Economic Impact of Tourism in Kansas Christopher Pike Director, Impact Studies Tourism Economics October 18, 2016

Impact of Tourism in Kansas Agenda Impact of Tourism in Kansas Overview of US consumer Kansas visitation and spending Composition of Spending Economic Impacts Tourism in Context

US Consumer spending Outlook Factors favoring recent travel growth 1 Steady job and income growth 2 Stronger consumer confidence 3 Improved household balance sheets 4 Lower transportation costs All signs point up!

Labor Market: Slack tightens, Wage growth recovers Wage growth for individuals recently recovered to 3.5% (Atlanta Fed tracker)

Labor Market: Quits and Layoffs Rising “quit- rate” reflects firming labor conditions… …and layoffs are low

Consumer Confidence Survey Favorable view of “present situation”… … future expectations are more cautious

Households have reduced debt levels… Household Debt Households have reduced debt levels… …freeing disposable income for future spending growth

Home prices and financial markets have boosted household wealth Household Net wealth Home prices and financial markets have boosted household wealth Wealth effects typically support consumption with a lag

Gas prices have fallen from nearly $4 gallon to around $2 gallon

Recent Consumer Spending on Lodging

Two separate trajectories of travel propensity Leisure travel continues to expand… …even as business travel remains tempered

Secular shift of spending toward lodging

Impact of Tourism in Kansas Agenda Impact of Tourism in Kansas Overview of US consumer Kansas visitation and spending Composition of Spending Economic Impacts Tourism in Context

Steady room rental growth y-o-y. When do visitors come Steady room rental growth y-o-y. 2015 started off well, ended up on par with 2014.

Room growth 2011 on Strong recovery early in decade, pause in late 12/early 13 and picks back up late 13 into 14.

View from sales tax side Lodging has led overall economy since 2010, restaurants showing some recent strength.

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.

View from sales tax side LHS employment supports view of strength in tourism.

Six years of volume and spending growth Visitation reached 35.4 million and spending reached $6.5 billion in 2015.

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.

Visitor spending Note the growth in key categories early in the decade as a share of all growth compared to 2015.

Impact of Tourism in Kansas Agenda Impact of Tourism in Kansas Overview of US consumer Kansas visitation and spending Composition of Spending Economic Impacts Tourism in Context

Spending by category

Spending by category Local transportation and food and beverage were key categories of traveler expenditures.

Spending categories over time Lodging spending has increased from $730 million to $1.06 Billion.

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.

Overnight travelers comprise 62% of all visitor spending in 2015. Spending by market Overnight travelers comprise 62% of all visitor spending in 2015. 75% of all visitor dollars are by overnight travelers

More than just traveler spending Tourism Satellite Accounting also includes investment and other spending streams in support of travelers. $7.1 billion in total.

Impact of Tourism in Kansas Agenda Impact of Tourism in Kansas Overview of US consumer Kansas visitation and spending Composition of Spending Economic Impacts Tourism in Context

Direct Tourism employment The tourism employment growth of 1.6% was a point higher than overall Kansas employment growth.

Direct Tourism employment Direct tourism employment isn’t all of any one industry but a piece of many industries.

Ranking direct tourism employment Tourism employment would rank as the 8th largest industry in Kansas

Illustrating the concepts Travel & Tourism Industry The direct effect of visitor spending Focus of Tourism Satellite Account Travel & Tourism Economic Impact The flow-through effect of T&T all demand across the economy Expands the focus to measure the overall impact of T&T on all sectors of the economy ACCOMMODATION

Contribution to Kansas’ economy $1 million in sales can have different impacts to Kansas depending on where those sales are…

Contribution to Kansas’ economy $1 million in sales can have different impacts to Kansas depending on where those sales are…

Contribution to Kansas’ economy $1 million in sales can have different impacts to Kansas depending on where those sales are…

Visitor spending Note the growth in key categories early in the decade as a share of all growth compared to 2015.

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.

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.

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

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

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.

Taxes of $1.0 billion were generated by tourism in 2015. Tax revenue Taxes of $1.0 billion were generated by tourism in 2015. State and local taxes alone tallied $588 million in 2015.

$272 million in state revenues Tax revenue $272 million in state revenues Local governments received $316 million in tax receipts from travel- generated activity.

Impact of Tourism in Kansas Agenda Impact of Tourism in Kansas Overview of US consumer Kansas visitation and spending Composition of Spending Economic Impacts Tourism in Context

Tourism in context - visitation Kansas’ 35.4 million visitors would be like everyone from Texas, Nebraska, and Missouri visiting Kansas once a year.

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 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.

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.

Tourism in context – visitor spending The 93,126 tourism jobs would be enough for two jobs for every resident of Salina, Kansas.

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.

Summary Summary 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

Impact of Tourism in Kansas Bonus sections Impact of Tourism in Kansas Counties! DMO value

County results

County results

County results

Why prioritize destination marketing? The visitor economy is a catalyst for economic development

How destination marketing drives the economy

#2 – Raising the destination profile Destination promotion strongly supports economic development through brand development, raising awareness, and building familiarity “Every tourist that comes through here is a potential business lead.” Jeff Malehorn, President & CEO, World Business Chicago “If we do it right, the ideal brand will transcend the visitor market and support all economic development.” Hank Marshall, Economic Development Executive Officer, City of Phoenix Community and Economic Development Department

#2 – Raising the destination profile Familiarity is critical in attracting investment 13% of executives with site selection responsibilities state that their perceptions of an area’s 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, Governor’s Office of Business and Economic Development

Impact of campaign on economic perceptions Missouri 2016 campaign impact effect +57% +53% +79% +43% +67% +50%

Why prioritize destination marketing? The visitor economy is a catalyst for economic development It actually works

SDTMD case study is telling

San Diego stark demand slowdown in 2013 Surge in 2014

Pennsylvania

Pennsylvania Marketing cuts resulted in share losses

Dropped to third from first most visited mid-west state. 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 January–April was down 0.7% , while the US average was up 4.9%. Inquiries about travel to Illinois were down over 70% in FY16.

Why prioritize destination marketing? The visitor economy is a catalyst for economic development It actually works Destination marketing meets a pronounced need

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 Global&US.PPT Linked: D:\DATA\PMI\PMI_Data_Charts ‘Manufacturing US, EZ,JAP,UK’

Target opportunity: 658 mn unused vacation days Global&US.PPT Linked: D:\DATA\PMI\PMI_Data_Charts ‘Manufacturing US, EZ,JAP,UK’

Destination marketing must reverse this trend Global&US.PPT Linked: D:\DATA\PMI\PMI_Data_Charts ‘Manufacturing US, EZ,JAP,UK’

Plenty of reasons why… Global&US.PPT Linked: D:\DATA\PMI\PMI_Data_Charts ‘Manufacturing US, EZ,JAP,UK’

But the benefits are real The Manager’s View of PTO Global&US.PPT Linked: D:\DATA\PMI\PMI_Data_Charts ‘Manufacturing US, EZ,JAP,UK’

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 cpike@tourismeconomics.com