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Testimony of
Eric Pearson
Senior Vice President, E-Commerce
InterContinental Hotels Group
On
"Travel, Tourism, and Homeland
Security:
Improving Both without Sacrificing Either"
Before the
Subcommittee on Commerce, Trade, and Consumer Protection
June 23, 2004, 10:00 a.m.
2322 Rayburn House Office Building
Chairman Stearns, Ranking Member Schakowsky and Members of
the Subcommittee, I am Eric Pearson, Senior Vice President, E-Commerce, for
InterContinental Hotels Group (IHG), the world's largest and most global hotel
company doing business in nearly 100 countries.As you may already know, we are actively involved in several
industry organizations focused on advancing travel and tourism including the
Travel Business Roundtable and the World Travel & Tourism Council.
I want to thank you for this opportunity to provide a
hotel-industry perspective on tourism in the United States in a post 9/11 world.In addition to representing InterContinental Hotels Group, I'm also
here as a frequent traveler who spends a significant amount of time traveling,
especially overseas, being part of a global company. Notwithstanding time away from family, it has been a rewarding experience
to travel around the world conducting business while learning different
cultures.It does, however, come
with increased concerns about the safety of our borders, airways, and ports of
entry which continue to be targeted as entry points for potential terrorists.
Travel & Tourism Economic Impact
It should come as no surprise that the United States
receives tremendous economic benefit from travel & tourism.According to a report by the World Travel & Tourism Council, this
year the industry both directly and indirectly will account for nearly 17
million jobs, roughly 12% of total employment, and $1.2 trillion in Gross
Domestic Product, roughly 11% of total GDP. International travel alone is one of the largest "exports" for the
U.S. and the largest services sector export category favorably impacting our
balance of trade.These travelers
spend more and stay longer than our domestic travelers and generated over $13
billion in tax revenues last year.Unfortunately,
these travelers are declining as a direct result of post 9-11 concerns coupled
with confusion about our security policies going forward.For every 1 percent drop in international arrivals, we lose 173,000 jobs
and $1.2 billion in tax revenue.
Over the past few years, we've also seen the results of
lost local and state tax revenue which negatively impacts our schools, police
and fire departments, and ultimately applies pressure to raise other taxes to
offset budget deficits across the nation. These tax shortfalls are further impacted by the promulgation of new
business practices aggressively employed by travel websites in the wake of 9-11
putting additional pressure on the various tax authorities.Efforts by state officials in Massachusetts, Florida and
prospectively by others to collect their proper share of taxes adds more
confusion to the mix.
Current Trading
At IHG, our business has been steadily improving in the
past year and we are experiencing an encouraging recovery in both North America
and the UK.We are also seeing
tentative signs of the beginning of a recovery in Europe and trading in Asia
Pacific has returned to pre-SARS levels. Growth remains occupancy driven in all
regions with early evidence of potential rate recovery in some US markets and
London.This is driven by strong
leisure demand which has outpaced the recovery of business travel.As we know, it is the business traveler that drives higher rated
business.D.K. Shifflet &
Associates, a leading travel research firm, suggests that business travel
recovery should begin late in 2004.This is good news for the hotel industry given the 80+
million room night shortfall last year over 2001. All of this recovery, of course, assumes no negative changes in travel
behaviors resulting from increased delays at airports, or worse, new terrorist
activities, creating greater fear and uncertainty among consumers and
businesses.
Clearly, we all share a common goal of keeping our citizens
and visitors safe as they travel about the country.In the wake of the September 11, 2001, we have been
challenged to devise innovative ways to address the nation's security concerns
without compromising the ability of legitimate foreign travelers to enter and
exit our borders.It is what
Secretary of State Colin Powell described in a May 12th address to the U.S.
Chamber/Travel Business Roundtable Travel and Tourism Summit as the
Department's "Secure Borders/Open Doors" policy.
Keeping our borders secure while at the same time
keeping our doors open to foreign visitors might be viewed by some as
conflicting goals.Nonetheless,
both are fundamental to preserving the freedom and strength that defines
America.I would like to take a few
moments this morning to examine how various U.S. policies and initiatives are
affecting this delicate balance between security and openness.
Visa Waiver Program
IHG is concerned about the impending October 26, 2004,
deadline for travelers from Visa Waiver Program (VWP) countries to present
passports containing biometric identifiers in order to gain entry to the United
States.We believe incorporating
biometric technologies into passports can be an effective and efficient way to
strengthen security at our nations' borders without impacting travelers.However, VWP nations must be given sufficient time to develop and
implement these new technologies.IHG
commends the U.S. House of Representatives for recognizing this necessity in
passing H.R. 4417, which provides a one-year extension of the deadline to
October 26, 2005.We understand
that the Senate is considering similar legislation to extend the deadline.We urge Congress to act quickly to send legislation to the President that
will give VWP countries sufficient time to comply with the biometric passport
requirements.Failure to do so will
create uncertainty, backlogs and delays that will have the effect of driving
legitimate foreign visitors away.
US-VISIT
The ability to screen travelers in order to assure that
dangerous entities or suspected criminals do not illegally enter the United
States is a key component in keeping our country safe from terrorists.Indeed, the Department of Homeland Security reports that the US-VISIT
program has stopped almost 200 criminals or suspected criminals from entering
the United States since the initial phase was implemented in January at 115
airports and 14 seaports.The
program, which requires international visitors to provide digital photographs
and finger scans upon entry to the United States, appears to be achieving its
purpose without significant delays in the entry process.We note, however, that the enrollment of an estimated 13 million
additional travelers this fall when VWP travelers are added to the program could
provide a challenge to the ability of the system to function efficiently and
accurately.A further challenge
looms in the December 31, 2004, deadline to integrate US-VISIT procedures at the
50 busiest land ports of entry.We
encourage the Congress and the Administration to takes all steps necessary to
assure that our land borders are adequately staffed and have the tools needed to
accurately screen foreign visitors in a timely fashion.Finally, we note that the exit component of US-VISIT is still a
work-in-progress.Our industry
looks forward to working with the Subcommittee and DHS to assure that US-VISIT
exit procedures are both efficient and effective.
Terrorism Risk Insurance Act (TRIA)
As I'm sure
this Subcommittee is aware, hotels are particularly vulnerable to terrorist
threats.The ability to insure
against those risks is key to the economic viability of our industry.We therefore were extremely pleased to learn last week that the Treasury
Department has extended a provision of the Terrorism Risk Insurance Act
requiring commercial property and casualty insurers to offer terrorism coverage.The provision extends for an additional year, through 2005, a requirement
that insurers offer terrorism coverage on commercial policies.Treasury Secretary Snow's decision to act now, rather than waiting
until the September 1, 2004 statutory deadline, provides greater certainty and
less market disruption in the terrorism insurance market.
However, it is also important for Congress to take action
to reauthorize and extend this initiative.It is my understanding that today, Congressman Richard Baker (R-LA) and
others will introduce a bill to do just that.We encourage you and your colleagues to promptly engage in the review
necessary to consider and approve such an initiative.
Registered Traveler
The proposed Registered Traveler pilot program is a good
example of deploying innovative products and services to ensure new policies
designed to protect the public don't negatively impact the domestic travelers.As a nation, we are accustomed to programs that offer convenience and
time savings even with an additional cost.These include toll roads and electronic passes, convenient stores, and
even express passes at theme parks to reduce waiting in lines. As such, this program will be welcomed by travelers who want hassle free
travel and hopefully promote future business with them. IHG supports this initiative as it expedites the screening process and
reduces the wait times for travelers without compromising security.
Other Issues
These and other issues are addressed at length in written
testimony presented to this Subcommittee by the Travel Business Roundtable.IHG is an active member of the TBR, serves on its Executive Committee and
supports its views on Homeland Security issues.We recommend TBR's testimony to the Subcommittee, and encourage you to
tap TBR's significant source of knowledge and information on travel and
tourism issues if they can be of service in any way.
Conclusion
As multiple committees of Congress and federal departments
and agencies work to enact policies and procedures designed to protect the
United States from future terrorist threats, harmonization of what can often be
duplicative or conflicting requirements imposed upon the tourism industry and
the traveling public must continue to be a priority.We commend this Subcommittee and the Congress for its efforts
to-date, and we look forward to continuing to work with you to identify ways to
protect our country from further terrorist attacks while keeping our doors open
to foreign visitors and their significant contributions to our economy.
Thank you for the opportunity to present these remarks. I
would be happy to answer any questions you may have.
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