Tourism After September 11

¶ … Terrorist Attacks on New York City

Consumer Behavior and Risk

Terrorism and Consumerism in the Melting Pot

How has September 11 Impacted Americans

Economic Impact of terrorism

Outlook for the New York Economy

Examination of the Effects on Business

Regaining Consumer Confidence

Sampling Procedures

Survey Construction

Survey results

Recommendations for Further Studies

Survey of Consumer Patterns After The September 11 attacks on the World Trade Towers

Survey Results presented Graphically

Store Owner Interviews

The Impact of the Terrorist Attacks on New York City: One Year Later Chapter 1

The attacks on the World Trade Towers on September 11, 2001 threatened the American People's sense of security in a way that had not been felt since the attack on Pearl Harbor. To say that the attacks changed the lives of many people would be an understatement. The attacks literally brought the country to a halt for nearly three days. It can be expected that these events would have an immediate and drastic effect on people's behaviors and the economy. However, the true test of the effects is if they have had any lasting effects on people's behavior and on the economy. This research will examine the question, "What are the effects on people's behaviors and tourism in New York City one year after September 11, 2001 attacks?"

This research hopes to achieve several objectives:

To identify the damage made on that tragic day by looking at various Sectors related to the travel and tourism industry.

To establish which businesses, if any, have been completely ruined, consequently ruining the industry,

To examine how this will change people's perspective of doing business in the future and whether they are hesitant at starting a new business in a busy city like New York.

To evaluate people's behavioral changes and whether they believe that day will have an impact on the rest of their life. I will encourage people to discuss with me their weekly typical life and compare it with an average week before the attacks, for example.

To examine how this business loss and slowdown has affected the global economy by looking at various industries individually.

To draw clear conclusions on what actions can be taken to restore the city to the way things were, and whether there is a chance things will never be the same, and whether the city's structure is debatable to permanent change.

This research will support the thesis that the financial impact of September 11, 2001 will have a lasting effect on people's lives, but that the financial impact will be decreased over time. It is expected that permanent change will occur in people's lives and that these changes will not effect their habits in a significant manner. This research will shoe that these changes will not have a long-term devastating effect on businesses. Businesses need only survive the short-term effects in order to survive long-term. This research will support the above hypothesis.

It is expected that this research will be of benefit to businesses in helping to predict future trends and marketing strategies. Identification of methods to restore consumer confidence, particularly in tourism and entertainment sectors of the city will help businesses to establish strategies to survive the short-term impacts and set goals for rebuilding future business.

Determining steps that can be taken to rebuild the lives and businesses in New York is a proactive step to recovery. As confidence is restored in New York, so will confidence be restored in the rest of America as well. The first step in developing a plan is to identify what needs to be done. This is the purpose of this research, to identify the effects on people's lives and businesses and to assess what consumers feel would help to restore their confidence. The target audience of this report is marketers and administrative personnel responsible for long-term projections and goal setting.

Chapter 2

Literature Review

The effects of September 11, 2001 have been a subject of study for many in Psychology and social sciences. Many financial analysts have made predictions and forecasts on how these events would effect people's lives and ultimately the economy. It is generally believed that the entertainment and tourism sectors would be the hardest hit. Many of these predictions were made directly following September 11, 2001. It was generally felt that the impact on the economy would be severe and sudden, but that over time things would eventually stabilize and return to somewhat normal. Literally thousands of articles have been written on the subject. The following literature review will attempt to consider only the most credible and noteworthy sources on the subjects.

In article published by the U.S. Embassy in Bulgaris, Brian Wesbury stated the economy has largely recovered from the attacks (Wesbury, 2002). According to the National Bureau of Economic Research, the U.S. had officially been in a recession since March of 2001, six months prior to the attacks (Wesbury, 2002). According to Wesbury, 45 days following the attacks the aggregate demand had recovered to its previous trend before September 11. The real gross domestic product (GDP) fell less than it had in the previous quarter. The airline and hotel industries are still experiencing a slow down, but Wesbury is quick to point out that other spending has recovered and is working to offset the travel-related losses.

Wesbury further explains that there are several reasons why the U.S. economy was able to rebound so quickly. One of the first reasons is that the Federal Reserve has cut interest rates three times in wake of the attacks. Second, President Bush signed a bill cutting taxes for both businesses and individuals. The third reason stated by Wesbury for the recovery is that productivity continued to grow eventhough the country was in a recession, which strengthened the GDP. He also points out that measures had been taken to aid recovery of an already lagging economy before September 11, 2002.

The events of September 11, 2002 did have drastic immediate impact as America lost 1.1 million jobs. According to the Bureau of labor Statistics (in Wesbury, 2002) 70% of those lay offs were in the travel and air transportation industries. Other industries rebounded in October to offset losses in September. The retail industry is one example of this. Auto sales soared in October 2001, partially due to the institution of 0.0% financing. Movie theaters also set record highs in Late 2001 and early 2002. New home sales rose as did electronics and appliance sales.

Consumer Behavior and Risk

The questions posed by this research essentially are trying to make a prediction about consumer behavior. Consumer behavior is a complex subject and there are countless variables that will effect the final outcome. The essence of the question concerns motivation. Primarily, what motivates consumers to spend. In this research "spending" will encompass travel, and activities associated with spending such as going to public places, eating at public restaurants, and attending entertainment activities such as sporting events, concerts, or plays. This definition of "spending" is not concerned with monetary motivation, only activities associated with it.

Many studies have been conducted concerning what motivates people to perform a specific activity. Whatever the activity, in order to perform it, the person weighs the perceived costs with the perceived benefits of the activity (Atkinson,1957). In order for an activity to be performed, the benefit must outweigh the "cost" in order for the person to be motivated to do it. If the perceived "cost" is too high, then the person is unlikely to perform the activity. In this case, "risk" is the same as "Cost."

Specifically, when we are talking about the risk of becoming a victim of a terrorist attack, the perceived threat must be relatively low for the activity to be performed. The risk must not outweigh the benefit. When we are talking about the entertainment industry, it is a generalization that for most people, the risk of attending must be extremely low to gain a perceived benefit. It is assumed that most people will not risk their lives for entertainment purposes. This is the root of the question that marketers must now solve to regain the losses in consumer spending on entertainment. They perceived risk of terrorist attacks must be lowered in order to increase consumer spending in these areas.

Terrorism and Consumerism in the Melting Pot

America has been called the great melting pot and is made up of largely people who were immigrants or descendants of immigrants. New York is the center of cultural diversity and this creates a unique situation when members of one ethnic group launch an attack on a population of persons of mixed culture that even included members of the attacking group themselves.

Swaidan, et. al (2001) attempted to determine what effect acculturation would have on immigrant consumers (Swaidan., et. al., 2001) The U.S. Bureau of Census (1997) reported that about 26 million U.S. residents, one in every ten, were born abroad. However, few studies have been conducted to determine the spending habits of nearly one-tenth of the nation's consumers (Penaloza,1994 and Sturdivant,1981). The Federal Census Bureau (2000) estimates that the minority population will increase from 28% in 1999 to 47% in 2050.

Acculturation refers to changes in cultural attitudes, values, and behaviors as a result of geographical contact between members of two cultures (Redfield, Linton, and Herskovits 1936). When two cultures live together, they must make certain compromises, yet still maintain their sense of identity (Berry 1998; Berry and Sam 1996; and Berry, Trimble, and Olmedo 1986). In mixed societies, such as that of America, cultural groups and their individual members must deal with the issue every day.

When these two underlying issues are considered, four acculturation strategies are generated. First, an assimilation strategy holds that the acculturating group adopts the dominant culture and sheds their original culture. They consider themselves to be part of the host culture and see themselves as separated from their original culture. This group has become an integrated part of the American society and is difficult to separate from the host culture.

The second, and opposite approach, is when a separation strategy prevails and the acculturating group place more value on keeping their original culture and try to avoid adopting the dominant culture. The third, integration strategy prevails when there is an interest in both maintaining one's original culture, yet wishing to participate as an integral part of the dominant culture. The fourth type of strategy prevails when marginalization dominates in the case of enforced cultural loss combined with enforced segregation (Berry, 1990). A good example of this fourth type is illustrated by the treatment of blacks in the earlier part of the twentieth century. They were expected to emulate white culture, yet were separated from it.

The affects of acculturation must be considered in the study of the effects of September 11 on the future of consumer spending with regard to the terrorist attacks. What effect will the perceived risks have on consumer spending by groups other than natural-born Americans.

In addition the question of acculturation poses a potential problem in sample selection. Many of these people speak a variety of languages other than English. An English survey would only target those members of the population who have sufficient English to understand the questions, either as natural-born citizens, or as a result of a high degree of acculturation. In addition, it leads us to the question of whether to consider only legal citizens of the United States. Many immigrants consider themselves to be fully acculturated, and have been in the country many years, but are not legal U.S. citizens. They must be considered as a part of the economy, as they do contribute and participate in it, both as employees and workers and as consumers with a voice and opinion. The issue of acculturation, as it relates to this particular research, only serves to present several sampling issues, that must be dealt with in the methodology section of this report.

Terrorism and Market Entry and Expansion

Terrorism may have both direct and indirect impacts on marketing plans and strategies. During the late 1980s, the U.S. experienced a fall in tourism that impacted luxury hotels in Rome and other parts of Western Europe. Many European hotels had to use aggressive pricing and promotional strategies to off set occupancy decreases after terrorist attacks in Rome and Vienna. The hospitality industry responded to this with increased marketing expenditures to relieve fears regarding consumer safety. Rate reductions, intentional drops from five-star to four-star designations and increased advertising on electronic media helped to rebuild its market positioning (Hurley 1988).

This strategy illustrates that terrorism has an impact on the tourism business, but that with proper advertising and publicity these effects can be overcome. Protection from the consequences of terrorism has many sides. One might expect that an ounce of prevention is an immediate cure for a market filled with uncertainty. Market uncertainty may indicate a missed opportunity, as marketers are in search of new customers to strengthen their position in the global market. Even relatively safe markets, such as the pharmaceutical industry, can be targets of unpredictable terrorist activities such as tampering with products (Sommez, Apostolopoulos and Tarlow 1999).

How has September 11 Impacted Americans?

A team at Carnegie Mellon University conducted a study immediately following September 11 to assess the public reaction and to assess the role that the media played in this reaction (Thomas, 2002). The sample consisted of 1,000 American men, women, and teens aged 13-88. This was a groundbreaking study that assessed the role that the media played in influencing public opinion and support for the war. This study revealed four conclusions. They are that people who experience anger are more optimistic about the future than are those who experience fear. They are less likely to take precautionary actions and more likely to favor aggressive policy responses. Men were more likely to experience fear than women. Likewise, those who experience fear are more pessimistic about the future and more likely to react in ways that helped to contribute to the economic downturn after September 11. Persons who experienced fear are more likely to favor tightened security. Those who were optimistic had a greater sense that something could be done about terrorism. Those who experienced fear felt a lack of control (Thomas, 2002).

The second part of the Carnegie Mellon survey assessed what effect the media had on these responses. A survey was administered nine days after September 11 to assess reactions. Eight weeks later the same group was divided into two groups, one which watched a fear inducing media clip of the event and the other watched an anger inducing clip about the events. The groups were re-surveyed. Thomas and associates found that those assigned to the fear-inducing clip perceived greater risks from terrorism, while those exposed to the anger-inducing clip perceived less risks associated with terrorism.

This study is significant in that researchers acted quickly and took advantage of the opportunity to study effects directly after a life-changing event. This is one of the first types of studies conducted in this atmosphere (immediately after an event.) This study broke new ground as many studies concerning persons who have experienced tragedy are conducted ex-post facto, sometimes years later. These studies occur after the initial shock and reaction are over. The test subjects have had time to process through the event and may give different answers than they would have in the early stages after the event. The Carnegie Mellon study was able to assess reactions when people were in the early stages of the tragedy. It reflected their true feelings after the event, not those that are a result of a year of healing.

Economic Impact of Terrorism

The economic impact of terrorist activities was a source of study long before September 11, 2002. The tourism industry generates a major amount of income for most countries around the world. It can be especially important in developing countries. Tourism generates foreign exchange earnings, tax revenues, business opportunities, and employment (Schuelke, 2000). Tourism ranks in the top five export categories in 83% of the countries in the world (Schuelke, 2000). According to the World Bank (2000), tourism generates approximately $800 billion yearly. Events that effect tourism have a major effect on local and world economies.

Many sectors make up the travel and tourism industry. Barriers to entry are relatively low, except in areas such as hotel and airlines. Travel and tourism provide opportunities for companies, both large and small. It is friendly to small businesses. Tourism effects many directly through hotels, restaurants, nightclubs, taxis, and souvenir sales. However, the businesses that provide goods and services to these areas cannot be ignored either.

Economists know that events that significantly effect one sector or one branch of a sector have a profound effect on other branches that depend upon and supply goods and service to that sector. They also describe what is called a Multiplier effect. This effect says that if extra money is pumped into a local economy, then this causes some workers to have excess to spend, which in turn gets pumped right back into the economy. One person's spending is another person's income (Schuelke, 2000). The reverse holds true when money is taken out of an economy, such as was the case with the drop in tourism associated with September 11. Economists have a complex algorithm to describe this effect and make predictions. In general the effect is that a small amount of money put into or taken out of an economy has an effect many times its original amount.

The effect that a drop in tourism has on the macroeconomy of a country largely depends on how much portion of income that industry has on that particular country. Until, September 11, the tourism industry had survived many events that effected tourism. It is the magnitude of the event and the effect of the Multiplier effect that caused a different scenario this time as compared to the past. In a country such as Egypt, tourism plays a larger part of the overall economy. Whereas, in the United States, other industries such as manufacturing and technology play more of a role than tourism. Therefore a drop in tourism in Egypt would have a greater effect on the country's total economy, than it would in the United States.

Schuelke points out the terrorist attacks on New York will have an effect on the global economy for another reason. New York derives a major income from the tourism industry and the multiplier effect will have a more profound effect on the local economy than on the national economy. However, many economists forget to remember, that tourism not only generates income for New York, but that Americans are major consumers of tourism in other areas in the world. When Americans are afraid to travel, other countries will have less money pumped into their tourism trade. Americans not only bring in money from tourism, they a major spenders of it as well. According to the WTO (in Schuelke, 2002), Americans spent $60.1 billion on international travel in 1999, followed by Germans at U.S. $48.2 billion and Japanese at U.S. $32.8 billion. According to the Travel Industry Association of America (in Schuelke, 2002), total travel expenditures in the United were U.S. $520 billion in 1999.

A drop both in tourism income and tourism spending has a profound multiplier effect on the rest of the world. How quickly the economy recovers is largely dependent upon how quickly confidence is restored in the American public (Schuelke, 2000). The images of September 11, have been burned into people's minds, which the media takes partial credit. These images will not be easily forgotten, this is one reason why recovery was not rapid and is still in the process of making baby steps.

The local New York economy has always been in the public eye. It is one of the largest population and business communities in the world. What happens in New York always has an effect on world reactions. After September 11, the New York economy has been under particularly close scrutiny. In 2000, the New York City economy was outperforming the nation due to a strong financial services sector. However, by mid-2000 the New York City economy had began to slow. Slow downs in the technical sector caused economic growth in the city to come to a stand still in second quarter of 2001. Then the devastation of September 11 caused one of the sharpest contractions in the history of New York (Gertner and DiChiara, 2002).

The gross product of New York fell approximately 15% as compared to a 1.3% decline in the annual Gross Domestic Product (Gertner and DiChiara, 2002). This trend is illustrated in the following chart (found in Gertner and DiChiara, 2002).

The September 11, 2001 attacks destroyed or significantly damaged many lower Manhattan businesses. "Advertising, travel, tourism, and retailing suffered immediate declines. Airline traffic came to a standstill, and New York City's hotels suffered significant declines in revenues per room, which declined 34% from fourth quarter 2000 to fourth quarter 2001 due to sharply lower occupancy and room rates" (Smith Travel Research Numbers, quoted in Merrill Lynch Research, "Top 25 Lodging Markets," May 8, 2002). These effects have multiplied to produce one of the largest budget deficits in the history of New York City. Total jobs in New York City have declined by 100,000, or roughly 3% (Office of the New York City comptroller, 2002).

Though the greatest and most immediate economic effect has been in the travel, tourism, and entertainment industries, the multiplier effect can be seen in other major sectors and is reflected in other indicators of economic growth in the city. The following charts represent changes in the FIRE sector, which includes finance, insurance, and real estate. This sector is a good barometer of the economic health of an area. Any general decline in income will show direct effects on this sector. The following chart illustrates the changes that have occurred in this sector since September 11 and can serve as a general indicator of the economic health of the community. The following chart compares the change in employment in the FIRE sector in New York as compared to that of the same sector nationwide (found in Gertner and DiChiara, 2002). It can be seen that 9/11 had a more drastic effect on the local New York economy than it did on the rest of the nation.

Employment in the FIRE sector comprises approximately 13% of the city's workforce however accounts for approximately 30% of the city's annual earnings (Federal Reserve Bank, 2002). It is by far the city's biggest sector. This sector had been in decline prior to 9/11 primarily due to the halt in growth of the technology sector. The attack on the World Trade Towers served to sharpen and exaggerate this effect, as can be shown by the following chart (found in Gertner and DiChiara, 2002).

The office space market in Manhattan has suffered a major loss. The World Trade towers and surrounding buildings comprised a 13 million square foot loss. Vacancy rates are higher than they have been since the early 1980s (Croghan, 2002). Another effect of the attacks is that immediately after the attacks, insurance against terrorist acts for commercial real estate properties became either non-existent or so expensive as to prevent many business owners from obtaining it (Friedman, 2002). This also forced some business owners to vacate their current property in search of more affordable space. For businesses seeking loans to move to this area of Manhattan, loan officers were requiring more collateral, if adequate insurance could not be obtained (Board of Governors of the Federal Reserve System, 2002).

The Manhattan residential housing market is dominated by condominiums and cooperatives. It struggled after September 11, 2001 with sales plunging to 55% lower than the year before. However, this market has seen recovery and as of April 2002 was is expected to be at the highest vacancy rate in 20 years by end of year 2002 (Marcus & Millichap, 2002).

Outlook for the New York Economy

Most economic forecasts predict that recovery for New York City will be slower than for the rest of the nation. Recent numbers indicate that employment in the FIRE, business services, and tourism sectors may be gaining strength (Bureau of Labor Statistics, April, 2002). In a report to the Mayor (2002) most experts in the New York City Office of Management and Budget and the New York City Comptroller's Office reported that they expect the city may take until 2005 or 2006 to regain its 2000 employment levels. This report indicated that the key to New York's economic recovery will lie in the ability of the FIRE sector to recover.

After September 11, 2001 many businesses were forced or chose to re-locate their operations out of lower Manhattan. As the plan to continue cleaning ground zero and the plan to rebuild begins, it is cannot be determined how many businesses will move back into the lower Manhattan area. As explained by the Multiplier effect the only way to truly experience economic recovery is to put more money into the area. The tourism and entertainment sectors are a part of this plan. However, the FIRE sector is the biggest and its recovery will largely determine the path of the recover. The other sectors will contribute through the multiplier effect, but it is the FIRE sector that will be the greatest indicator of recovery.

Between 18,500 and 31,800 workers were relocated from lower Manhattan to out-of State since 9/11 (DRI-WEFA, 2002). Construction efforts in the re-building of lower Manhattan are expected to have a positive effect on the economy. They will channel funds into lower Manhattan that will then filter into and help the other sectors of the economy. Eight months after the attack, businesses, residents, and visitors began to return to Lower Manhattan. Credit quality has deteriorated since the end of 2001. According to a survey conducted by American Bankers Association (2001), bankers remain optimistic that conditions will improve as the recovery e efforts get underway.

The Enron Corporation bankruptcy and the weakening of the power markets were underway before 9/11. The World trade Tower attacks may not have directly effected the energy sector, but they may have accelerated problems already in existence (Barone, et. al., 2002).

The Enron collapse followed by September 11 were defining events in the energy sector. The cost of insurance instability experienced by other companies in relation the September 11, were also experienced by the energy companies. They already have to contend with very high insurance premiums, typically with premiums at 1-10% of the amount being covered (Barone, et. al., 2002).

The energy sector, particularly the nuclear energy sector has been forced to install extra security measures. Indian Point Nuclear Power Plant has even been forced to use U.S. Coast Guard ships to patrol the Hudson River adjacent to the facility. Insurers are now starting to add exclusions that do not include terrorism. High profile projects are more difficult to insure. (Barone, et. al., 2002).

All of these measures are costly. The effects of September 11 have shown the interdependence of the sectors and those events do not only affect a single sector, but also involve many different sectors.

The effects of September 11 directly effected energy companies centered on New York City. However, the effects did not stop there. The entire energy sector experienced this impact as a negative credit rating. The oil and gas industry has been experiencing similar woes due to September 11 (Barone, et. al., 2002).

Robert Looney of the Center for Contemporary Conflict examined the short-term and long-term effects of September 11, 2001 (Looney, 2002). He devised a system for breaking down the effects into several categories depending on their nature (direct and indirect) and their expected duration (short, medium, and long-term). Many assumptions are made in predicting long-term and indirect effects. These categories will be discussed further in the following section.

Immediate and short-term direct impacts included the extreme casualties and loss of life immediately following the incident. Lower Manhattan lost approximately 30% of its office space. The dollar losses totaled in excess of $14 billion dollars (Looney, 2002).

Short-term indirect impacts included the downgrade in the forecast for U.S. real GDP growth. It also included a drop in revenues by certain sectors such as airlines and the tourism industry. Fortunately the negative effects of these things were much less than was originally expected (Looney, 2002).

Medium term impacts primarily consist of things, which occur immediately as a result of extra measures needed in the recovery efforts and in making sure that future similar events do not occur. These impacts occurred in the following sections insurance, airlines, tourism and other industries associated with travel, shipping, and increased defense/security expenditures.

Insurance losses from the terrorist attacks are estimated at between 30-58 billion dollars. The wide disparity is due to unknown amounts from liability claims. By comparison, losses due to Hurricane Andrew in 1992 were around $21 billion (Looney, 2002). These losses have caused an nearly 30% increase in insurance premiums.

The airline industry was experiencing difficulties before the attacks due to rising debt ratios and falling returns on investments. Although this sector has seen significant recovery, passengers have remained about 20% lower than prior to September 11 (Looney, 2002). Tourism and related industries including hotels, tourism, automobile rentals, travel agents, and civilian aircraft manufactures have also experienced a drop in business as compared to prior to September 11 (Looney, 2002). Military spending has increased since the September 11 attacks. The medium term costs to the economy appear to be considerable.

Long-term effects have a potential to threaten the global economy through higher transaction costs, resulting n lower potential output. These costs may be broken down into higher operating costs, higher inventories, higher risk premiums, lower equity in investments, a shift in resources from civilian to military, and a shift away from globalization (Looney, 2002). Long-term outcomes cannot be predicted with any amount of precision and much of their severity results from the ability of the American citizens to recover and the ability of businesses to re-gain consumer confidence.

Two days after the attack, Standard and Poor's issued a statement that the effects of the attack would not be long lasting. David M. Blitzer, Managing Director and Chief Investment Strategist for Standard and Poor's issued the following statement,

While some pause in consumer spending and business investment is likely, the efforts of all levels of governments to return to normality and response of people and officials in New York and Washington strongly suggest that economic effects will be limited duration and scope" (Standard and Poor's, 2001).

In another new release, Adam Geller noted that even thought the loss on September 11 was close to $30 billion, the losses from the stock market down turn are close to $7 trillion (Geller, 2002). He gives the following estimates regarding the effects of the terrorist attacks on many sectors across the nation, The number of passengers on domestic flights plummeted in the third quarter of September 2001 and is still down 11.4%. Airlines are slowly beginning to call back furrowed workers. America West Airlines has called back 1,500 of the 2,000 employees eliminated last year. However, the story is different for some of the larger airlines. U.S. Airways cut 11,000 jobs last year and has only recalled 1,900 workers to date. Boeing cut 30,000 workers and says that it will never re-hire them (Geller, 2002).

Hotels, restaurants and other businesses have been hit hard. At the Grand Canyon, visitors have been down 4.2%. Travel by car has increased over the same period. Visits by tourists overseas are down by 40 per cent (Geller, 2002).

The construction and new home markets hardly noticed the downturn in other sectors. This sector has experienced a10% increase in sales. This is partly due to low interest rates. Detroit sparked new car sales by offering 0% financing on new cars (Geller, 2002). As expected, industries related to public and private security have experienced a significant increase over the last year.

Rationale for Study

The events of September had an immediate and devastating effect on the economy. However, prior to September 11, many other factors were in place that created a downturn in the economy dating back to at least March of 2001. Several factors were responsible for this downturn, one factor was the bursting of the tech bubble in the early part of 2000. The economy was taking a downturn prior to the September 11 attacks, therefore the attacks may have served to exacerbate problems that already existed, but cannot be blamed entirely on the September 11 attacks.

Earlier studies have shown that the media had a profound effect on the way that people perceived the risk of subsequent terrorist attack and whether they reacted with fear or anger. Those who reacted with anger have a more optimistic opinion than those who reacted with fear. Fear reaction was partially responsible for the drop in consumer spending after the attacks.

Past experience concerning the drop on hotel attendance after the attacks in Rome and Vienna during the early 1980s proved that consumer confidence can be restored and the economy can recover. It also showed that the media can play an important part in this recovery. We know that people take risks based on the amount of perceived benefit that they expect from it. The media can play an important role in shaping the perception that the benefit outweighs the risk.

The primary focus of economic research has been focused on the New York City economy, and its effects on the rest of the economy, both nationally and globally. The focus of the research has been the travel and tourism industry, particularly the already ailing airline industry. The travel and tourism sector suffered the most immediate and devastating effects, but is beginning to show a slow recovery. This sector still fails to reach pre-attack spending levels. It is expected that recovery could take 3-4 more years.

Although many focus on the travel and entertainment industries, this sector is not responsible for the greatest devastating effect on the New York economy. The Financial, Insurance and Real Estate (FIRE) sectors have had the greatest impact on the economy. Economic indicators, such as new home construction and the automotive industry indicate no significant effects on the national economy. The effects of September 11 are expected to be minimal in the long-term.

September 11 demonstrated the interconnectivity between the various market sectors. The multiplication effect was clearly demonstrated when the local economy of lower Manhattan suffered a severe drop in cash flow coming into the area. There were few sectors that were untouched by the drop in income.

Since September 11, Americans have not only been reluctant to travel domestically, but have also been reluctant to travel abroad. This has had a profound effect on the global economy as travel and tourism make up a larger part of the economy in other areas of the world, particularly developing nations. An unwillingness of foreign travelers to visit America has hurt the domestic travel and tourism as well.

In the short-term these effects have been damaging and for some individual companies, even devastating. However, for the most part, the sector as a whole is beginning to recover. How far this recovery goes and how long it takes remain to be seen. The key to restoring the economy, particularly the travel and tourism sector lies in the ability of the government and businesses to regain the trust of the American people in their ability to keep them safe. The purpose of this study is to determine what the American public feels would help to restore their confidence and entice them to take part in the travel and tourism industry.

Chapter 3

Methodology

This research is essentially divided into two parts. The first part attempts to explore the real effects that September 11 has had on the travel and tourism industry and in turn the effect on other sectors as well. It intends to explore this issue both in relation to the local New York City economy, and on a national and global level as well. The second part of the research attempts to determine, what would make the public feel like participating in the travel and tourism trade. It explores what can be doe to restore the confidence of the American people. In a third portion of the study, an attempt will be made to determine the attitudes of small business owners regarding the effects that September 11 has had on their businesses and their future plans for their business. The third part is small in scope and is only intended to add to enhance the information contained in the other sections of the report. The sample size is small, therefore the interviews only provide a snapshot of the attitudes of small shop owners. Even if trends are found in the interviews, the results cannot be considered conclusive, as this part was conducted informally and not in accordance to standard research methodology. Further, more formal studies would be needed to make predictions based on this information.

Examination of the Effects on Business

The first part of the research entails a literature review of the actual effects of September 11 on the economy. This portion is included in the literature review previously presented. There are many sources of opinion on this matter, however, it was the goal of the researcher to provide number and figures from the most credible resources possible. Data for this portion of this the study was obtained from government agencies, both local and federal. Where news sources were consulted, they were selected for credibility in reporting financial matters, such as Standard and Poor's and the World Bank.

Individual surveys of businesses would not be helpful in this portion of the survey, as the effects on individual businesses is varied. It was the purpose of the study to determine aggregate effects and not focus on individual businesses. This portion of the study provided an examination of the aggregate effects on various sectors effected by the September 11 attacks. Various viewpoints were examined. However, for the most part, only factual information and numbers were included. Expert opinions were provided to give depth and perspective to the numbers presented.

Regaining Consumer Confidence

The second part of this research involves determining how the attacks have effected people and their willingness to participate in the economy, particularly in the travel and tourism industry. It will attempt to determine what can be done to boost sales in this sector. The primary model for this research will be the study conducted by Carnegie Mellon University (Thomas, 2002) directly following the attacks. This research will essentially be an extension of that study and serve to give a perspective one-year later. The Carnegie Mellon study was initially performed nine days after the attack and the portion on the effects of the media performed eight weeks after the attack. It focused on the initial response of Americans, particularly fear and anger, as it related to their attitude of pessimism or optimism. It did not relate to expectations of spending habits. The focus of this study will be on spending habits, not initial emotional response. The survey used will be different and related to the research question.

The survey will answer question regarding perceived public safety. However, as was stated in the research objectives, the work was also to assess the likelihood that businesses would continue to operate in New York and to examine how this will change people's perspective of doing business in the future and whether they are hesitant at starting a new business in a busy city like New York. It was also to evaluate whether they believe that day will have an impact on the rest of their life. Originally, the intent was to use interviews with managers and top executives of financial corporations. However, I could find none who were willing to cooperate with the interview. The reason most typically given for the unwillingness to cooperate was either time related, or they were afraid that their answers would be published and would have repercussions.

Individual small shop owners were found to be more cooperative, Therefore, 5 interviews will be conducted with random small business owners. Two will be from the food court and 3 will be from lower Manhattan. This is a small sample size and cannot be used to draw inferences afffecting the population at large.

Sampling Procedures

The survey will be conducted in a similar manner to the Carnegie Mellon study in that a random sample of people will be given the survey. The survey will be conducted at La Guardia airport by random willing participants. It is important that the survey be short, as it is more likely to be answered. It would be interesting to cross tabulate demographic information, however due to the fact that people may be reluctant to answer questions from a total stranger anyway, it is believed that the inclusion of too much demographic information will severely effect survey response in a negative manner. Therefore only basic demographic information will be obtained.

The sample will be obtained by approaching random people in the non-restricted area of La Guardia Airport. This airport was chosen over JFK because it was the objective of the study to obtain information about the American Public. JFK handles many international flights and therefore it was determined that La Guardia would have the most likelihood of having the targeted population. Five hundred surveys were handed out.

The survey will only be conducted in English, which will serve to create some degree of sample bias due to the effect that only natural-born Americans or those who have been in the country for a sufficient length of time to know English will be test subjects. The study will not consider whether the person is a legal American citizen, or whether they just consider themselves to be American. Only persons who consider themselves to be American will take part in the survey.

The survey will include tourists to New York who are of domestic origin as well as locals. The sample population will be varied and diverse, but will not include foreign travelers.

Survey Construction

The survey will be short and take only 2-3 minutes to fill out. This will give the highest likelihood of the greatest response rate. Demographic information will be limited as well for the same reason. This does not give any possibilities for cross tabulation, but will still gather the preliminary information needed to answer the research question. It might be noted that this survey will measure people's opinions and does not give any criteria by which to judge subject's individual perceptions. Individual perceptions will not be a part of this survey. Nor does it allow us to tabulate results across various cultural backgrounds.

Only two demographic questions will be asked regarding whether they are American and whether they are male or female. Questions 3-8 will assess their feelings about travel safety and their habits both before and after September 11. Questions 1-8 will be in a multiple choice format so that descriptive statistics can be easily applied. Question 9 will be a subjective answer and the results will be tabulated according to the number responses in response categories that will be determined by the survey results themselves. Categories will be at the discretion of the researcher. Each survey will only fit into one category. The research will use his own judgement in the scoring and reporting of this question.

Chapter 4

Survey Results

Five hundred surveys were handed out to persons in the food court at La Guardia airport. Question number one was used as a qualifier. As this survey wished to address the reactions of Americans, a no answer to question number 1 disqualified the survey. The question asked, " Do you consider yourself to be an American?" In this case a "no" answer disqualified the survey. Out of five hundred surveys handed out, 412 answered "yes" to question number one and were considered valid questionnaires in this survey. Therefore the sample size of the survey is 412 subjects.

Question 2 asked "Are you male female?" This was the only demographic information collected in this survey. Of the respondents, 55.1% were male and 44.9% were female.

Question 3 asked, "How often do you travel?" Answers for this question were tabulated using frequency distribution. Of the respondents, 18.9% said that they traveled once a week or more, 37.9% said that they traveled several times a month, 28.4% said they traveled several times a year, and 14.8% said they traveled rarely. It might be noted that the survey was conducted mid afternoon from 12:30 to 4:00 PM. A high number of respondents indicated that they traveled several times a month. The second highest group traveled several times a year. This would be consistent if these travelers were business travelers. This may skew the results slightly as the survey may indicate different results when conducted on a holiday weekend, for example. It would be expected that a survey taken then would have more travelers who traveled less frequently. In addition, business travelers travel as a part of their job and often do not have a choice, whereas holiday travelers have more of a choice as to whether to travel or not.