The 9-11 Terror Attacks And Their Effects On Us Hospitality Industry

Introduction;

On the morning of September 11^th 2009, 19 terrorist affiliated with the Al-Qaeda group crashed four planes into the world trade center in downtown New York, into the Pentagon building in Washington D.C and a fourth plane crashed on a field Pennsylvania. These resulted in the deaths of all the passengers and terrorist on board and left many others injured and dead after the collapse of the world trade center. A total of 2,974 people died in the attacks.

The attacks had far reaching effects on various aspects of the US society including on the economy, foreign policy, security, politics and the hospitality industry. It marked the beginning of the Bush’s’ administrations War on terror with the deployment of US armed forces in Afghanistan and later in Iraq.

The hospitality industry including airline companies, restaurants and the tourism industry are very prone to crises from events external to it; event such as war, attacks, natural disasters, disease outbreaks; all have far reaching effect and implications on the industry; the 9/11 attacks were no different.

The effects;

The tourism industry world wide suffered heavily from the attack; for example hotel occupancy in New York fell to as low as 40% in the period immediately after the attack; as a result, about 3000 workers were laid off.

Table 1 International tourist arrival in 2001 compared to 2002. Source: Nigel (2005) adapted by author.

The 9/11 attack led to the complete destruction or irreversible damage to four downtown Manhattan hotels – Marriot World Financial Center, Marriot World trade center , Millennium Hilton and the Embassy suites Hotel New York city. The attack also caused the postponement of the début of the new Ritz- Carlton Battery Park City. The average occupancy rate in Manhattan fell from 89% and 87% for the months of September and October in 2000 to 62.2% and 70.8% for the corresponding months of 2001 (Ernst & Young,2002). New York hotels and most of other hospitality facilities country wide were faced with panicky customer and the managers were faced with reduced hotel occupancy and falling revenues.

Table 2: Percentage change in hotel occupancy form previous year, 1999-2000. Source: WAI analysis of Smith travel Research data.

From table 2 it is already clear that the hotel industry was already facing a slow down following an economic recession in the United States. The crisis precipitated by the attack only served to make it worse. The fall in occupancy rate was more pronounced in the upper scale segments because these depended on consumers originating from long distance travels and vacation-related hotel stays more than the lower segments that depended mostly on local occupancy (Howard et al, 2002).

Table 3: Percentage change in hotel average daily room rate from previous year: Source WAI analysis of Smith travel Research data.

The immediate response of the hotels was to raise the daily room rates for the upper scale segment in order to meet the revenue deficit. However, the lower scale segments, which targeted the local population reacted by lowering of the daily room rates aim at increasing their occupancy rate during the period (table 2).

The airline industry was hardest hit; the number of passenger worldwide fell by 10%; this worsened the financial woes which the industry was already experiencing. Immediately after the attacks flights were grounded in many parts of the US and Canada due to the closure of the corresponding airspace to forestall other attacks; and the airline were forced to pay refund for the passenger who couldn’t pay their flight. Some airline for example, Midway airlines shut down their operations; even the major airlines were tittering at the edge of bankruptcy and others went ahead to file for it; and there were thousand of layoffs announced the week after the attack; the industry was in a major crisis. Additionally the industry was forced to upgrade their airport security measures to cover for the deficit that precipitated the attacks. This had the effect of reducing the convenience of flying; consequently it is estimated that the industry lost close to USD1.1 billion due to falling demand (Garrick et al, 2005). The inconveniencies were blamed on the delays caused by individual and luggage security checks introduced. In a response the federal government pumped into the industry USD 5 billion as short-term assistance and an additional USD 10 billion as loan guarantees (Makinen, 2002).

The response;

Immediately after the attack the staff of most hospitality establishment sought to reassure their client of their safety; there were also preparations for any more attacks by mobilization of emergency equipment. Special attention was given to the guests who feared for the safety of their families (Sturman, 2001). Televisions were placed in public places for better and continuous viewing. Various channels of constant communication between the various firms in the industry and with local and federal agencies were opened for the purposes of monitoring the situation (Stafford et al, 2002).

Crisis management;

The ability of an industry to react quickly and effectively is very important in ensuring its survival during major and unpredictable events that may harm the organization or the stakeholders. It is of importance to note that the hospitality industry offers very personalized services and the consumers’ choice is based on perceived rather than real quality; therefore it is in the best interest of the player to be seen in a good light especially during a crisis. There are several theories that can be used in management of a crisis.

Crisis management planning; even though crises are unpredictable, it would serve an organization greatly to have a contingency plan; this involves  crisis management teams that develop simulated crisis management plan that seek to respond quickly and effectively to a situation.

Business continuity planning; this envisions a situation where the business of a firm is greatly disrupted by a crisis; and seeks to formulate a way of moving the business back to the pre-crisis state; it is of importance to note at this juncture that some of the businesses that were affected by the terrorist attacks never recovered.

Structural functional systems; this clearly stipulate the decision making hierarchy in the organization and taking into account the possible absence of some members of the chain; for example it should be made very clear who make press statements to avoid conflicting or negative statements showing the firm in a bad light emanating from it.

Diffusion of innovation; there should be open communication paths of sharing new ideas and method of ensuring that the ideas reach the decision making people in the organization. It should  always be that if anyone comes up with a new way of dealing with a certain aspect of the crisis that he/she should be given a chance to voice it; this is especially so among larger group than the lower cadre workers.

Crisis management can be divided into four stages commonly known as the four R’s. These are reduction, readiness, response and recovery.

The 9/11 crisis was a sudden and shocking occurrence that threatened the loss of many organizations. The reduction phase involved the repeated assurances through the media to the general of their safety. The response, seen as lay offs, cutting down of costs and complete shut down of some sectors; after this  initial defensive response, the sector sort to win back the confidence of its client through widespread campaigns in the media.  They also lobbied for example for the reopening of some of the facilities like airports that had been shut down and the lifting of travel bans and warnings. The recovery process had three main parts; first they contacted as many clients as possible to reassure them of their safety, secondly they engaged the community, media and aid agencies in generation positive feedback encouraging local and regional visitation, finally a market recovery financial plan was launched to look for funds through various sources to cushion the industry against the downturn and to regain consumer confidence. The airline industry for example was funded by the government. Key to the crisis management was cooperation and constant communication among the key players of the industry.

Criticisms:

Various branches of the industry were criticized for laying off their workers during the crisis; the firms were viewed as to have rushed to axe tens of thousands of jobs in the process of strategic management of their business; it was viewed as adding insult to a country already injured by the attack. Some of the new security measures in the airports have also been criticized for causing inconvenience (Cunningham et al, 2004); however, opinion of this is divided with some of the commuters felling safer with the new regulations in place.

Recovery in the industry;

A study carried out by Travelocity one year after the attack sowed that at last the industry was recovering from the attack.  One in 16 respondents answered that they continued to avoid air travel as opposed to one in four immediately after the attack. Concerns about personal security were reduced with the majority of the respondents feeling that the level of security was better than immediately after the attack. Immediately after the attack, the responses showed that 73.2% of the respondents did not avoid travel while 26.8% did avoid travel. One year later, 93.3% did not avoid travel while 6.4% actually avoided travel (Travelocity, 2001). The tourism industry is also recovering from the crisis and some of the establishments; as indicated in the predictions of the outlook for the year 2009 are operating at pre-crisis rate (Travelocity, 2009).

Recommendations;

The industry should carry out thorough debriefing procedures after every crisis of this nature; this will seek to find out where there are weak links in crisis management. Additionally there should be a precise methodology in dealing with crises especially in an industry that is prone to external factors like the hospitality industry. The firms should also identify organizations that can help them during crisis; these include government agencies, and should corroborate with them during the crisis. The firms should cooperate with media agencies to enable them to tell their own story; this will prevent them from being viewed in a bad light. The firms should retain flexibility to a certain degree to enable them to be decisive and to react quickly during operation. Scenario- based training for the staff should be part of the policy that should also involve live drills simulating an actual situation. Most importantly, contingency plans should be drawn up to spell out the course of action in case of a crisis; this is of special importance to the hospitality industry since it is easily affected by external occurrences. The plans should also incorporate short and long term turn around strategies that will be employed in a future crisis (Nigel et al, 2004).

Conclusion;

Some sectors of the hospitality industry have never fully recovered from the effects 9/11 attacks since the blow rendered to them was so devastating that it completely disrupted their business; for example Midway airline ceased operation on September 12^th 2001 and never reopened again. Other airlines that can blame the 9/11 attack to their collapse are; Sabena (Belgium), Ansett (Australia), Vanguard (U.S) and Swiss air. This can be blamed largely form lack of preparation in their part; none of the managers had envisioned a terrorist attack on that scale.

Now, it is very clear that crisis management plans should form an integral part of any firms’ strategic plan. Since crises are sudden and cannot be prevented, the lesson to be learnt is that you can never be too prepared.

References

Cunningham, Lawrence F., Young, Clifford E., Lee, Moonkyu: (2004): Perceptions of Airline Service Quality: Pre and Post 9/11; Public Works Management Policy 2004 9: 10-25

Ernst & Young LLP: (February 2002): 2002 Manhattan Lodging Forecast: Available from:
http://www.hotel-online.com/News/PR2002_1st/Feb02_EYManhattan.html

Garrick Blalock, Vrinda Kadiyali, Daniel H. Simon: (February 23, 2005): The Impact of Post9/11 Airport Security Measures on the Demand for Air Travel. Available from:

http://aem.cornell.edu/faculty_sites/gb78/wp/airport_security_022305.pdf

Howard Wia, Jeff Rickert: (September 2002): US Hotels and Their Workers:  Room for Improvement:  AFL-CIO Working for America Institute: Available from: http://www.hotel-online.com/News/PR2002_3rd/Aug02_HotelJobs.html#experience

Makinen, Gail (September 27, 2002): The Economic Effects of 9/11: A Retrospective Assessment: Congressional Research Service. p. CRS-4. Available from: http://www.fas.org/irp/crs/RL31617.pdf.

Nigel Evans, Sarah Elphick: (2005) Models of crisis management: an evaluation of their value for strategic planning in the international travel industry: Newcastle: International Journal of Tourism Research VL: 7 NO: 3 PG: 135-150, 2005: John Wiley & Sons, Ltd: Available from: http://dx.doi.org/10.1002/jtr.527  

Stafford, Greg Yu, Larry Armoo, Alex Kobina (2002) Crisis Management and Recovery: How Washington, D.C., Hotels Responded to Terrorism:
Cornell Hotel and Restaurant Administration Quarterly.2002; 43: 27-40

Sturman, Michael C (September 11, 2001): The hospitality industry: one year since By Publication: Cornell Hotel & Restaurant Administration Quarterly: Tuesday, October 1 2002

Travelocity: (2002): Travelocity survey on the effects of 9/11 attacks on passengers attitude to air travel: Travelocity.com Newsroom: Available on http://www.travelocity.com/

Travelocity: (2009): 2009 Forecast poll: Travelocity.com Newsroom: available from: http://www.travelocity.com/about/newsroom/