U.S. Travelers' Satisfaction
With Hotels, Airlines Rises

American travelers are more satisfied with airlines and hotels, despite the fact that many of those companies are in a deep slump.

That conclusion is among the findings of the latest American Customer Satisfaction Index, a quarterly consumer survey by the National Quality Research Center at the University of Michigan Business School. The survey, scheduled for release Wednesday, found that for the quarter ended March 31 customer satisfaction with airlines improved to a score of 67 out of 100, up from 66 the year before and a nadir of 61 in 2001. Hotels rose to 73 from 71 in 2002. While these scores are improving, they remain lower than the average for the more than 200 companies and government agencies ACSI measures during the course of a year. Food companies routinely get scores in excess of 80.

The prevailing theory among industry analysts is that airlines and hotels are finding it easier to cope with customer demands because bookings are lower due to the weakened economy. It is also possible that airlines and hotels are working harder to please, since they can ill afford to lose customers these days. Data from the U.S. Department of Transportation, for example, indicate that more flights are arriving on time than a year earlier, and there are fewer reports of lost luggage, though that is probably attributable to the fact that there are fewer flights. Hotels, meanwhile, have been slashing prices or throwing in extras like free breakfasts and room upgrades.

"I do a lot of traveling, and my impression is that it just doesn't seem as awful, as horrible an experience as it was two to three years ago," says Nariman Behravesh, chief economist at Global Insight in Lexington, Mass. As evidence, he says he has seen a drastic drop-off in the number of flight delays. "The big congestion problems that were in the system through summer 2001 just aren't there anymore," he says.

The ACSI survey, produced in conjunction with the American Society for Quality in Milwaukee and CFI Group, an Ann Arbor, Mich., consulting firm, measures consumer satisfaction with different segments of the economy each quarter. Previous surveys measured durable goods, retailers and consumer products.

In addition to airlines and hotels, the latest survey focused on communications, utility and other service companies, the majority of which showed either some improvement or were unchanged from a year earlier. Including all the companies the ACSI survey has measured during the past four quarters, overall customer satisfaction in the U.S. has risen to 73.8 from 72.9 in the fourth quarter. Economywide customer satisfaction is now at its highest level since 1996.

Within the airline category, Southwest Airlines led the pack with a score of 75, up one point from 2002. Analysts said part of Southwest's success might simply be the low price of its tickets. Also, its employees haven't faced massive job or pay cuts in the past year, meaning that morale could be higher than at other carriers. AMR Corp.'s American Airlines saw the biggest improvement in the airline category, jumping to 67 from 63.

Laggards in the sector included Northwest Airlines, which fell one point to 64, and UAL Corp.'s United Airlines, which also dropped one point, to 63. A Northwest spokeswoman attributed its decline to issues associated with adapting to a new terminal in the airline's Detroit hub. At United, a spokeswoman said the company's own in-flight passenger surveys paint a different picture, and have yielded some of the best results in 10 years.

Among hotels, Starwood Hotels & Resorts Worldwide Inc., the parent of Sheraton hotels, showed the biggest improvement, rising four points to 73. The company has been jettisoning its worst-performing Sheratons and last year launched a "Sheraton Promise" program to fix problems or compensate guests. Fixing complaints, many of them plumbing-related, led to the discovery of a $1.90 piece of drain-clearing hardware called the "Zip-It" that is now standard on 10,000 Sheraton housekeeping carts -- keeping drains clear.

Only one hotel group showed a decrease in satisfaction. Hilton Hotels Corp., which owns chains including Hilton, Embassy Suites, and Doubletree, fell two points to 74, according to the survey. A Hilton spokesman said the company isn't familiar with the ACSI data, but that Hilton's internal surveys show increasing customer satisfaction.

Among other industries measured by the survey, satisfaction for telecommunications companies rose to 72 from 71, while utility companies, parcel delivery/express mail companies and cable television providers remained flat. The U.S. Postal Service saw its score fall to 72 from 73.

Four companies had declines of three points or more, all of them in the communications and utilities categories: MCI, Entergy Corp., Allegheny Energy Inc. and Reliant Resources Inc. MCI, formerly known as WorldCom, said its own internal surveys indicate that satisfaction is improving. Entergy said that higher fuel bills, caused by higher natural-gas prices last winter, could have reduced satisfaction. At Allegheny Energy, a spokesman said other surveys, including a J.D. Power & Associates report earlier this year, have shown improving customer satisfaction. Reliant Resources said it preferred not to comment because it hadn't seen a detailed analysis of the data or the survey's methodology.

The director of the survey, Michigan business professor Claes Fornell, says the overall increase in satisfaction means that consumer spending is about to climb, because happier customers are willing to spend more. But many economists disagree, saying the survey is best viewed as a measure of which companies are likely to steal market share.

The ACSI survey attracted considerable attention earlier this year, when The Wall Street Journal reported that Mr. Fornell had been buying and selling short the stocks of companies in the survey, sometimes before it was released to the public. In addition, the CFI Group, which Mr. Fornell founded, has performed consulting services for some companies in the ACSI, including United Parcel Service Inc.

In a recent interview, Mr. Fornell said he hadn't closed out any of his positions, but has "not done any trading" based on the current ACSI.

Write to Patrick Barta at patrick.barta@wsj.com and Christina Binkley at christina.binkley@wsj.com

Updated May 21, 2003

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