America: 'Borderless' No More

By Karyn Strauss, Senior Editor -- HOTELS Magazine, 3/1/2007

NORTH AMERICA The U.S. government's Western Hemisphere Travel Initiative, which took effect January 23, requires anyone entering or re-entering the United States to show a passport or (for those Canadian and U.S. citizens who meet eligibility requirements) a Nexus air travel card. An amendment that delays implementation of passport requirements for land crossings at the Mexican and Canadian borders or cruise arrivals to the United States from the Caribbean, Mexico, Canada and Bermuda until January 1, 2008 does little to ameliorate the situation, says Vincent Vanderpool-Wallace, secretary-general for the 32-member Caribbean Tourism Organization, Barbados. He likened the impact to "a Category 6 hurricane."

The Westin Aruba Resort is offering US$50 off the bill if Aruba is the first stamp on guests' passports.

Vanderpool-Wallace says the potential economic impact "could be catastrophic." In an offi cial statement, he adds, "It is incomprehensible that the United States government would approve an amendment that excludes air travel from the Caribbean and, thereby, grants an additional advantage to cruise lines in the Caribbean who already enjoy a signifi cant competitive advantage, especially in light of the fact that the cruise lines supported the inclusion of air arrivals also." Vanderpool- Wallace sees the possibility of far-ranging" aftershocks. "There is nothing more potentially devastating," he says.

Not everyone sees a downturn looming, however. No passport will be required for Puerto Rico or the U.S. Virgin Islands. While these unincorporated U.S. territories are likely to benefi t, even destinations such as the Bahamas may not see a dramatic disruption, says Bryan Guillot, chief marketing offi - cer for Nassau's Cable Beach Resort & Crystal Palace Casino and Baha Mar Resorts Ltd. "We have been working alongside the Nassau Island Promotion Board to promote awareness among our guests about the need for passports when re-entering the United States. Frequent visitors, meetings planners, airline and industry partners were prepared because all knew in advance that passports would be mandatory. We feel confi - dent the negative impact will be minor," he says.

Canada Braces For Impact
Although Canada may not feel the true impact of this legislation until the passport requirements for land crossings take effect, the shortterm business threat is not insubstantial. U.S. citizens account for 79% of Canada's international tourism arrivals. An analysis by The Conference Board of Canada in Ottawa predicts a cumulative loss of 14.1 million travelers from the United States to Canada between 2005 and 2010. That could take more than US$3.6 billion away from the bottom lines of Canada's hotel and tourism industry. The United States will not be immune either, says The Conference Board. It projects that 7.4 million fewer Canadians will travel to their southern neighbor and shift US$1.7 billion in tourism spending to domestic or other easier to access international markets.

Convention hotels may face the biggest near-term challenges, but nothing like the properties that market to the steady stream of U.S. travelers who drive across the border.

"Many business travelers already have passports. But, only 27% of the U.S. population does. If I have a family of four from Buffalo or Seattle, am I really going to go out and spend US$97 for each adults and US$82 per child family to go to Montréal or Vancouver?," asks Tony Pollard, president of the Hotel Association of Canada, Ottawa. Some of the hardest hit areas are likely to be popular border crossings in New York, Michigan and Washington state.

Less Risk For The Luxury Sector
Hoteliers at the top of the market are likely to experience little more than a blip. "Guests of Small Luxury Hotels of the World tend to have passports as they are well-traveled and visit many destinations through the year. I do not believe member properties will be affected adversely by the new passport regulations," says Lanny Grossman, director of communications, Small Luxury Hotels of the World, New York City.

But that does not mean upscale hoteliers expect to be immune. Jim Mockford, general manager of Vancouver's Listel Hotel and O'Doul's Restaurant and Bar, says that while the majority of the boutique hotel's U.S. guests are "savvy, sophisticated travelers (predominantly from Washington, Oregon and California) who are likely to carry a current passport and have plenty of opportunity to use it, that is not say we have not heard rumblings," Mockford says. "A meeting client involved in training people in the forest industry considered moving his meetings to Texas, partially because of these regulations."

More Aggressive Marketing
Hotels and hotel companies are taking the initiative to minimize business disruptions from phase one and begin to educate customers before phase two. Giants such as Marriott International have been working on the issue since last spring with programs ranging from links on their sites to the U.S. State Department's Web site for passports, to a reminder on hotel reservation confi rmations and collateral materials at front desks in hotels in Mexico and the Caribbean. Marriott and Renaissance resorts in the Caribbean and Mexico launched a "Passport to Paradise" travel incentive that allows guests with new passports to earn a US$100 resort credit that can be applied to a wide range of resort services.

Chains such as Starwood Hotels & Resorts are turning the new legislation into a marketing opportunity. The Westin Aruba Resort is crediting US$50 per person for each new passport holder with Aruba as the fi rst stamp, while the W Montréal rewards new U.S. passport holders with a Montréal International Airport stamp with reimbursement for the taxi airport transfer on their accounts and a complementary Le Montréal-tini upon arrival.

How Long Will It Last?
According to a Kayak.com survey, one in three Americans are planning to apply for a passport. The problem is that only one in 20 actually has. "For now, that certainly creates a more challenging environment," says Drew Patterson, vice president, marketing, Kayak.com, Norwalk, Connecticut. "Anything that creates friction for people who want to travel creates a problem."

At a point when Kayak.com is just starting to look at the data, Patterson has not seen "a huge shift" away from the Caribbean or Canada. However, he also points out that the numbers may not refl ect the broader market, as 63% of Kayak.com's users already have passports. One trend to watch, he says, will be travel to easily accessible, warmweather destinations with no passport requirements-from Puerto Rico and the U.S. Virgin Islands to the Gulf of Mexico and Hawaii.

As Mockford says, not many hoteliers in neighboring countries are happy about the new regulations. However, as with most new security measures, there is a feeling that travelers will begin to see passports as part of the cost of traveling.

"Short-term, there will be a major impact on land travel," Pollard says. "It will take several years to stabilize. Young travelers will expect to get a passport, just as Europeans do now. A passport will be part of the cost of doing business. When I renew my driver's license, I do not submit an expense report-even though I drive for business. Having a passport will be the same thing. This is a new reality. Get on with it."

Calls For New Solutions
Vicki Gordon, senior vice president, corporate affairs, InterContinental Hotels Group (IHG), Atlanta, says it is too early to assess what the full impact could be on hotels throughout North America. She says it will take some time before hotel companies and industry organizations gather enough data "to make an assessment."

In the interim, industry leaders such as IHG are working to soften the hit of the second stage that will require passports for land border crossings. "With more than 20% of U.S. hotels on the border of Canada or Mexico, mandating passports could have a devastating economic impact on the hotel industry. IHG welcomes the idea of a less expensive, more convenient Passport Card as an alternative to a traditional passport, but "we are concerned that the United Sates does not have the adequate infrastructure to execute against this proposed pass legislation," Gordon says.

The PASS (People Access Security Service) card would be less expensive than passports: US$20 for adults; US$16 for children plus a US$25 execution that includes a background check. This card would be good only for land crossings, not for global travel. "The plan could have negative consequences for tourism. Families with minor children might choose to vacation in their own country rather than spend US$40 to US$50 per family member for an identity card to cross the borders of Canada or Mexico," Gordon says.

Is all this necessary for security? Gordon says IHG would like to see a balance between efforts to secure U.S. borders and making sure the process of security can be achieved "without disrupting commerce."