Hobbit Travel shuts its doors

(If you're concerned about your travel plans through Hobbit Travel, send an e-mail to Suzanne.Ziegler@startribune.com).

Minneapolis-based Hobbit Travel says it's temporarily shutting down, leaving travelers and officials with airlines, cruise companies and other travel vendors scrambling to figure out if they will be left holding worthless or unpaid reservations.

In a news release Tuesday night, the discount leisure travel agency cited "financial difficulties and the present economy."

The company says it's been "particularly hard-hit by the recession and has suffered declining revenues and earnings."

In the statement, Hobbit President George Wozniak apologizes for the inconvenience to employees, customers and trade partners.

Wozniak says he hopes to find additional financing or a strategic partner to resume operations in the next few weeks, and has retained a turnaround advisory firm to help find financing.

The statement provided few other details, and company officials did not return messages seeking further information. The company suggested customers who have booked trips through Hobbit call individual vendors and airlines to determine the status of their travel reservations.

"That's why we need to hear from each person [who booked through Hobbit]." In many cases, Sun Country doesn't know the names or other basic information of those who have booked flights through Hobbit. She said Sun Country will hold reservations for people and will do "everything we can to reconstruct a person's trip and try to make this as painless as possible."

"Our No. 1 priority is to make sure our passengers have a good travel experience," Blackshaw said.

Hobbit's decision to close its doors "is very unfortunate," she said. And figuring out how it will affect travelers and vendors won't be any fun.

Hobbit's troubles likely won't have a major financial impact on vendors like Sun Country. Blackshaw said only about 5 to 10 percent of the company's business came from Hobbit bookings.

Tom Schmelzle of Menomonie, Wis., said he was shocked Tuesday to learn that his weeklong, $2,600-plus January trip to Cancun with his wife could be in jeopardy. But after calling MLT Worry Free Vacations, which Hobbit used for his trip, he was relieved to find his reservation was paid for, and it appears the trip is ready to go.

But the recession has dealt a major blow to the travel industry.

Last spring, Hobbit closed two offices and laid off 55 to 100 workers. In an interview in November, Hobbit President George Wozniak said he expected revenue to fall to about $100 million this year compared with $135 million in 2008. But, he said, he expected the company to remain profitable.

Sales in the summer were down 30 to 35 percent but by mid-October, Wozniak said customer call volumes began to pick up. He recalled about a dozen sales agents in hopes both Hobbit and the travel industry would rebound as the recession eased and winter arrived.

"We're usually busier in the winter season," Blackshaw confirmed.

But despite some positive signs, revenues remained depressed in November and passenger traffic continued to decline.