Hobbit Travel recalls staff

The phones are ringing again at Hobbit Travel.

As cold weather approaches, Minnesotans are plotting their winter getaways, and for Hobbit President George Wozniak, the reprieve couldn't come soon enough.

In April, worried that sales were going to fall off a cliff as the recession spooked leisure travelers, Wozniak closed two offices and laid off 55 of 100 workers.

"Our projections were correct," he said. "Sales were off between 30 and 35 percent depending on the week in the summer." Wozniak expects Hobbit's revenue to fall to about $100 million this year -- from $135 million in 2008 -- though he said the company will remain profitable.

He didn't see customer call volumes pick up until mid-October.

But he's now confident that business will continue to build and he's recalled about a dozen sales agents. "We don't want to wait until 200 phone calls are on hold," Wozniak joked.

On Friday, Carolyn (Rae) Johnson was busy booking customers on seven-day cruises to the Caribbean. "I sold more cruises this week than I did almost all of last month," Johnson said.

"A lot of people travel out of here in the winter regardless of how good or bad the economy is," Wozniak said. For the week ending Nov. 15, Wozniak said that his sales were up 2 percent from a year ago -- the first time he's seen a year-over-year revenue increase since last winter.

November has been a good month for Hobbit because Southwest Airlines cut fares, and Wozniak said that "Northwest, Delta and the whole gang matched them." Cruise lines also have been running sales. "Cheap is now chic," Wozniak said. When he talks to consumers, he added, "We're hearing loud and clear what we need to do is value, value, value."

Hobbit is well known for offering low prices to leisure travelers, with Wozniak buying airline tickets, cruises and hotel rooms at discount prices and then marking them up slightly for resale.

Yet discounting has become commonplace across the travel industry this year as businesses cut back on corporate travel and many leisure travelers looked for sales or stayed home.

Airlines have scaled back, cutting routes and taking seats off the market.

At Minneapolis-St. Paul International Airport, the number of travelers declined by 4.3 percent during the first nine months of this year, with both Northwest and Sun Country among the airlines carrying fewer passengers.

People who are still flying are paying cheaper fares. The Air Transport Association, a trade group that represents the nation's biggest airlines, announced Friday that passenger revenue for large airlines dropped 15 percent in October compared to a year earlier.

Ticket prices have declined for 11 months in a row. In October, the average price for a passenger to fly 1 mile on a major U.S. airline dropped 13.5 percent. Price cutting on international fares has been even deeper than on domestic tickets.

"With U.S. unemployment surpassing 10 percent in October, these results for air travel demand come as little surprise," James May, CEO of the airlines' association, said in a Friday statement. "Economic conditions suggest that pressure to generate revenue will remain intense for the foreseeable future."

Wozniak said that consumers need to see "real savings" or they won't buy a ticket. During the recession many consumers also have been booking their plane and hotel reservations much closer to their dates of travel than they did in years past.

But with fewer flights, Wozniak warns there's a danger in waiting too long.

"We are seeing tour packages, flights, cruises and other travel-related products sell out, and this will cause prices to go up," he said. "If you see a price today, it's probably going to be the best price available."

In addition to the recession, the travel industry has been beset by other problems, including the H1N1 virus. But Steve Loucks, of Eden Prairie-based Travel Leaders, said that a survey done recently by his company showed that bookings to Mexico have rebounded as worries about violence in Mexico and the H1N1 flu have lessened.

As the travel business faced a rough economy this year, Wozniak slashed his expenses by 40 percent.

He also altered his marketing strategy. He dropped his advertising from the Sunday editions of the Star Tribune and Pioneer Press, and now sends a weekly ad via e-mail on Sunday mornings to about 16,000 customers who've requested it.

He does some paid advertising on radio and TV stations, and gains visibility for his business by appearing as a travel expert on broadcast programs.

Wozniak recently hosted a Mexican beach night and a cruise night at Gabe's Roadhouse in St. Paul's Como Park neighborhood to entice customers to book vacations. He hasn't had to use this marketing technique for about 15 years.

He co-hosted the special events with FunJet Vacations and several cruise line businesses. Wozniak said, "We will continue doing whatever it takes to get our product in front of the consumer."

Liz Fedor • 612-673-7709