Travel and Tourism: An Overlooked Industry in the U.S. and Tenth District

By Wilkerson, Chad | Economic Review - Federal Reserve Bank of Kansas City, Third Quarter 2003 | Go to article overview

Travel and Tourism: An Overlooked Industry in the U.S. and Tenth District


Wilkerson, Chad, Economic Review - Federal Reserve Bank of Kansas City


With the onset of recession in early 2001, the U.S. travel and tourism industry fell into its worst slump since World War II. The September 11 terrorist attacks and subsequent tightening of airport restrictions dealt the industry an unprecedented blow. Many travel destinations continued to suffer in 2002 and early 2003 from a declining stock market, sluggish economic recovery, and war in Iraq. Prior to these recent difficulties, however, travel and tourism's role in the national economy had been rising steadily for decades.

As in the nation, the travel and tourism industry has become increasingly important in the Tenth Federal Reserve District.1 Indeed, by the late 1990s, the industry contributed more to gross output in the district than either agriculture or oil and gas extraction, the region's defining industries for much of the 20th century. Travel and tourism is especially important in the district's Rocky Mountain states, which are home to popular vacation spots like Yellowstone National Park, Santa Fe, and the Colorado ski resorts, as well as Denver, a top business travel destination.

Policymakers have begun to recognize travel and tourism's economic significance. In early 2003, for example, Colorado's state legislature-despite facing a severe budget crisis-approved $9 million in new tourism-promotion funds to tiy to boost economic activity in the state. At about the same time, Congress approved $50 million for an international tourism marketing campaign and to create a U.S. Travel and Tourism Promotion Advisory Board. Yet comprehensive analysis of how travel and tourism performs over time and across areas is lacking, making it difficult to know the benefits and costs of greater reliance on the industry.

To provide a better understanding of the travel and tourism industry's role in the economy, this article compares and contrasts travel activity in the nation with that in the Tenth District. The article shows that national travel and tourism activity generally grows rapidly during economic expansions but slows during recessions. In the district, the effect of recessions on the industry is much less than in the nation, due largely to the different types of travelers the region attracts. At the same time, many travel destinations in the district are susceptible to other types of shocks, such as wildfires or inadequate snowfall, which can disrupt local activity.

The first section of the article defines travel and tourism and explains the industry's importance and historical performance at the national level. The second section shows the reliance of the district on travel and tourism and points out overall differences in historical performance from the nation. The third section investigates activity in specific types of tourist areas to determine why the travel and tourism industry sometimes performs differently in the region than in the nation. The article concludes with a discussion of implications of the findings.

I. OVERVIEW OF U.S. TRAVEL AND TOURISM

Because travel and tourism is not generally classified as a separate industry in economic data sources, determining its importance and tracking its performance can be difficult. This section reviews several measures of travel and tourism's national importance and provides a working definition of the industry for comparing activity across geographic areas. The section also looks at the historical performance of national travel and tourism activity and explains the industry's behavior.

Measuring travel and tourism

Most researchers would likely agree with the definition of travel and tourism provided by the Bureau of Economic Analysis (BEA) in its national travel and tourism satellite accounts: "the economic activity generated inside the United States by Visitors' of all types-for business and pleasure, by residents and nonresidents alike-and outside the United States by U.S. residents" (Okubo and Planting).2 Yet measuring travel and tourism activity is not easy, particularly at the state and local levels. …

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