Wall Street Week With Fortune

Oh. Coming up on Wall Street Week With courtroom sky high fuel prices and airline problems have been grounded U.S. travelers business is booming for the vacation industry and of Jeff glowing reports about how you booked that trip has become big business and assisted living. It's not your grandmother's nursing home anymore. Karen Gibbs takes a look at the new face of elderly care. Welcome to Wall Street Week With fortune. Wall Street with the fortune is made possible in part by Nuveen investments. Now you can learn everything you need to know about exchange traded funds.

Comforting as an. ETF connect an educational website of Nuveen investments and he's proud to support Wall Street Week With Fortune Wausau insurance. Offering a full line of coverage from workers compensation. To general liability. Welcome to Wall Street Week With fortune. I'm Karen and I'm Jeff call vun. Or if you're traveling this holiday season you understand why the word travel is derived from the word try Vale. Long lines bad weather bankrupt airlines high gas prices. You'd never guess that in fact travel is booming on track to top pre-9 11 levels. But the way we buy travel is changing leading a couple of America's sharpest business titans to bet big time on travels online future. So what's it all going to mean to investors and travelers. And where do Americans most want to go now. Paul Keogh covers the travel industry for CIBC World Markets He joins us

from New York. As does Daniel Cadillac who writes for Time magazine. Paul so much of what we hear about travel seems to be bad news airlines in crisis. Gas prices off the charts. Inconvenience at airports. How is this travel season actually shaping up. Big picture as a business. As a busy travel season have a great year. We've had several very difficult years if you go back to 9/11 the Iraq war and in ASAR scares that affected a number of the industries. The numbers that will seen a backlash that it won't be as robust and strong as the first half of the comparisons are different. That being said you are seeing a significant increase in leisure travel still you're seeing corporate farms come back about five or six points over last year and you're seeing pricing up in just about every category except in airlines and car rental which have their own structural issues. Damn the Internet is transforming travel as it's transforming everything. And a couple of the very best wheeler dealers in America Henry Silverman of the Cendant corporation and Barry Diller of Interactive Corporation have

decided to place big bets on this what's going on and can they both succeed. Well you know Jeff anytime you get to celebrity see I was in the same market. You know it's going to be interesting but you also know it's a hot market. Online travel booking is growing roughly four times the industry by the estimates I've heard something like one in three people will book online this year which is double A couple years ago and that might easily go to one in two over the next couple years in the very near term. People don't know how ascendance name all that well but they do know the companies that Cendant has in travel What are they. Well Senden is a big player in travel they have Avis rental car they have hotels a travel lodge Ramada in Howard Johnson's. So they're a big player in that area but they just got into online travel in a big way is that right. Right I mean just this week they bought the bookers which is a very popular British

travel site. In September they bought Orbitz one of the big players in the States I think they paid something like a billion two for that business. Only a year ago it's not clear that Henry Silverman ever thought he'd be making this kind of investment in online travel. But the growth story is just so strong he couldn't ignore it. And of course Barry Diller has been in online travel in a big way for some time what is he got. Right this is this is Barry's game and he bought Expedia a while ago. He has hotels dot com. You know he is sitting there waiting to scoop up all the business as people migrate from old travel agencies to online travel. That's his game plan he's doing it in a lot of areas other businesses as well. Travel is his biggest bet. You've spoken to them you've written about them and these guys maintain that they're not butting heads right. That they're not help without impeding there's room for both to buy it. You know that's what they say. But these guys know each other they have lunch together they're in the same industry in the same circles. Maybe they just want to kind of keep it civil but. But you know what

they do say that there's room for both. And in fact they say there's room for even more than two of them with this kind of growth. You know the travel we haven't mentioned Travelocity which is in there also a third player. So they insist there's room for everybody. It seems to me that at the moment there is but who knows down the road. Paul you track these companies as an analyst what do you think of IAC Interactive Corporation Diller's company and Cendant Henry Silverman's go. Well I think of both that the top two players in a space and they have very smart investors and smart. Given a track record and they realize HOW TO ME into sector there's really a pocket full of opportunities one is you have tremendous secular growth I mean people are moving in migrating online. And all of our recovery in travel and three structurally there is an opportunity to give consumers more of what they want and making travel booking travel convenient and Pasi giving them packages and giving them options they can normally have before.

And when you're looking at you know look to book their vacations Barry Diller told me was it packages are the future of this segment. You know everybody can get every knows about getting hotels and cars and airline tickets online. But you know the holy grail is moving to restaurant reservations and theater tickets and booking tours and and getting your tee time and getting all of this online on one site and getting it at a cheaper price than if you booked directly individually. Well it sounds like a great advantage in a technological challenge at a business challenge but what I don't understand and I appreciate both of your views on this is how does any one company build a sustainable advantage in this area it sounds to me like it could just devolve into a price war one against another. Dan what do you think. Well that's that's clearly the challenge but you know Expedia in orbits already have big names out there very well-recognized. You know a lot of hotels are trying to drive business right to their websites and they

haven't really been able to do it because of the name recognition of expedience orbits. But clearly it's a challenge in the USA Space been evolving for five or six years now and I think what's really saying now is sort of the emergence of who are going to be the top players. And in the U.S. right now you only have about four players that control most of the third party bookings control plus a billion hours of marking revenues and line should have profitability the second tier players a smaller mom and pop websites that try to go out to space they're done you know they got bought out or they close their shops as you said for control of who are the outside of Barry Diller and Henry Silverman's portfolio and you also have Travelocity owned by saber and you also Priceline which is still independent still a pretty legitimate player in North America. OK here's another angle on the whole thing we've got a survey showing the places that Americans most want to go. The top five in order are the neighbor islands meeting and stuff like that to the national parks like Grand Canyon and Yellowstone three Honolulu for the Florida Keys and

five the Florida Gulf Coast. Paul how is this changed over the years and what does it mean. Why does the number of dynamics of highly none of those locations one is you've had a weaker dollar too as you've had Iraq war and saw as in 9/11 and what that has done is sort of highlighted the need for Americans to travel closer to home another beneficial has also been a cruise industry to extend you can park your car on a cruise ship and go for a week or so without having to go too far from North America. That has enabled a lot of these particular locations you mentioned to really thrive. That said That being said however the weaker dollar also seems to increase international travel of foreigners coming to us to take vacations that could be an added benefit over next year to a lot of people think about their vacation not necessarily use a city or region but as the resort or hotel they actually want to go to you cover those companies. One of the best run resort and hotel companies. Some of the best hotel companies I mean it's the ones that consumers recognize I think first off you

look for the strong brands Look at times like Marriott Hilton Starwood has brands like the Ritz Carlton Starwood has the Westin think we just brands. Hilton of course have a very strong and worldwide put for investors. What's the best place to be as we watch this whole industry evolve who's got a sustainable advantage who's going to survive. Well actually it's funny you mentioned earlier Barry Diller and Henry 7 footfall as we actually have a sector perform on both those stocks outperform. Yes I mean we actually recommend stocks. But what's important about these two companies is that the great assets right now they're in a great sector and very strong management I think if you look at the landscape right now has very few predators that really match up in terms of the assets and about that they have. Dan is this all going to make life easier and less expensive and generally better for travelers. Yeah I mean I think that's the endgame. Again it comes back to packaging but also price. As these guys battle it out in this area they're going to have to make more

things available at a better price and and more conveniently. Gosh that's that's that's a homerun for consumers. That's that's what you want that's what you hope will happen. And that's probably what will happen. Daniel padlock and Paul thanks so much for your views. One thing keeping many baby boomers closer to home is the need to care for elderly parents. Boomers are often called the sandwich generation because they're sandwiched in between their children and their parents. Just when we thought we might have college tuition and retirement all planned for comes yet another challenge caring for aging parents. More than 30 million Americans are caring for an elderly parent and helping with that challenge has become big business one that Wall Street is certainly take notice of. We asked contributor Michael Farr to take us inside that industry. Michael. Kerin this increasing portion of the population presents a business opportunity. The real question is how do you sell these services. How do you provide these

services. So we went to sunrise assisted living to figure out how they do it and to whom they're selling. Julia Faust is in her 40s and recently made the difficult decision to move her mother into a sunrise assisted living residence. For Julia. This was more a decision of the heart than of the pocketbook and appearances counted for a lot. When you drive up. It says a Victorian type house look which I think is lovely so it looks like more like a home than a facility. Number one number two you have the concierge right there in the semis of the train. They're very friendly very nice wonderful people and you have the dog on your the dog. My mother loves dogs and there you get back again to this feeling of a home and not a facility. Went to her room showed her her room. Beautiful view of the woods. Just a very nice bright room and by putting one's.

Parent into assisted living. A child is not. Abdicating their responsibility to the parent. That you know it's not as if well. Here you go. I'm never going to see you again. Wham. It's where she's going to sleep she's going to eat she's going to have her needs met. But you know it's still like an apartment. What was important to you when you were looking for an assisted living facility for your mother. The general environment. It's an environment where people are friendly. She can go downstairs she can go to the beast have coffee talk to people. It's. A nice. Environment. Your first impression any time you walk into a place it's going to have an impact either positive or negative. It's a home like environment. It's also very clean. It's not cluttered. And I think it's reminiscent. To a lot of people of a better and more simpler time. So I think the older people like that and I like it. Even at

my age. So I think we all can appreciate that. Julia's positive impressions of the sunrise residence didn't happen by accident. Sunrise CEO Paul Clawson explains that they you know who really makes this crucial decision for mom and dad. People think about senior's are the consumer they the senior comes and lives in an assisted living community but a very very important is the relationship we have to family members because it's typically a 45 to 64 year old son or daughter. I have to say more often daughters and daughters in law that are concerned about how his mom or his mother in law are doing she getting the services she needs and they are really in many ways the the decision maker or certainly the decision influencer as to where mother or mother in law is going to live. And so they are equally. Our customer. If you're normally marketing to this 45 to 64 year old daughter what do you do to make your community more appealing.

The quality of our buildings is very important. Part of our outreach to the community rebuild our buildings usually highly trafficked areas so they're quite visible and that's important because our residents want to feel that they're still part of the community and the architecture is also very important. So we use iconic architecture out here on the East Coast. It's usually a bit more Victorian looking with turrets and big porches and a steeply Gable grooves. We blend in to what the vernacular of the architecture is in that region. But it has to be really a beautiful building. And then word of mouth is incredibly important. Nothing is more a fish and also for us then to gain residence through happy customers. We don't have to spend much money then on media advertising and we don't. We're really interested in establishing in the zip code in the neighborhood. We tend to draw almost all of our family members and residents from about a five mile ring right around the sunrise community where it's located. The setting is important and in our case that means a

very residential no fluorescent lights no institutional finishes and combined with that is services delivered in a way that really honor the senior. And ultimately if the family member has to. Have again have confidence that that quality of life that they are looking for for their loved one can occur in this setting here almost every day. I have lunch with her. I spend a few hours whether. It's not unlike living in my home to a certain extent. It's just that I'm not doing the everyday functions of bringing her breakfast or changing her bed or vacuuming the carpet. That kind of thing. It's really quality time. And I think that's very important. And Karen these assisted living companies and senior care companies are a lot more than just sort of feel good pretty houses let's make everybody feel good inside and pretty decor. They're serious businesses with serious marketing strategies.

Sunrise knows that they're going to market and sell that 45 to 55 year old woman that daughter or daughter in law. Be nice to your daughter in law because she could be making that decision for you. They want to make sure that the decor appeals to the daughter in law so that they provide some kind of guilt free or very low guilt on the scale opportunity for that decision to place mom in assisted living. Mom the octogenarian isn't going to like it she's going to walk through and say I don't like it I want to go home you know. So they are very effective marketers they have a market in magazines that are going to be read by 45 to 55 year old women they go to local hospitals and churches and say Here we are come visit. But it's a real strategy and they're very good at it. Well let's talk about this industry. We're also joined by Jerry Doctorow who follows these transfer McMath. Jerry this sunrise facility that we just saw representative of senior housing and it's representative I think of one type of senior housing.

These would all be called Assisted living facilities which are really did designed for you know a frail senior. But you know there's a range of facilities around that independent living would be a facility that has larger apartment units probably a little less services designed for a slightly more active senior. That's another alternative. There are what are called. Continuing care retirement community CCRC which do independent assisted and nursing on the same level as well as the more traditional nursing home. But even there I think the facilities are probably changed from what you might have seen 5 or 10 years ago. They've gotten a lot more I think customer friendly or driven by changes like what you've seen it. Sunrise assisted living. What's behind this demand now for senior housing. There is a large group of people born in the 1920s that are now passing 85. That's the group that's driving demand for a senior housing. The cost of the founders of Sunrise who were instrumental in developing sort of a more residential oriented

more customer friendly type of senior housing that I think provided options that the old nursing home just did. What can I buy now have any pics any companies that we could invest in now. I think one of the things as important as investment theme is that the aging of this population the old elderly population is driving demand for a number of services both assisted living. But also nursing care. The company in that space we like the best right now is a company called kindred health care k and D is the ticker. Again just below a billion dollar market cap company we think it's attractively valued and has upside. There's a little uncertainty in reimbursement and in nursing care where the government does pay. You know early next year but we think in kindreds case that's priced into the stock. Some of the other opportunities we see are in home nursing. There's a company Gentiva. Cittie Ivy is the ticker smaller market capital about

400 million provides home nursing care announced a program just the other day to do more cardiac care for people post cardiac care in the home. I think that's an interesting interesting model. And the final company we like is a company called Apria a G which is in the home respiratory business providing home oxygen medications for lung function and that also there's been some issues about reimbursement we think they're well positioned and for a more managed care environment and attractively priced how big a company is after it happens about one and a half billion dollars so these are all small cap companies by Wall Street standards I think that's the nature of the industry but I think they have significant growth potential in our opinion. Well with the number of baby boomers increasing elderly citizens whether they are the 20 or the ones that growing are we now going to see a rise in say housing

for seniors. The Boomers which I'm included are starting to drive demand for general health care use but are certainly a long way away from sort of senior housing. But both of them are having an influence. What are some of the other companies I follow our health care Rietz real estate investment trusts that own nursing homes own assisted living may own medical office buildings as well. That's another alternative for I think an investor that believes in some of these trends we've been talking about. But maybe looking for more of an income stock to purchase I think on the read side again rates have had a couple of very strong years here so it's harder to find great values. I think you know a couple of the names that we like probably best in that space again are also small cap is coming out LTC properties out of California. LTC is the ticker that you know a mid 6 percent dividend yield and I

think has some good earnings growth potential and also some good dividend growth potential Ventas VTR is another one they're very closely tied to Kindred So there's Samina relationships there that's less of a value play as is you know there are some specific things about that stock that we think are attractive fascinating and very timely discussion. Dr. Michael Farr thank you very much. Thank you. Well it seems most investors were less than fascinated with the markets this week as trading was how then tracked by a weak dollar and disappointment with the number of drops the economy is creating. The Dow gained less than 70 points. The S&P picked up eight and a half point and the Nasdaq earned just under 46. Well that's our program. Next week we're going to take you inside the world of mutual fund scorekeeper Morningstar the company that is transforming the investing industry. Yet few people know who they are or how they operate so long. We'll see you next week.

To learn more about this program visit the PBS dot org. For a transcript of this program send a $5 through transcripts Wall Street Week With fortune. Maryland Public Television Owings Mills Maryland 2 1 1 1 7. Wall Street Week With fortune that was made possible in part by Nuveen investment. Now you can learn everything you need to know about exchange traded funds. Comforting. As an. ETF connect an educational website of Nuveen investments and he's proud to support Wall Street Week With Fortune Wausau insurance. Offering a full line of coverage from property.

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