Economics 101: what travel and tourism mean for your county

By Christina Crayton
Research Associate

The 2006 summer tourist season may have ended, but many smart local governments have already begun planning for the 2007 season. And it’s no wonder: the American Hotel and Lodging Association reports that tourism is currently the nation’s third largest retail industry, behind automotive and food stores, and one of America’s largest employers. It’s in the top three largest employer industries in 30 of the 50 states.

The tourism industry includes more than 15 interrelated businesses, from lodging establishments, airlines and restaurants to cruise lines, car rental firms, travel agents and tour operators. Travel is also a leading industry and source of jobs in regions and local communities, and is increasing in economic importance.

Economic impact, broad

The total economic impact of tourism is more than just the dollars a visitor spends in a community. Tourism contributes to sales, income, jobs and tax revenues. In some areas, a $100 tourist expenditure can add $30 to $50 to local tax revenue.

Especially lucrative are taxes charged on overnight lodging accommodations, commonly known as a bed or occupancy tax or hotel/motel tax. In 2004, Nebraska’s 93 counties generated more than $10 million from these funds: money used to fund the Nebraska Division of Travel and Tourism, county tourism marketing and attraction development efforts. Allegheny County, Pa. reported revenues in calendar year 2005 of more than $17 million from this tax.

Overall, local and state tax revenues generated by travel spending were $536 million in 2004. Without these travel-generated tax revenues, each household in West Virginia would have had to pay an additional $730 in state and local taxes to maintain current service levels. During 2004, visitor spending in West Virginia directly supported more than 40,000 jobs with earnings of $766 million. Travel spending generated the greatest number of jobs in accommodations and food services, arts, entertainment and recreation, such as performing arts, gaming, outdoor recreation and sightseeing.

According to a study conducted by the University of Arizona, tourists visiting Tucson nonprofit arts organizations generated $96.8 million in economic activity for Pima County. The county arts industry employs more than 3,500. For every public dollar received by arts organizations, $1.79 is returned to the county coffers in tax revenue, largely generated through tourism. The tax revenue impact was:

• $2.9 million, state of Arizona
• $1.8 million, city of Tucson
• $1.1 million, Pima County

In 2004, Tippecanoe County, Ind., a county of about 150,000 people, saw an estimated $279 million increase in revenues from travel and tourism. More than $183 million was in direct expenditures from visitors. The tax revenue to the government was more than $66 million: $13 million going directly to the county government. The economic impact from local tourism also increased employment, accounting for 4,183 jobs for county workers.

In 2003, Orange County, Fla. tourism generated $87.2 million in surplus revenues for the county and the city of Orlando. In addition, tourism generated a net fiscal surplus for the Orange County School Board of $4 million. A fiscal surplus represents the degree to which the tourism industry not only pays for its fair share of government expense, but also subsidizes the community, which helps keep overall local tax rates lower. The total net fiscal impact of tourism in 2003 was $91.2 million, equal to a tax savings of $352 to $515 for every household in Orange County.

The importance of tourism to local economies can also be seen when this important activity is disrupted. The aftermath of Hurricane Katrina devastated every aspect of life for residents of the Gulf Coast. The travel and tourism industry was a primary economic engine that drove the prosperity of the region.

In Gulfport and Biloxi, Miss., the gaming industry alone generated about $911.5 million in annual revenues, which roughly produces $500,000 in tax revenue on a daily basis. Post-Katrina stats reveal the following:

• Approximately 18 percent of total employment for Louisiana, Mississippi and Alabama, or approximately one out of every five jobs, are travel and tourism specific and have been affected by Hurricane Katrina.
• In the 15 affected counties in Mississippi, $2.8 billion is spent annually in travel-related businesses, which encompasses 38,000 jobs. This ongoing loss totals approximately $7.7 million per day.
• In the three affected counties in Alabama, $2 billion is spent in travel-related businesses per year, involving 30,000 jobs, with ongoing losses of $5.5 million per day.

Last spring, communities and counties across the country celebrated See America Week, May 13-21, 2006. This event is sponsored each year by the Travel Industry Association of America. During this week, hundreds of cities and counties across the nation promote greater public awareness of the economic, social and cultural impacts of travel and tourism. The purpose of See America Week is to promote a wider understanding of travel and tourism as a major American industry that is vital to the economic stability and growth of communities nationwide.

Travel and tourism can be a significant, and even essential, part of the local economy. Tourism accounts for thousands of jobs and millions of dollars in contributions to local revenues. Local elected officials are key stakeholders in tourism development. Advocates for local development, commonly referred to as a tourism support group, include tourism councils, Chambers of Commerce, clubs, historical societies and resort associations. Travel by U.S. residents to destinations within the country has grown by an average of 7 percent in the last three years. Newer destinations that offer adventure travel, and cultural and heritage offerings, are becoming the places of choice for families.

Marketing your county and strengthening the capacity of your community or region to attract travelers and tourists is one key to growing and sustaining economic vitality.

For more information on this subject, visit your local Chamber of Commerce. National and global information on travel and tourism can be found at www.tia.org.