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Travel industry economics. (Travel Economics).

The National Perspective

2002 was an interesting year, albeit one with few surprises. Domestic leisure travel was predicted to increase as the economic downturn and threats of terrorism kept Americans on U.S. soil for vacation. And indeed, the Travel Industry Association of America (TIA) reported a 2 percent increase in domestic leisure travel in 2002 over 2001. Domestic business travel, expected to falter because of the economy, did decline by 4 percent in 2002. Finally, international arrivals were expected to decrease because of the Sept. 11 terrorist attacks. Overseas arrivals to the United States for the first half of 2002 were down 17 percent, but no additional changes were foreseen for the final half.

Forecasts for 2003 are promising. While recovery from 2001 is still slow, the TIA is expecting a 3 percent increase in U.S. domestic leisure travel in 2003. This increase is based on the attachment Americans have to travel, a pent-up demand, and attractive pricing for consumers. According to the TIA, the United States is showing a heightened preference for domestic travel, including rural destinations; more people are traveling by car or RV; and more people are traveling with outdoor recreation activities, or history and culture, in mind.

Business travel isn't expected to change much in 2003, with a forecasted increase of less than 1 percent nationwide. The economic downturn has forced businesses to analyze the need for trips and to cut back where they can. This behavior will continue into 2003.

Overall, however, many travel industry indicators show positive signs, as seen in Table 1. Most encouraging for the leisure travel industry is the continual increase in disposable income. On the downside, one unknown that does not show up in these figures is the lingering threat of war. In general, war has a negative effect on both leisure and business travel.

The Montana Perspective

Preliminary estimates of nonresident travel to Montana in 2002 show a 2 percent increase over 2001--to 9.77 million visitors or 4 million visitor groups (Figure 1). Nonresident travel mirrored the national increase of 2 percent.

Other signs of improvement in 2002 are in the visitation numbers for both Glacier and Yellowstone national parks. Even after the latest-ever opening of Going-to-the-Sun Road, Glacier Park rebounded significantly, with a visitation increase of almost 13 percent over 2001. Yellowstone s visitation numbers increased as well, with a jump of slightly over 8 percent (Figure 2).

Montana airport deboardings for 2002 were slightly above 2001 levels, with less than a 1 percent increase (Figure 3). Montana should be pleased with any increase since most airports and airlines around the country showed declines in 2002. According to the TIA, the airline industry is still down 5 percent from 2001, indicating that air travel recovery has stalled. The American public took to the highways this past year and the numbers show it.

Finally, hotel/motel occupancy in Montana remained virtually the same in 2002 as in 2001 (Figure 4). However, compared to the mountain region, which experienced a 1 percent decrease in occupancy, Montana fared well. To highlight the differences, Montana reported a 2 percent increase in room availability, which generally correlates to a temporary dip in occupancy. The mountain region, on the other hand, experienced a 0.5 percent increase in room availability, but a 1 percent decrease in occupancy.

Travel Expenditures. Preliminary estimates show nonresident travel expenditures of $1.8 billion in Montana during 2002, up 2.3 percent from the previous year (Table 2). With the exception of 1996, when a slight decrease occurred, travel expenditures have grown steadily over the years.

Expenditure patterns of nonresident visitors to the state vary according to purpose of trip. Those whose primary purpose is vacation spend $ 130.58/day/group. Those visiting friends and relatives spend $100.79/day/group, while those simply passing through the state spend $79.01/day/group (Table 3).

* In 2001, total personal income paid by travel-related firms in Montana attributable to nonresident visitor spending totaled nearly $563 million, up 4.9 percent from 2000.

Travel-Generated Income. Personal income derived from the expenditures of nonresident visitors to Montana falls into two categories: employee compensation, which is wages and salary income paid to employees of businesses within the travel industry, and proprietors' income, which is the income of self-employed workers in businesses serving travelers' needs (Table 4).

* On average, every dollar spent by nonresident travelers in Montana in 2001 generated 32.2 cents in wage and salary income for Montana residents. The national equivalent is 30.6 cents.

* Personal income generated by nonresident spending in Montana constituted 2.7 percent of Montana residents' total personal income in 2001, compared to 2.1 percent at the national level.

* During five of the past 10 years, travel-generated personal income showed a higher growth rate than that of total personal income in the state.

Travel-Generated Tax Revenue. Travel tax receipts consist of the federal, state, and local tax revenues attributable to nonresident travel spending in Montana. Because Montana does not have a sales tax, the state and local tax receipts attributable to nonresident travelers are low compared to those of other states.

Montana does, however, have a statewide lodging facility use tax of 4 percent on overnight accommodations. In addition, nonresident travelers contribute to the tax base by paying excise taxes such as those on gasoline, and indirectly by supporting employment in industries that pay corporate taxes and whose workers pay income, property and other taxes.

Nonresident travel spending in Montana generated well over $346 million in revenue for federal, state, and local governments in 2001. This represents an increase of close to 9 percent over 1995 revenue (Table 5).

The Regional Perspective

Montana is divided into six travel regions for marketing purposes (Figure 5). During the summer of 2002, visitors to attractions within the six travel regions were surveyed about their travel behavior within that region.

As shown in Table 6, the behavior of visitors who spend time at attractions varies depending on the region they visit. The most striking difference is seen with first-time visitors. Russell Country attractions have more first-time visitors--at 51 percent, while Yellowstone receives mostly repeat visitors (only 38 percent are new to the region). This study intercepted both nonresidents and residents of Montana who did not reside in that region. Proportionately, Montana residents visited Missouri River Country and Russell Country at a higher rate than they did other regions. For example, in Missouri River Country, nonresidents represented 68 percent of the visitors to attractions, while residents represented 32 percent. At the other extreme, in Custer Country, nonresidents represented 95 percent of the visitors to attractions, while residents were only 5 percent of the visitation.

Other regional data shows that Billings, Bozeman, and Kalispell experienced increases in airport deboardings through November, compared to 2001. Butte, Missoula, Helena, and Great Falls saw significant decreases compared to 2001 (Table 6).

Outlook

Each year, the Institute for Tourism and Recreation Research surveys travel-business owners and land managers to get an industry perspective. This year, 191 business owners responded (16 percent outfitter/guide, 15 percent vacation home/condo/cabin, 13 percent B&B, 13 percent dude/guest ranch, 11 percent motel, 8 percent tours, 7 percent campground, 6 percent attraction/museum/ski area, 4 percent tourism promoter/advertiser, 4 percent government).

In 2002, 52 percent of the respondents reported an increase in visitation over 2001, while 18 percent said business was the same and 30 percent reported a drop in business. Increases were attributed to many aspects, but most respondents cited increased road travel in the post-Sept. 11 world; better marketing and management of their business; and a business that is still being discovered. Decreases were attributed to Sept. 11 and the economy, followed by the weather and business changes.

The outlook of travel industry businesses throughout the state is extremely positive. Seventy percent of the 191 respondents expect an increase in business in 2003, with an average of a 10 percent increase over 2002. Only 8 percent of respondents expect a decrease. Based on national and local business projections, and barring a war or further national economic downturns, the travel industry in Montana can be expected to see an increase of 2 to 5 percent in 2003.

[FIGURE 1 OMITTED]

[FIGURE 2 OMITTED]

[FIGURE 3 OMITTED]
Figure 4

Hotel Occupancy, Montana and Mountain Region, 1999-2002

 Montana Mountain Region

1999 58.0 64.9
2000 59.0 65.5
2001 57.4 62.1
2002 * 57.6 60.9

Source: Smith Travel Research.

* forecast

Note: Table made from bar graph

Table 1

U.S. Economic Growth Expected

 2001 2002 * 2003 *

Real GDP 0.30% 2.30% 3.20%
Consumer Price Index 2.80% 1.60% 2.80%
Travel Price Index 1.10% 0.50% 3.30%
Disposable Income 1.80% 4.50% 2.40%
Unemployment 4.80% 5.90% 6.00%
Corporate Profits -10.00% -2.30% 21.20%

Source: Travel Industry of America, 2002 TIA Marketing Outlook Forum.

* forecast

Table 2

Travel Expenditures in Montana, 1992-2002

 Expenditures Percent Change
Year Millions of $ from Previous Year

1992 $1,514 0%
1993 $1,550 8.8%
1994 $1,601 2.4%
1995 $1,622 1.3%
1996 $1,608 -0.8%
1997 $1,644 2.2%
1998 $1,716 4.4%
1999 $1,743 1.6%
2000 $1,750 0.4%
2001 $1,766 0.9%
2002 $1,806 2.3%

Source: Institute for Tourism and Recreation Research, The University of
Montana-Missoula.

Table 3

Expenditure Profiles--Summer Visitors

 Visiting
 Friends &
 Vacation Relatives Pass-Through

Camping $3.24 $1.21 $1.97
Hotel $16.07 $9.99 $14.79
Gas $25.80 $23.91 $28.28
Restaurant $22.91 $19.02 $16.03
Grocery $12.25 $8.56 $4.25
Retail $29.16 $25.04 $8.86
Guide $7.69 $2.12 $0.10
Auto $8.37 $7.98 $2.96
Transportation $0.10 $0.15 -
Entrance fees $4.36 $2.16 $1.52
Services $0.63 $0.65 $0.25

Total $130.58 $100.79 $79.01
Sample Size 1,434 403 568

Source: Institute for Tourism and Recreation Research, The University of
Montana-Missoula.

Table 4

Travel Generated vs. Total Montana Personal Income, 1992-2001

 Travel-Generated
 Travel-Generated Total Personal as % of Total
 Personal Income Income Personal Income
Year (Thous. of $) (Thous. of $) (Thous. of $)

1992 $433,830 $14,075,520 3.1%
1993 $441,140 $15,178,490 2.9%
1994 $457,130 $15,499,030 2.9%
1995 $463,480 $16,296,840 2.8%
1996 $460,200 $16,992,480 2.7%
1997 $469,830 $17,726,290 2.7%
1998 $488,890 $18,941,950 2.6%
1999 $507,530 $19,287,170 2.6%
2000 $536,610 $20,336,880 2.6%
2001 $562,890 $21,283,050 2.7%

Percent change from previous year

 Travel-Generated
 Travel-Generated Total Personal as % of Total
 Personal Income Income Personal Income
Year (Thous. of $) (Thous. of $) (Thous. of $)

1992 9.5% 5.5% 3.7%
1993 1.7% 7.8% -5.7%
1994 3.6% 2.1% 1.5%
1995 1.4% 5.1% -3.6%
1996 -0.7% 4.3% -4.8%
1997 2.1% 4.3% -2.1%
1998 4.1% 6.9% -2.6%
1999 3.8% 1.8% 2.0%
2000 5.7% 5.4% 0.3%
2001 4.9% 4.7% 0.2%

Source: Institute for Tourism and Recreation Research, The University of
Montana-Missoula.

Table 5

Travel-Generated Tax Revenue by Level of Government, 1995 and 2001

Level of Government Revenue

2001 Tax Revenue
 Federal $200,332,000
 State/Local $146,359,000
 Total $346,691,000

1995 Tax Revenue
 Federal $183,925,000
 State/Local $134,372,000
 Total $318,297,000

Percent change, 1995-2001
 Federal 8.90%
 State/Local 8.90%

Source: Institute for Tourism and Recreation Research, The University of
Montana-Missoula.

Table 6

Visitor Profile Regional Comparisons

Summer 2002
Visitors at Attractions in Regions Custer Glacier

Primary Reason for Visiting MT
 Vacation 64% 69%
 Visit friends/relatives 20% 20%
 Passing through 9% 4%
 Business 4% 4%

Average nights in Montana 5.3 7.5
Average nights in region 2.8 5.3
1st time visitor to region 47% 46%

Visited Parks During Trip
 Yellowstone 46% 24%
 Glacier 15% 71%

Where do Visitors Come From?
 Montana 5% 8%
 Foreign Country 4% 6%
 Other States 91% 86%
 CA - 11% WA - 16%
 WA - 9% CA - 12%
 CO - 8% OR - 7%

Airport Data - 2002
 Deboarding % '02 vs '01 Billings +6.9% Missoula -3.3%
 (Through November) Kalispell +2.4%

Nonresident Overnight Stays
 % within each region during 14% 33%
 summer

Summer 2002
Visitors at Attractions in Regions Gold West Missouri River

Primary Reason for Visiting MT
 Vacation 59% 47%
 Visit friends/relatives 28% 28%
 Passing through 8% 14%
 Business 2% 3%

Average nights in Montana 6.9 7.2
Average nights in region 4.0 4.1
1st time visitor to region 44% 44%

Visited Parks During Trip
 Yellowstone 43% 13%
 Glacier 24% 30%

Where do Visitors Come From?
 Montana 18% 32%
 Foreign Country 6% 5%
 Other States 76% 63%
 WA- 17% WA - 15%
 CA - 12% MN - 9%
 CO - 16% CA - 7%

Airport Data - 2002
 Deboarding % '02 vs '01 Butte -5.8%
 (Through November) Helena -3.0%

Nonresident Overnight Stays
 % within each region during 11% 2%
 summer

Summer 2002
Visitors at Attractions in Regions Russell Yellowstone

Primary Reason for Visiting MT
 Vacation 43% 73%
 Visit friends/relatives 25% 13%
 Passing through 8% 4%
 Business 6% 5%

Average nights in Montana 7.5 6.5
Average nights in region 4.0 4.5
1st time visitor to region 51% 38%

Visited Parks During Trip
 Yellowstone 30% 74%
 Glacier 45% 16%

Where do Visitors Come From?
 Montana 20% 9%
 Foreign Country 6% 4%
 Other States 74% 87%
 WA - 13% CA - 15%
 CA - 12% TX,WI and
 OR - 5% OR - 5%

Airport Data - 2002
 Deboarding % '02 vs '01 Great Falls -1.9% Bozeman +5.2%
 (Through November)

Nonresident Overnight Stays
 % within each region during 9% 30%
 summer

Sources: Institute for Tourism and Recreation Research, The University
of Montana-Missoula; Montana Aeronautics Division.


Norma Nickerson is director of The University of Montana-Missoula Institute for Tourism and Recreation Research. Thale Dillon, formerly an economic analyst with ITRR, is currently a research associate at BBER.
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Title Annotation:Montana travel industry
Author:Nickerson, Norma; Dillon, Thale
Publication:Montana Business Quarterly
Geographic Code:1U8MT
Date:Mar 22, 2003
Words:2373
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