Leisure travel deals key as industry eyes economy

By Kyle Peterson

LOS ANGELES (Reuters) - An economic recession in the United States may mean fewer people will take vacations and leisure travel operators will have to cater more for consumers seeking deals.

Gambling and luxury travel hub Las Vegas has seen some weakness at the low end, but foreigners capitalizing on the cheap dollar and U.S. vacationers unable to afford a trip abroad will help soften the impact, industry executives say.

Online travel agencies could also suffer if travel declines but get better negotiating power with hotels more eager to rent rooms.

"I wouldn't say we're immune to what goes on around us. I think our business model is a little more resilient," Daniel D'Arrigo, chief financial officer at MGM Mirage, the world's second-largest casino operator, said at the Reuters Travel and Leisure Summit in Los Angeles on Monday.

Recent economic data points to a slowing U.S. economy, increasing the risk of a recession.

"It's hard to ignore a lot of the bad news that's out there," D'Arrigo said. "Clearly the consumer is a little bit stressed."

He said some businesses on the Las Vegas Strip have already seem some erosion in demand for lower-end offerings.

One way to avoid potential damage to U.S. hotel and casino business is to market aggressively to travelers from Europe who may be less impacted by U.S. economic softness, he said.

"Assuming the international economy does well, that should bode well for our Vegas properties," D'Arrigo said.

Paul Meyer, chief operating officer at casino game maker Shuffle Master Inc, told Reuters that casinos typically do not suffer much during economic downturns partly because of the escapist qualities of gambling.

"I think Vegas will be less affected than some other places," Meyer said. "I think to some extent gaming is recession proof."

For companies that sell travel bookings, economic softness can be both bad and good. While a recession could erode travel demand, it also boosts demand for the bargains offered by online travel agencies like Orbitz Worldwide and Priceline.com Inc..

Priceline Chief Executive Jeffery Boyd told Reuters that if airlines and hotels find themselves with unused inventory, they will send more unsold rooms and seats to online agencies.

"I think you can expect to see a more promotional activity," Boyd said. "The services that online travel agencies provide are going to be little more useful."

Boyd said Priceline is further insulated from a U.S. economic downturn by its presence in international markets, especially Europe.  Continued...