The Economic Impact of Tourism in Wisconsin April 2017

State Overview

Headline results Wisconsin’s visitor economy continued to climb to new heights in 2016 with $20 billion in total business sales as a result of increases in visitation, visitor spending, tourism supported employment, and state & local tax revenue. Visitor spending grew 3.3% in 2016, marking the seventh year of visitor spending growth. Visitor spending increased by $390 million in 2016 to reach $12.3 billion. Wisconsin visitor volumes grew by 2.4 million to reach 107.7 million. Visitor spending growth was led by spending on lodging with strong growth in all non-transportation sectors as lower gas prices, growing wages, and strong consumer confidence meant both growth in travel and spending per trip. Since 2011, visitor spending growth has averaged 4.5%, boosting tourism sales by $2.4 billion.

Headline results Visitor spending of $12.3 billion generated $20.0 billion in total business sales in 2016 as traveler dollars flowed through the Wisconsin economy. Visitor activity sustained 193,454 jobs in 2016, both directly and indirectly. 1-in-12.3 jobs in the state is sustained by tourism activity – 8.1% of total employment in Wisconsin. Including indirect and induced impacts, tourism in Wisconsin generated $1.5 billion in state and local taxes and $1.1 billion in Federal taxes in 2016. In the absence of the state and local taxes generated by tourism, each Wisconsin household would need to pay an additional $650 to maintain the current level of government services.

Tourism Indicators

Industry indicator summary Key industry indicators continued to point to strong growth in visitor spending and impacts. Room demand continued to post solid growth in 2016. Strong ADR gains supported growing room revenues. Sales tax revenue growth in several key visitor spending industries continued to be strong with growth from the lodging industry surpassing 6%. Lower transportation costs supported trip growth. Job and wage growth in several tourism-centric industries outpaced overall state employment growth.

Lodging industry The hotel sector's expansion continues to be robust; room demand surpassed 17 million rooms in 2016, an increase of 2.3%. Higher occupancy boosted average room rates 3.1%. Rising demand and higher prices generated growth in room revenues of 5.4%.

Sales taxes While down slightly from 2014 and 2015 levels, growth in sales tax collections in all tourism- related industries continued to be strong in 2016. Sales tax collections in the retail sector accelerated after several years of relatively modest growth. The strongest growth in sales tax collections was from the lodging industry.

Visitor Spending

Overview Wisconsin visitor volumes reached 107.7 million in 2016. Visitors spent $12.3 billion. Visits grew 2.3% while spending increased 3.3% in 2016. 2016 saw 2.4 million more visits than in 2015 – that is like adding the population of the city of Chicago to the visitor total.

Visitor spending Visitor spending growth was supported by higher spending for lodging, on food & beverages and on recreational activities. Even with growth in visits, the decline in gas prices brought down overall transportation spending.

Visitor spending by sector All non-transportation sectors saw spending increases in 2016. Visitor spending reached $3.2 billion on food & beverages in 2016. The lodging sector is the second largest spending category with $2.7 billion in sales. Note: In this chart Transportation includes local and air transportation

Visitor spending distribution The share of the visitor dollar spent on recreation in 2016 is at its highest level post-recession. The share of the visitor dollar spent on lodging (including 2nd home values here) grew to 27.1% in 2016. With the decline in gas prices, the share of the visitor dollar spent on transportation costs fell to 9.9%.

Visitor spending trends Visitor spending grew by $390 million in 2016. The majority of that spending growth was in the lodging and food & beverage categories – both growing $146 million Visitor spending has grown an average of 4.5% per annum since 2011.

Visitor spending by market segment Leisure tourism represents 88% of visitor spending in Wisconsin. Overnight visitors spend $8.2 billion in Wisconsin, 66% of the total. Day visitor spending added $4.1 billion in 2016. Domestic visitors to Wisconsin spent $11.7 billion in 2016, 95% of all visitor spending.

Visitor spending by market segment

Seasonality of lodging Room revenue in Q3 surpassed $600 million for the first time ever – for any quarter. Room revenue grew by nearly $30 million in Q2, the largest quarterly increase in 2016. Room demand growth was strongest in Q2 and Q4, with the share of rooms rented increasing 0.2 percentage points to 22.3%.

Seasonality of visitor spending Total visitor spending also peaks in the 3rd quarter with $3.9 billion in visitor sales. In 2016, spending growth was 3.3% or higher in all four quarters with Q4 driving overall tourism spending growth. Business Day

State Tourism Impacts

How visitor spending generates impact Travelers create direct economic value within a discrete group of sectors (e.g. recreation, lodging, transportation) supporting a relative proportion of jobs, wages, and taxes within each sector. Each directly affected sector also purchases goods and services as inputs (e.g. food wholesalers, utilities) into production. These impacts are called indirect impacts. Lastly, the induced impact is generated when employees whose incomes are generated either directly or indirectly by tourism, spend those incomes in the local economy. 20

Tourism sales by industry

Tourism sales by industry All industry sectors of the Wisconsin economy benefit from tourism activity directly and/or indirectly. Sectors that serve the tourism industry, such as business services, gain as suppliers to a diverse tourism industry.

Total tourism employment The tourism sector directly and indirectly supported 193,454 jobs, or 8.1% of all employment in Wisconsin last year.

Total tourism employment Secondary benefits are realized across the entire economy through the supply chain and incomes as they are spent. The unemployment rate in Wisconsin was 4.6% in December 2016. Without the 193,454 tourism supported jobs, the unemployment rate would more than double to 10.1%. Significant indirect and induced benefits

Tourism employment intensity Tourism is a significant part of multiple industries; 94% of lodging, 35% of recreation, and 23% of food & beverage employment is directly supported by tourism spending.

Tourism labor income

Tourism labor income Substantial tourism employment in F&B and recreation support significant labor income in these industries. Business services and the FIRE (finance, insurance and real estate) sectors depend on tourism activity as suppliers to tourism companies and their employees. Significant indirect and induced benefits

Tourism tax generation $2.65 billion in taxes were directly or indirectly generated by tourism in 2016. State and local taxes tallied $1.5 billion. In 2016, each household in Wisconsin would need to be taxed an additional $650 to replace the tourism taxes received by state and local governments.

Tourism tax generation – state & local government Of the $1.5 billion collected by state and local governments from traveler activity, $825 million (55%) accrued to state government. Local government revenues from visitor activity grew to $685 million.

Methodology and Background

Why quantify the tourism economy? By monitoring tourism’s economic impact, policy makers can make informed decisions regarding the funding and prioritization of tourism development. It can also carefully monitor its successes and future needs. In order to do this, tourism must be measured in the same categories as other economic sectors – i.e. tax generation, employment, wages, and gross domestic product.

Why is this a challenge? Most economic sectors such as financial services, insurance, or construction are easily defined within a country’s national accounts statistics. Tourism is not so easily measured because it is not a single industry. It is a demand-side activity which affects multiple sectors to various degrees. Tourism spans nearly a dozen sectors including lodging, recreation, retail, real estate, air passenger transport, food & beverage, car rental, taxi services, travel agents…

Methods and data sources Domestic visitor expenditure estimates are provided by Longwoods International’s representative survey of US travelers. These are broken out by sectors (lodging, transport at destination, food & beverage, retail, and recreation), by purpose (business and leisure), and by length of stay (day and overnight). Tourism Economics then adjusts these levels of spending based on a range of known measures of tourism activity: Overseas visitor spending (source: NTTO, TE) Canada visitor spending (source: Statistics Canada, TE) Sales tax receipts Spending on air travel which accrues to all airports and locally-based airlines Gasoline purchases by visitors (source: TE calculation) STR data on hotel demand and revenue Industry data on employment, wages, GDP, and sales (source: BEA, BLS, Census) 33

Methods and data sources An IMPLAN model was compiled for the State of Wisconsin. This traces the flow of visitor-related expenditures through the local economy and their effects on employment, wages, and taxes. IMPLAN also quantifies the indirect (supplier) and induced (income) impacts of tourism. All results are benchmarked and cross-checked and adjusted based on the following: US Bureau of Labor Statistics and Bureau of Economic Analysis (employment and wages by industry) US Census (business sales by industry) The source of the employment and wage data is the Regional Economic Information System (REIS), Bureau of Economic Analysis, U.S. Department of Commerce. All employment rankings are based on Bureau of Labor Statistics (ES202/QCEW) data. 34

Selected recent economic impact clients Associations / Companies Center for Exhibition Industry Research (Economic Impact of Visa Restrictions) DMAI (Event Impact Calculator for 160 CVBs) US Travel Association (Impact of travel promotion) InterContinental Hotels States South Dakota Kansas Maryland New York North Carolina Ohio Pennsylvania Wisconsin Cities Baltimore, MD Columbus, OH Kansas City, MO New York City Omaha, NE Orlando, FL Galveston, TX Seattle, WA Los Angeles, CA Countries / Provinces Bahamas Bermuda Cayman Islands Dubai Ontario Canada St. Lucia United Kingdom Guam

About Tourism Economics Tourism Economics, headquartered in Philadelphia, is an Oxford Economics company dedicated to providing high value, robust, and relevant analyses of the tourism sector that reflects the dynamics of local and global economies. By combining quantitative methods with industry knowledge, Tourism Economics designs custom market strategies, project feasibility analysis, tourism forecasting models, tourism policy analysis, and economic impact studies. Our staff have worked with over 300 destinations to quantify the economic value of tourism, forecast demand, guide strategy, or evaluate tourism policies. Oxford Economics is one of the world’s leading providers of economic analysis, forecasts and consulting advice. Founded in 1981 as a joint venture with Oxford University’s business college, Oxford Economics is founded on a reputation for high quality, quantitative analysis and evidence-based advice. For this, it draws on its own staff of 150 highly-experienced professional economists; a dedicated data analysis team; global modeling tools; close links with Oxford University, and a range of partner institutions in Europe, the US and in the United Nations Project Link. For more information: info@tourismeconomics.com.

For more information: Adam Sacks, President adam@tourismeconomics.com Christopher Pike, Director, Impact Studies cpike@tourismeconomics.com 37