PRESENTATION TITLE - Cloudinary

PRESENTATION TITLE - Cloudinary

ECONOMIC IMPACT OF TOURISM IN KANSAS Christopher Pike Director, Impact Studies Tourism Economics October 18, 2016 AGENDA Overview of US consumer Kansas visitation and spending Impact of Tourism in Kansas Composition of Spending Economic Impacts Tourism in Context 2

Tourism Economics US CONSUMER SPENDING OUTLOOK Factors favoring recent travel growth 3 1 Steady job and income growth 2 Stronger consumer confidence 3 Improved household balance sheets

4 Lower transportation costs All signs point up! Tourism Economics LABOR MARKET: SLACK TIGHTENS, WAGE GROWTH RECOVERS Wage growth for individuals recently recovered to 3.5% (Atlanta Fed tracker) 4 Tourism Economics

LABOR MARKET: QUITS AND LAYOFFS Rising quitrate reflects firming labor conditions and layoffs are low 5 Tourism Economics CONSUMER CONFIDENCE SURVEY Favorable view of present situation future expectations are more

cautious 6 Tourism Economics HOUSEHOLD DEBT Households have reduced debt levels freeing disposable income for future spending growth 7 Tourism Economics

HOUSEHOLD NET WEALTH Home prices and financial markets have boosted household wealth Wealth effects typically support consumption with a lag 8 Tourism Economics GAS PRICES HAVE FALLEN Gas Prices Are On a Three Year Decline

Gas prices have fallen from nearly $4 gallon to around $2 gallon Texas gasoline price, all grades, dollars per gallon 5.0 4.5 4.0 3.5 3.0 2.5 Retail price 2.0 12-mo moving avg 1.5 06

07 08 09 10 11 12 13 14 15 16

Source: Energy Information Administration 9 Tourism Economics RECENT CONSUMER SPENDING ON LODGING Consumer spending, US Growth from Dec. 2011 Index (Dec. 2011=100) 140 Lodging (37.6%) 130 F&B (28.4%) Recreation services (17.7%) Consumer spending (17.7%)

Air (17.0%) 120 110 100 90 80 70 Motor vehicle fuel (-32.6%) 60 2011 2012

2013 2014 2015 2016 Note: Data is nominal, three-month moving average, seasonally adjusted and extends through July 2016. Source: Bureau of Economic Analysis; Tourism Economics 10 Tourism Economics TWO SEPARATE TRAJECTORIES OF TRAVEL PROPENSITY Business and leisure trip propensity Leisure travel

continues to expand U.S. Domestic Travel, 1994=100 120 110 100 Leisure trips per employee 90 Business trips per employee 80 even as business travel remains tempered 70

60 1994 1998 2002 2006 2010 2014 Source: U.S. Travel Association, Tourism Economics 11 Tourism Economics SECULAR SHIFT OF SPENDING TOWARD LODGING

Consumer spending on lodging Real, per capita GDP and spending on lodging Percentage change since 1980 300% 245% Spending on lodging has increased 245% since 1980 (real, per capita basis) 250% 200% 150% 78% 100% GDP has increased 78% since

1980 (real, per capita basis) 50% 0% -50% 1980 1985 1990 1995 2000 2005 2010

2015 Source: Bureau of Economic Analysis; Oxford Economics 12 Tourism Economics AGENDA Overview of US consumer Kansas visitation and spending Impact of Tourism in Kansas Composition of Spending Economic Impacts Tourism in Context 13

Tourism Economics WHEN DO VISITORS COME Steady room rental growth y-o-y. 2015 started off well, ended up on par with 2014. 14 Tourism Economics ROOM GROWTH 2011 ON Strong

recovery early in decade, pause in late 12/early 13 and picks back up late 13 into 14. 15 Tourism Economics VIEW FROM SALES TAX SIDE Lodging has led overall economy since 2010, restaurants showing

some recent strength. 16 Tourism Economics VIEW FROM SALES TAX SIDE Retail picture has been mixed clothing led economy early in decade, losing some of the lead in 2014, while sporting goods trailed until gains seen in 2015.

17 Tourism Economics VIEW FROM SALES TAX SIDE LHS employment supports view of strength in tourism. 18 Tourism Economics SIX YEARS OF VOLUME AND SPENDING GROWTH Visitation reached 35.4

million and spending reached $6.5 billion in 2015. 19 Tourism Economics VISITOR SPENDING Visitation grew 4.2% in 2015. Traveling spending growth has averaged 5.5% per year since 2009, a total increase

of $1.8 billion. 20 Tourism Economics VISITOR SPENDING Note the growth in key categories early in the decade as a share of all growth compared to 2015. 21 Tourism Economics

AGENDA Overview of US consumer Kansas visitation and spending Impact of Tourism in Kansas Composition of Spending Economic Impacts Tourism in Context 22 Tourism Economics SPENDING BY CATEGORY 23 Tourism Economics

SPENDING CATEGORIES OVER TIME Lodging spending has increased from $730 million to $1.06 Billion. 25 Tourism Economics SPENDING CATEGORIES OVER TIME The share of the traveler dollar spent on lodging has risen to 16.3%

in 2015 from 14.9% in 2010, as both room demand and room rates have risen. 26 Tourism Economics SPENDING BY MARKET Overnight travelers comprise 62% of all visitor spending in 2015. 75% of all

visitor dollars are by overnight travelers 27 Tourism Economics MORE THAN JUST TRAVELER SPENDING Tourism Satellite Accounting also includes investment and other spending streams in support of travelers. $7.1 billion in

total. 28 Tourism Economics AGENDA Overview of US consumer Kansas visitation and spending Impact of Tourism in Kansas Composition of Spending Economic Impacts Tourism in Context 29 Tourism Economics

DIRECT TOURISM EMPLOYMENT The tourism employment growth of 1.6% was a point higher than overall Kansas employment growth. 30 Tourism Economics DIRECT TOURISM EMPLOYMENT Direct tourism employment

isnt all of any one industry but a piece of many industries. 31 Tourism Economics RANKING DIRECT TOURISM EMPLOYMENT Tourism employment would rank as the 8th largest industry in Kansas

32 Tourism Economics ILLUSTRATING THE CONCEPTS Travel & Tourism Industry Travel & Tourism Economic Impact The direct effect of visitor spending The flow-through effect of T&T all demand across the economy Focus of Tourism Satellite Account ACCOMODATION ACCOMMODATION CATERING, ENTERTAINMENT RECREATION, TRANSPORTATION &OTHER TRAVEL RELATED SERVICES

Expands the focus to measure the overall impact of T&T on all sectors of the economy PRINTING/PUBLISHING, UTILITIES FINANCIAL SERVICES, SANITATION SERVICES FURNISHINGS AND EQUIPMENT SUPPLIERS, SECURITY SERVICES, RENTAL CAR MANUFACTURING, TRANSPORTATION ADMINISTRATION, TOURISM PROMOTION, SHIP BUILDING, AIRCRAFT MANUFACTURING, RESORT DEVELOPMENT, GLASS PRODUCTS, IRON/STEEL FOOD & BEVERAGE SUPPLY, RETAILERS BUSINESS SERVICES, WHOLESALERS, COMPUTERS, UTILITIES, MANUFACTURERS, HOUSING, PERSONAL SERVICES Tourism Economics CONTRIBUTION TO KANSAS ECONOMY

$1 million in sales can have different impacts to Kansas depending on where those sales are 34 Tourism Economics CONTRIBUTION TO KANSAS ECONOMY $1 million in sales can have different impacts to Kansas depending on

where those sales are 35 Tourism Economics CONTRIBUTION TO KANSAS ECONOMY $1 million in sales can have different impacts to Kansas depending on where those sales are 36 Tourism Economics

VISITOR SPENDING Note the growth in key categories early in the decade as a share of all growth compared to 2015. 37 Tourism Economics CONTRIBUTION TO KANSAS ECONOMY The tourism industry: $2.7

billion of Kansas GDP in 2015. The tourism economy: generated GDP of $4.9 billion. This is 3.3% of the state economy. 38 Tourism Economics CONTRIBUTION TO KANSAS ECONOMY The tourism industry: 63,211 jobs in Kansas in 2015.

The tourism economy: 94,126 jobs. This is 4.9% of all jobs in the state. 39 Tourism Economics ALL SECTORS BENEFIT FROM TOURISM $7.1 billion directly in tourism economy supports an additional $3.3 billion in business sales = total of $10.4

billion in sales to Kansas businesses 40 Tourism Economics TOTAL TOURISM EMPLOYMENT Visitors directly support 24,000 food & beverage jobs over 27,000 in total. 5,560 business service jobs supported by tourism 50 directly by visitors Tourism Economics

LABOR INCOME TO WORKERS IN KANSAS Significant employment in F&B and recreation drives high labor income in those industries. Above average wages support labor income in supplier industries. 42 Tourism Economics TAX REVENUE

Taxes of $1.0 billion were generated by tourism in 2015. State and local taxes alone tallied $588 million in 2015. 43 Tourism Economics TAX REVENUE $272 million in state revenues Local governments

received $316 million in tax receipts from travelgenerated activity. 44 Tourism Economics AGENDA Overview of US consumer Kansas visitation and spending Impact of Tourism in Kansas Composition of Spending Economic Impacts Tourism in Context

45 Tourism Economics TOURISM IN CONTEXT - VISITATION Kansas 35.4 million visitors would be like everyone from Texas, Nebraska, and Missouri visiting Kansas once a year. 46 Tourism Economics

HOW IMPORTANT IS TOURISM? Kansas visitation rose by nearly 900,000 in 2015 which is like having everyone from Austin, Texas stop on by during the year. Tourism Economics TOURISM IN CONTEXT VISITOR SPENDING Visitors spent nearly $6.5 billion in business sales in Kansas in 2015 - or about

what all Americans spent on food for July 4th. 48 Tourism Economics TOURISM IN CONTEXT VISITOR SPENDING Were the Kansas tourism industry a single business, it would rank #402 on the Fortune 500 list, similar in size to JetBlue Airways and Charles Schwab, and bigger than

Dr. Pepper Snapple Group. 49 Tourism Economics TOURISM IN CONTEXT VISITOR SPENDING The 93,126 tourism jobs would be enough for two jobs for every resident of Salina, Kansas. 50 Tourism Economics TOURISM IN CONTEXT STATE AND LOCAL TAX REVENUES

The $588 million in state and local tax revenues represents $525 per household in Kansas the approximate cost of hosting a 10 person dinner on Thanksgiving. 51 Tourism Economics SUMMARY Summary 52

1 2015 marks six years of spending and visitation growth 2 Recent growth in categories that produce largest impact in Kansas 3 Impacts are across every industry and are a significant portion of the state economy 4 State and local tax revenue supports $525 in government services for each household in Kansas Tourism Economics BONUS SECTIONS

Counties! DMO value Impact of Tourism in Kansas 53 Tourism Economics COUNTY RESULTS 54 Tourism Economics COUNTY RESULTS 55

Tourism Economics COUNTY RESULTS 56 Tourism Economics WHY PRIORITIZE DESTINATION MARKETING? The visitor economy is a catalyst for economic development 57 Tourism Economics HOW DESTINATION MARKETING DRIVES THE ECONOMY 58 Tourism Economics

#2 RAISING THE DESTINATION PROFILE Destination promotion strongly supports economic development through brand development, raising awareness, and building familiarity Every tourist that comes If we do it right, the ideal through here is a potential brand will transcend the business lead. visitor market and support Jeff Malehorn, President & CEO, all economic

World Business Chicago development. Hank Marshall, Economic Development Executive Officer, City of Phoenix Community and Economic Development Department 59 Tourism Economics #2 RAISING THE DESTINATION PROFILE Familiarity is critical in attracting investment 13% of executives with site selection responsibilities state that their perceptions of an areas business climate were influenced by leisure travel and 37% reported influence by business travel (Development Counsellors International, 2014) We are learning a lot from Visit California by how they brand California and how to take their model and apply it to economic development.

Brook Taylor, Deputy Director, Governors Office of Business and Economic Development 60 Tourism Economics IMPACT OF CAMPAIGN ON ECONOMIC PERCEPTIONS Missouri 2016 campaign impact effect A good place to live +57% A good place to start a career +53% +79% A good place to start a business

A good place to attend college +43% A good place to purchase a vacation home +67% A good place to retire +50% 0 20 Percent Who Strongly Agree Aware 61 40

Unaware Tourism Economics WHY PRIORITIZE DESTINATION MARKETING? The visitor economy is a catalyst for economic development It actually works 62 Tourism Economics SDTMD case study is telling San Diego TOT Receipts year-over-year % change 12% 10% Defunding of

SDTA 8% 6% 4% 2% 2013 2014 JanAug Source: SD TMD 2012 2011 0% Tourism Economics

San Diego stark demand slowdown in 2013 Striking lull in SD room demand Room nights, 12-mo moving sum, % change year ago 6 5 Surge in 2014 Defunding of SDTA 4 3 Top 25 Comp set San Diego 2 1 0

Jan -12 Jul -12 Jan -13 Jul -13 Jan-14 Jul-14 Sources: STR, Tourism Economics Tourism Economics PENNSYLVANIA PA budget Graph shows PA tourism budget before earmarks. After earmarks,

only $2.0 million was available for statewide marketing in FY2015. Budget, in millions of constant 2014 dollars $55 $50 $45 Average '07-'08 tourism budget: $36.3 million $40 $35 $30 $25 $20 $15 Tourism budget FY2015:

$7.3 million $10 $5 $0 2005 2006 2007 2008 2009 2010 2011 2012

2013 2014 2015 Note: PA tourism budget adjusted to real terms (i.e. constant dollars adjusted for inflation). Source: US Travel Association; Tourism Economics 65 Tourism Economics PENNSYLVANIA Marketing cuts resulted in share losses PA share of competitive state total PA share of nine-state total

2009 27.4% 2014 22.9% 19.4% 18.4% 14.7% 6.2% State tourism budgets Marketable overnight trips Marketable day trips Note: Nine-state competitive state region includes Pennsylvania, New York, New Jersey, Delaware, Maryland, Virginia, Ohio, West Virginia, Virginia and District of Columbia. Tourism budgets for 2009 are the FY 2008-09 fiscal year, where available.

Source: US Travel Association; Longwoods International; Tourism Economics 66 Tourism Economics ILLINOIS State budget impasse limited state and city destination marketing for most of the past fiscal year Dropped to third from first most visited mid-west state. Illinois ranked 9th among all 50 states and is now ranked 11th as both Michigan and Ohio gained share. Hotel tax revenue from JanuaryApril was down 0.7% , while the US average was up 4.9%. Inquiries about travel to Illinois were down over 70% in FY16. Tourism Economics WHY PRIORITIZE DESTINATION MARKETING?

The visitor economy is a catalyst for economic development It actually works Destination marketing meets a pronounced need 68 Tourism Economics THE NEED FOR DESTINATION PROMOTION Challenge Solution: Destination Promotion 1 The primary motivator of a trip is usually the experience of a destination, beyond the offerings of one

business Articulates the brand message that is consistent with consumer motivations 2 Effective marketing requires scale to reach potential visitors Pools sustained resources to provide the economies of scale and marketing infrastructure required to generate impact 69 Tourism Economics

TARGET OPPORTUNITY: 658 MN UNUSED VACATION DAYS Unused PTO in 2015 Days of PTO per worker 9.9 10 8 6 5.7 5.1 5.7 6.1 4.7 4 2

0 Total Gov't Private (Pub/Priv Sector) <100 100- 500+ 499 (Employees) Sources: GfK and Oxford Economics 70 Tourism Economics DESTINATION MARKETING MUST REVERSE THIS TREND Days Away on Vacation Annual vacation days per worker, trend is the 24-month moving average

22 21 20 19 18 17 Long-term trend 16 Long-term avg 1976-2000 15 75 80 85 90

95 00 05 10 15 Source: Oxford Economics analysis of BLS survey results 71 Tourism Economics PLENTY OF REASONS WHY Obstacles to taking PTO Multiple answers allowed, share of respondents, % Would return to backlog of work

I cannot afford a vacation No one else can do the work Hard to take PTO with seniority Can bank/roll over unused PTO Want to show dedication Get paid for my unused PTO Would work anyways I feel guilty using PTO Can't appear to be replaceable Work culture doesn't promote PTO Concerned about promotion/raise I would prefer to work Afraid I would lose my job Afraid of boss's perceptions Taking PTO comes with seniority Symptoms of a "work martyr" Somewhat or very

difficult to take PTO because... 0 10 20 30 40 50 Sources: GfK and Oxford Economics 72 Tourism Economics BUT THE BENEFITS ARE REAL

The Manger's View of View PTO of PTO The Managers %, "By using their PTO, employees..." Improve their health/out sick less Return more efficient and productive Have better morale and less turnover Return focused and more creative Agree? Somewhat Strongly Work extra when really needed

0 20 40 60 80 100 Sources: GfK and Oxford Economics 73 Tourism Economics THANK YOU Tourism Economics / Oxford Economics

All data shown in tables and charts is Tourism Economics / Oxford Economics own data, and is copyright Oxford Economics Ltd, except where otherwise stated. To discuss further please contact: Christopher Pike, Director of Impact Studies [email protected] 74 Tourism Economics

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