better.

Unfortunately, our nation’s image is continuing to deteriorate. In March 2005, the Lowy Institute conducted the most comprehensive national survey ever in Australia. Australians were asked to identify the most highly esteemed countries in the world. Japan, a nation at war with Australia just 60 years ago, ranked first; China came in second; and the U.S. trailed significantly behind. Australians were then asked to name the two greatest threats to world peace. The overwhelming majority of Australians ranked both Islamic fundamentalism and the United States of America as the two greatest threats. The Pew Research Center reported that the percentage of British citizens having a favorable view of the United States fell from 75 percent in the summer of 2002 to just 56 percent in June 2006.

The new Pew Global Attitudes Project study released last week showed that these attitudes are not improving. The study examined opinions of the U.S. in 15 countries. Of the 11 countries surveyed in both 2005 and 2006, only three had a more favorable opinion of the U.S. than in the previous year. Significant downturns were seen in Spain, where only 23 percent of the Spanish public have a favorable opinion of the U.S., down from 41 percent last year. Another significant drop was in India, where 56 percent had positive views of America as opposed to 71 percent in 2005.

Fortunately, travel and tourism can help to reverse those trends. A one percentage point increase in international travel would mean 7.6 million more visitors who could return to their home countries as ambassadors for the United States.⁷ That same mere one percentage point increase would have a huge impact on the U.S. economy: an additional $12.3 billion in spending across the U.S.; 150,000 more jobs; $3.3 billion in new payroll; and $2.1 billion in new federal, state and local tax revenues.

The numbers speak for themselves. We must act now to create momentum on what will take years to rebuild.

Airline Taxes and Airline Modernization Funding

There are two critical areas of concern to the travel and tourism industry specifically facing the U.S. airline industry. First, airlines and their passengers paid almost $16 billion dollars last year in 15 separate taxes and fees to the Federal Aviation Administration (FAA) and DHS. These taxes have contributed to the difficulties U.S. airlines continue to face as they recover from the effects of 9/11. Congress should seriously assess the effects this significant tax burden has on business, leisure travelers and the aviation industry.

Secondly, there is a critical need to upgrade the U.S. Air Traffic Control Organization. Last year, U.S. airline operations grew to a record 11.5 million departures with carriers transporting 736.6 million passengers. Experts are projecting the demand for air traffic control to triple over the next 20 years. The airspace above major metropolitan areas is already congested and is rapidly approaching saturation. This growth reinforces the need to modernize our antiquated ATC system and implement technology upgrades that will accommodate the growing demand being placed on the system. This Committee will have the opportunity to play a pivotal role in addressing these concerns next year when the Airport and Airways Trust Fund act will be reauthorized. We strongly encourage you to use this historic opportunity to support the technologies and user based funding that will accommodate the needs and growth of this vital part of our national infrastructure.

State and Local Excise Taxes

While not a federal governance issue, another obstacle facing the travel industry throughout the nation is the increasing tax burden that is being placed on the traveling public.

Whether it is hotels, car rentals or any other travel-related service, these customers – both leisure and business travelers – are more and more the subject of discriminatory taxes imposed by state and local authorities, often to fill the general treasury. These taxes are politically expedient because they target “tourists” and other “out-of-towners.” Put another way, they are “visitors, not voters.” Worse yet, there is often no special benefit for travelers, nor a direct connection between the use of funds and those paying the taxes. It is just seen as easy money. These tourism taxes threaten to diminish the multiplier effect that tourism brings, and the effect may well be a net loss of overall tax and tourism revenue.

INDUSTRY RECOMMENDATIONS

The following are recommendations for Congress on how to alleviate the negative unintended impacts of these barriers while continuing to strengthen border security.

• Grant an extension for WHTI and work closely with State and DHS to effectively implement it;
• Direct the State Department and DHS to work with travel and tourism experts to include customer service/hospitality training in CBP and consular officer curriculum, to assist in evaluating the inspection area for more effective queuing techniques and smarter use of staffing;
• Appreciate travel and tourism’s immense potential as a vehicle for enhancing our image around the globe;
• Appropriate one-time funding to the New Orleans and Mississippi Gulf Coast Convention and Visitor Bureaus to promote the Gulf Coast as a travel destination that is “open for business;” and
• Make travel and tourism a national policy priority.

Rice-Chertoff Joint Vision

As you are aware, Secretary of State Condoleezza Rice and DHS Secretary Michael Chertoff on January 17 announced their “Secure Borders and Open Doors in the Information Age” initiative (RCI). Even before September 11, 2001, and especially since that time, the travel industry has been calling for homeland security initiatives that protect our country but also protect our economic and social vitality. In her remarks, Secretary Rice expressed her gratitude specifically to the travel and tourism industry as a private partner who contributed to this vision.

The three broad categories within the Rice-Chertoff Vision include: 1) Renewing America’s Welcome with Improved Technology and Efficiency, 2) Travel Documents for the 21st Century, and 3) Smarter Screening. These are issues we have been trying to bring to light over the past five years, as travel and tourism is at the heart of all of them.

Our industry fully endorsed RCI and was encouraged by its announcement. We are now awaiting government action. As previously stated, the industry can play a significant role in both consular and customs officer training and the model ports-of-entry program. We eagerly await the announcement of the public-private advisory committee to lead these efforts, and we look forward to partnering with State and DHS to turn these ideas into reality.

USTTAB Policy Recommendations

In addition to the recommendations for Gulf Coast tourism revitalization commissioned by Secretary Gutierrez, he also called upon the USTTAB to develop comprehensive national tourism policy recommendations. The proposal, which is under development, will highlight three main areas: public diplomacy and ease of travel, marketing and promotion, and return on investment. It will be submitted to the Secretary this fall, and is the result of collaboration among all Board members and the industry as a whole.

U.S. Destination Marketing Campaign

As I have discussed throughout this testimony, the public and private sectors must work together to remove the barriers facing legitimate travelers wishing to visit the U.S. However, once the burdens are alleviated, it will be just as important to notify those travelers that the welcome mat has been rolled out. As an industry, we believe that a nationally coordinated marketing strategy is a crucial investment that we all must make.

Presidential Advisory Council on Travel and Tourism

Most major nations in the world have made travel and tourism promotion a centerpiece of their national economic growth plans. To facilitate that goal, each of these nations has made policy coordination of the many and overlapping issues affecting this industry a policy priority. The United States should and must make tourism a national priority.

TBR has long advocated for a Presidential Advisory Council on Travel and Tourism, whose mission would be to help the U.S. retain its edge against its competitors as the premier travel destination in the world and to promote public diplomacy through travel to America. The Council would be created by Executive Order as a federal advisory committee under the Federal Advisory Committee Act (FACA). Its members should be public, private and non-profit sector individuals, and federal, state and local officials. These members would represent a diverse range of business, government and non-profit organizations with experience relating to policy matters impacting tourism development. The Council would pursue five essential objectives

• Raise awareness of the economic importance of travel and tourism and the unique role of tourism in promoting public diplomacy;
• Foster tourism policy development and coordination within the federal government
• Demonstrate how effective tourism policy can be implemented;
• Develop appropriate benchmarks to measure tourism policy success; and
• Create a crisis plan in the event of another catastrophic attack on U.S. soil.

Based on the information presented here today, I think you will agree that such an entity would be invaluable for achieving our shared goals.

CONCLUSION

On June 7, the Bureau of Economic Analysis at the Department of Commerce announced that real tourism output increased at an annual rate of 5.5 percent in the first quarter of 2006, the industry’s fourteenth consecutive quarter of positive growth. In addition, on June 14, the Federal Reserve released its beige book findings for mid-April to early June, citing that the economy expanded during this period but that the growth is slowing down. In seven of the 12 Fed districts, travel and tourism was cited as one of the region’s most active industries. The Fed is keenly aware of the impact of travel and tourism economies in each of these districts, whether positive or negative.

The travel and tourism industry is an integral part of making America’s economy, borders and international relationships strong. The companies and associations represented here today appreciate the opportunity to share our thoughts and suggestions. We look forward to continuing our efforts to elevate the industry’s importance and to working with this Subcommittee and full Committee as we move forward. Thank you, and I look forward to your questions.

1 World Travel and Tourism Council
2 Travel Industry Association of America
3 Office of Travel and Tourism Industries, U.S. Department of Commerce
4 U.S. Department of Commerce
5 World Tourism Organization
6 The Anholt-GMI Nation Brands Index
7 Travel Industry Association of America

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