State Sponsored Tourism

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By James E. Wright II

In February 2014, Toyota Corporation announced it would consolidate its U.S. jobs in the states of California, Kentucky and New York and relocate its sales, engineering and finance departments to the state of Texas. Movements of this magnitude are beginning to take shape as competition between states and attracting corporations is shifting. As budgets are becoming more strenuous and local, city and state governments search for ways to add revenue, one of the biggest markets is through enticing businesses to become part of their revenue stream. The large-scale effort to attract tourism through attractive business opportunities is a technique that has existed for quite some time but has been underutilized and undervalued.

Increased revenue to companies and government entities can be gained if government is willing to incentivize these corporations to relocate their businesses. The first step to enhance state government revenue is to entice corporations through incentives. As in the case of Toyota, states can offer tax subsidies, land grants and discounts that will help incentivize corporations to relocate their headquarters.

According to Bloomberg News, Plano Texas approved $6.75 million of grants for the company, along with discounts on property taxes. This number is minuscule compared to the revenue Toyota will generate. According to a study commissioned by the city, the new headquarters will generate an additional $7.2 billion over the next 10 years. The money generated cannot only replace the initial $6.75 million offered by the city. However, a portion of the revenue can be used to incentivize other corporations to move their headquarters to the city.

While not every move corporations make to a state will generate $7.2 billion, each added corporation will have positive spillover effects. If states are able to negotiate agreements to bring corporations into their land, it will result in higher revenue from increased employment. Corporations employ hundreds to thousands of individuals in their day-to-day operations. While some of this employment can come from outside the state, the bulk of these employees will be employed from the surrounding neighborhoods.

When corporations relocate their businesses, a cycle ensues. First, relocation means more jobs for the people in the area. Second, those jobs can cause lower unemployment rates, which leads to increased savings by the state because of smaller state funded dollars going to those unemployed. Finally, higher employment simultaneously leads to more disposable income to purchase goods and services within the state by consumers. This sort of cycle is all the result of corporations bringing their business into a state, benefiting the state and the local neighborhoods.

Besides attracting businesses, another key component of increased dollars will come through travel. As technology has increased, the access of information has made it essential that states enhance and highlight their landmarks. For example, the District of Columbia has seen the importance of tourism and is currently spending millions of dollars to renovate and create new monuments and attractions.

Within the past three years, the District of Columbia has renovated the Washington Monument and built a Martin Luther King, Jr memorial. They are currently in the process of building a National Museum of African-American History and Culture. All of this is done with the intent to first inform the public of the different cultures and traditions within the United States but also increase tourism dollars in the area. The more appealing a place is to a tourist eyes, the more likely they will want to visit the establishment.

The movie industry is often an area were high revenue can be gained if utilized correctly. Having monuments, landmarks and attractions generate higher revenue through on-site shooting of movies. One of the top grossing films in the last five years is Transformers III. Many scenes in that movie were shot in D.C. at the Abraham Lincoln monument. This generated revenue through hotel rooms booked for actors, meals each day in the city, paying the city to use its monument in a movie, as well as other streams of revenue that went unnoticed. What can’t be measured is the sheer number of people that see the movie, which portrays the monuments in a positive image that will in turn increase foot traffic in the area.

Large-scale expansion in tourism has resulted in increased competition. For states to be successful, they must create innovative ways to attract tourist and businesses to help booster the economy. The examples above show the impact that tourism can play in generating revenue for a state. That revenue can be used to support residents through high sector job growth, lower unemployment rates and an increase in the exchange of money from individuals to businesses. The growing field of tourism needs to be capitalized upon by state entities that will enable short-term monetary gain as well as long-term monetary revenue.

 

 

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