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Tourism: a passport to Texas economic diversification?

Tourism: A Passport to Texas Economic Diversification?

Since the end of the period of high growth rates associated with rising oil prices, Texas has been looking for other economic activities to stimulate growth. Interest in diversification has been further triggered by the continued slump in real estate and finance.

Texas, with its diversity in nature and culture and its unique geography and history, has a great potential to draw tourists, and most Texans welcome the economic benefits associated with the travel sector. An important characteristic of tourism is that it is labor intensive. Thus, one of the most obvious and immediate benefits of tourism is the creation of jobs. A given level of revenue supports many more jobs in tourism than the same level of revenue will support in automobile manufacturing or oil refining. Income from taxes at the local, state, and federal level is another of the economic benefits associated with tourism. Secondary effects or tourism include increased demand for food products, food processing, handicrafts, and light manufacturing, as well as jobs in construction and capital goods industries associated with new hotels and resort complexes.

Although some of the benefits are widely recognized, concern for measuring the actual impact of tourism is a fairly recent development. Barriers to such measurement are a lack of reliable information and a tradition in tourism that places little emphasis on the type of research that would produce credible information.

Why is it difficult to measure the economic impact of tourism? Strictly speaking, there is no such thing as a "tourism industry." Instead, tourists purchase goods and services from a variety of industries, with less than two-thirds of their expenditures being in the hotels and restaurants normally identified with the tourism sector. More accurately, perhaps, tourism is a group of several related industries: transportation, accommodation, food services, attractions and events, and retail activities. Thus, it is difficult to trace employment, payroll, and taxes attributed to travelers. Second, the federal government stopped collecting statistics on tourism in 1977. The 1982 census of transportation does not include any statistics on travel activity, and plans for the 1990 census of transportation do not include collection of travel-related statistics.

Every state maintains an agency to promote in-bound travel, with budgets ranging from $1.2 million in Nebraska to over $20 million in Illinois in 1988. States allocated an average of $2.3 million to advertising efforts (U.S. Travel Data Center, 1988). Nearly every state evaluates promotional campaigns in some way, with thirty-five states specifically allocating money for research. Most of the research focuses on measuring the effectiveness of promotional campaigns by determining conversion rates (the percentage of individuals responding to advertising by requesting information and eventually by visiting a destination). Conversion rates and expenditure data collected from respondents are used to estimate the amount of spending produced by a promotional campaign. Recently, a U.S. Department of Commerce task force, asked to examine the issues of accountability and evaluation in travel research, pointed out certain biases associated with conversion studies: some respondents had already planned a visit before they requested information; respondents tended to underestimate their expenditures because they could not accurately remember the amount spent; and expenditure data were typically collected from a sample of tourists other than the original respondents.

One of the most important contributions in the area of tourism research is the travel model developed by the U.S. Travel Data Center in 1977. Travel activity levels from the 1977 census of transportation are used as a benchmark, and activity levels are updated annually using proxy growth factors. Updated data on travel activity and U.S. average costs are used to calculate travel-related expenditures at the state level. There exist, however, major limitations in the model: (1) no good proxy variables exist for travel-related activities such as expenditures on a vacation home, incidentals, and gifts; (2) the model uses state payroll and employment ratios to estimate travel-related employment and payroll at the county level, thus, the same proportion of employment to business receipts is assumed for each county; and (3) per-unit costs for each of the travel activities are national averages. More accurate estimates could be obtained using state or local average costs as well as county ratios to estimate travel-related employment and payroll. The travel model is a top-down model in which aggregate state and national ratios are used to estimate travel-related employment and payroll for each county. Recently California has adopted a different approach, collecting detailed local information to build a bottom-up model in which state expenditure is obtained by totaling county expenditures.

If we cannot measure the real contribution of the travel sector to the Texas economy, it is not possible to determine whether it is, indeed, a passport to economic diversification. What can we do? Texas has several alternatives: to assume the lead role in pressing the federal government to include travel activity statistics in the census of transportation; to measure the importance of tourism to specific economic development objectives; and, perhaps, to build a model for estimating expenditures in Texas. As an example of the second alternative, we might measure the contribution of the sector to training, education, and employment of the labor force. How many students have been able to finance their education by working in tourism-related businesses such as travel agencies, arts and crafts places, retail establishments, hotels, and restaurants? How many business graduates have received some training through their part-time jobs in travel-related activities? And how many hotels have benefited from the training that these students were receiving while working? Answers might provide an argument for allocation of more resources to the development of economic activities stimulated by tourism. Decision makers, planners, policy analysts, and entrepreneurs need better data if they are to understand the forces affecting tourism and how tourism, in turn, affects society. Improvements in data collection await improvements in research and research education.
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Author:Echeverri-Carroll, Elsie
Publication:Texas Business Review
Date:Jun 1, 1990
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