Last year was a good year for tourism in Rhode Island – with spending in 2007 jumping 9.3 percent from 2006 – but it’s already clear that high oil prices, despite the recent drop, and the economic downturn will affect 2008 results, according to an industry consultant.
Business travel, for example, has been slipping nationally for “way too many” quarters and will stay that way in the coming quarters, Kenneth McGill, executive vice president with Waltham, Mass.-based consultants Global Insight Inc., told a crowd of tourism and hospitality professionals on Nov. 19.
“Business travel is under siege right now,” he said. “Why? Because profits are down, revenues are down in a lot of industries. And what do businesses do when that happens? They shutter the doors and the first thing they do is attack controllable expenses.” Business travel is the “poster child” of controllable expenses, he added.
McGill also said leisure travel is expected to decline for the next three quarters before beginning to grow “ever so slightly” in the last quarter of 2009.
“And remember, leisure travel in the United States is about 76 percent of all travel,” he said.
McGill attributed the negative outlook to high household debt, high travel costs and falling housing wealth.
Oil prices, of course, matter to travelers, he said. During the three summers before the most recent one, gasoline prices topped $3 per gallon, but trip distances and number of trips continued to grow, McGill said.
But tourism statistics haven’t yet been finalized for last summer, when gas hit $4 per gallon. “According to our [preliminary] stats, the distances traveled went down markedly – [travelers] stayed closer to home,” he said. “But it took $4 per gallon for that to happen.”
While the 2008 tourism results are still a year away, McGill presented Global Insight’s 2007 Rhode Island tourism statistics, showing tourism spending jumped about 9.3 percent in the state.
The second annual report was commissioned by R.I. Tourism Division, in cooperation with local tourism boards. It shows that tourism spending rose from $3.88 billion to $4.24 billion year-over-year.
“For every 220 visitors, we create a job here in Rhode Island. For every 150 visitors, a student is put through school on the taxes that are generated,” Tourism Division Director Mark G. Brodeur said. “We actually had a very good year in 2007.”
In all, tourism spending accounts for about 12 percent of state and local tax revenue, along with $2.63 billion in economic impact, representing 5 percent of Rhode Island’s Gross State Product.
“If tourism went away tomorrow, each household would have to pay an additional $1,350 a year in taxes,” Brodeur added.
The study also says that the average amount spent per visitor during the year was $384, with about 62 cents of each dollar spent staying in the state. Brodeur encouraged the state’s tourism industry to work with the R.I. Economic Development Corporation to draw companies to Rhode Island that would allow Rhode Island businesses to retain more than 62 cents on the dollar. McGill added that some businesses that work in the tourism industry have to now go outside the state for supplies, but manufacturing or distributing those supplies locally would allow them to work with instate companies.
Based on number of jobs, tourism is the fourth-largest industry in Rhode Island, with about 10 percent of Rhode Islanders owing their jobs to the industry. Last year, the average tourism wage was $31,000, according to the study.
Entertainment spending rose 7.9 percent, buoyed by the renovation of Twin River. Entertainment spending in Blackstone Valley rose 12.1 percent.
While the $4.24 billion is from tourists traveling more than 50 miles to get to Rhode Island, the report also includes annual spending by tourists within 50 miles. Last year, that number rose 10.7 percent, to $2.57 billion from $2.32 billion in 2006.
Global Insight compiles similar reports for 18 states, 16 cities and 14 countries and McGill was able to offer at least a bit of positive outlook for 2008 tourism. International arrivals have been strong and should grow 7.2 percent this year.
“We’re still expecting international travelers to come,” he said. “As a matter of fact, if you’re thinking about origin markets to focus on for some promotional spending, I would take a hard look at those markets.” •
