State Sponsored Tourism— Consequences Under the Radar

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

By Minch Lewis

If you build a place people want to visit, you’ll build a place where people want to live. And, if you build a place where people want to live, you’ll build a place where people want to work. If you build a place where people want to work, you’ll build a place where business wants to be. And, if you build a place where business wants to be, you’ll be back to building a place that people want to visit.

Maura Gast, Irving Convention and Visitors Bureau 

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The travel and tourism industry is generally recognized as a beneficial component of a state’s economy. As Gast identified, strong tourism goes hand-in-hand with a strong economy. Despite this relationship, public support for tourism is often weak. This article explores two effects of travel and tourism that strengthen decisions to promote the industry locally—“consequences under the radar.”

First, tourism measures favorably compared to other industries in relative economic effectiveness. Secondly, tourism creates job opportunities that would be applauded by William Julius Wilson, author of “When Work Disappears”. These unintended consequences can point to policy recommendations for state and local economic decision-makers.

Travel and Tourism is a composite industry:

• The industry includes several North American Industry Classification System (NAICS) categories. A Minnesota report listed five separate measures. Unfortunately, there is no single NAICS class for “Tourism and Travel,” making it difficult to find consistent, comparable data. Nevertheless, even the soft numbers are indicators of reality.

As an industry group, Travel and Tourism is significant:

• The White House recognizes the importance at the national level. A presidential report issued recently identified travel and tourism as a major driver of the U.S. economy.
• State governments recognize the importance at the state level. Wisconsin, along with most other states, has focused on tourism. Wisconsin cites a healthy return-on-investment (ROI) of $6 in state additional tax revenue for every $1 spent.
• At the local level, there are 423 Convention and Tourist bureaus and 379 Economic Development Districts, an indication of the significant link between tourism and economic development. 

The Travel and Tourism industry has many benefits:

• Jobs–direct and indirect: The U.S. Travel Association reported that in 2012, “14.6 million Americans—or one in eight in the private sector–are employed in jobs dependent on travel and tourism.”
• Government revenue: Income, occupancy, sales and property taxes all receive a boost from tourism. The U.S. Travel Association reports that the travel industry generated $134 billion in federal, state and local tax revenue in 2013.
• Indirect: The economic activity that brings foreign visitors to U.S. communities can affect the local community with off-budget impacts. David Holder, President of the Syracuse Convention and Visitors Bureau, has found that, after high-end shopping, the most frequent activity of foreign visitors is campus tours. They are checking out academic institutions for potential tuition payments—prospects for future economic inflows. 

In a budget crisis, tourism promotion often gets cut first.

Despite the benefits, tourism does not receive appropriate public support.

• Subsidies: Even with a strong ROI, governmental support is politically suspect.
• Tax “favors:” The benefits from tourism are primarily non-property tax revenue, often resulting from payments-in-lieu-of-taxes (PILOT’s).
• Local disruption: Crowded streets, stores and services create inconveniences for local residents.
• Difficult to measure: Without structured measurements, the economic benefits of tourism are difficult to “prove.”
• Disregard for the benefits: Tourism does not have the same reputation as, say, manufacturing for increasing income. 

Tourism’s “consequences under the radar” should be “on the radar:”

Two factors might improve the status of tourism:

• The economic benefits are significant when compared to manufacturing, an industry popularly targeted for economic development. Actually, tourism beats manufacturing on one key point—the jobs can’t be outsourced. Additionally, the jobs have more local impact. Most of the dollars spent are from external economies. Revenue comes from less visible (and less objectionable) sources.
• The social benefits meet a pressing need in urban communities. According to U.S. Travel’s “Fast Forward” report:
  • The door is open for many potential employees who do not have advanced technical skills. The industry is based on hospitality, the ability to understand and respond to the needs of guests on an interpersonal level. In addition, schedules seem more flexible with many tourism workers pursuing additional education.
  • A career ladder is in place as the opportunity for advancement is based on performance.
  • The results are clear. According to longitudinal studies conducted over a 30-year period by the Bureau of Labor Statistics and Oxford Economics, many workers have succeeded. The research, summarized in the “Fast Forward” report, documents dramatic results. Two out of five employees who took their first job in tourism have progressed to earning incomes over $100,000. The data show that working in the tourism industry is not a “dead-end” job. The industry can fill a huge employment opportunity gap.

Recommendations for future growth in tourism:

• Develop the economic measures—industry standards that are being pioneered as part of the federal tourism promotion act should be universally accepted.
• Compare tourism PILOTS to other industries—tax incentives that would be available for proposed developments in industries like information technology should be available also for tourist facilities.
• Promote a positive attitude—San Francisco citizens welcome tourists, with 98% recognizing the importance of tourism to the San Francisco economy. It shows. And it pays.
• Build a career path for tourism connected to education—urban education programs should be developed to prepare students for careers in the tourism industry. State education departments could partner with state tourism departments to fund local programs.
• Consider the competitive nature of the business—in a recent interview, Holder observed that tourist agencies are comrades in arms until a development prospect is on the line. States that learn from each other, but push forward with an investment in tourism infrastructure, will reap the rewards.
• Develop state and local strategies to take advantage of the symbiotic relationship of tourism and economic development—build places that people want to visit…

 

Author: Minch Lewis is a part-time instructor at Syracuse University’s Maxwell School. He served as the elected city auditor in Syracuse, NY, for nine years. He has extensive experience nationally in developing and installing financial management systems for the affordable housing industry. He earned his master’s degree in Public Administration at the Maxwell School.  He holds a certificate from the Association of Government Accountants as a Certified Government Financial Manager. Lewis can be reached at [email protected].

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