Pulse of Tri-City travel and tourism industry beats strong

By D. Patrick Jones

Nearly all communities want to be popular with visitors. The sentiment has sound economics behind it since visitors bring new dollars into the local economy. Their visits catalyze economic transactions that wouldn’t have happened otherwise. There are, of course, other, non-monetary reasons to embrace visitors, such as introducing the outside world to the place we call home.

But measuring the effects of visitors is complicated. Ideally, we would like to know how big a contribution they make to the local economy. And whether their economic influence is growing or diminishing. A problem: there are no turnstiles at county lines asking for visitor status.

To begin, what do mean by tourism? Following federal standards, the official term is “travel and tourism.” This definition covers visitors for both business and leisure reasons. The sectors typically included in travel and tourism are, ranked by size nationally: non-air transportation, accommodations, air travel, shopping, food and beverage services, and recreation and entertainment.

Thanks to the U.S. Department of Commerce, we have a sense of the size of travel and tourism at the national level. Its measurement is relatively new since these activities have never been recognized as a unique sector, such as manufacturing or agriculture. Instead, for the past 20 years the commerce department has produced a satellite account. This approach pulls effects such as spending or employment from the regular sectors of our economic accounting via assumptions about what constitutes resident or visitor activity. What’s a visitor? According to the feds, someone from 50 or more miles away. As a satellite calculation, the totals are not used in producing national aggregates such as GDP.

For 2016, the most recently analyzed year, the Department of Commerce calculated that 3.6 percent of the U.S. workforce was engaged in travel and tourism. Further, 2.8 percent of the national GDP was accounted for by visitor spending. These are direct effects, and do not include the impact of any multiplier calculations.

How much do visitors spend in Benton and Franklin counties? Nothing is available from the commerce department for states, metro areas and counties. If we applied national ratios to the Benton-Franklin metro economy, we’d arrive at nearly $330 million in “visitor GDP” in 2016 — or about 5,200 jobs, full- or part-time. But that assumes that travel and tourism in the two counties mirrors national averages. What is the true effect annually? The short answer is, we don’t know with great accuracy.

Benton-Franklin Trends data, however, contains at least two indicators that point to the size and growth of travel and tourism. The first comes from a Portland research organization, Dean Runyan & Associates. Much like the Department of Commerce does nationally, this firm analyzes the visitor economy at the state and local levels. The methodology, while complicated, is similar to that of the feds.

At the core is an estimate of visitor spending. Spending has two elements: the volume of visitors and spending per visitor. Both components are not easy to estimate, with spending per visitor dependent on a set of surveys that are then applied broadly. Visitor count estimates largely follow from hotel/motel occupancy reports, although the growing popularity of private rental homes has complicated those calculations. Once visitor spending is estimated by sector, other direct effects, such as employment, can be calculated.

What does the Trends indicator on direct visitor spending reveal about travel and tourism in the two counties? For the most recently estimated year, 2017, total expenditures summed to nearly $625 million. That represents more than a doubling since 2000. In terms of a growth rate, expenditures have climbed 4.8 percent, compounded annually. This contrasts to a 2.7 percent growth rate throughout Washington state for nearly the same period, 2000-16.

What does the lodging tax tell us?

A less ambitious but accurate measure of travel and tourism can be found in state taxes levied on the accommodations industry. By definition, the bulk of activity of hotels is putting “heads in beds.” And it’s unlikely that many of those heads are local ones. Some of the state collection is returned to the communities for visitor promotion.

The Trends indicator on lodging tax redistributions tracks spending at hotels and motels, using the “state shared” rate (the general sales tax rate). This component of redistributed lodging taxes is based on a largely a constant rate, enabling year-to-year comparisons within the accommodation sector. This approach also enables comparisons to other counties in the state because their general sales tax rates do not vary much either. Many communities levy additional taxes on visitors, but this measure excludes them.

What does the lodging tax redistribution indicator tell us about the growth of accommodation revenue in the greater Tri-Cities? Strong growth over the interval, 2004-17: 5.2 percent per year compounded annually. The reflects a near doubling of accommodation revenues in the past 14 years. The graph shows the experience of the accommodation industry in all of Washington to be about the same, with a compounded growth rate at 5.8 percent.

Despite the difficulties in measurement, it certainly appears that the greater Tri-Cities is showing a strong pulse in travel and tourism.

D. Patrick Jones is executive director for Eastern Washington University’s Institute for Public Policy & Economic Analysis.