Friday, March 4, 2011

Do State Budget Shortfalls Mean Trouble for the Attractions Industry?

I’ve been on the road a lot lately, visiting associations for state and regional attractions. Two weeks ago, I was in Austin, Texas, to participate in the Texas Travel Industry Association's Unity Dinner and give a presentation on federal health care reform to TTIA members. Earlier this week, I attended the Pennsylvania Amusement Park Association’s Spring Meeting in Hershey, Pennsylvania. Later this month I will be in Providence, Rhode Island, at the New England Association of Amusement Parks and Attractions’ Annual Meeting.

Some years state-by-state issues vary greatly, but right now I hear similar themes in every region I visit: the recent economic troubles have left many states with budget shortfalls. Decreased property values and business revenues, coupled with unemployment means states are not getting the tax revenue they are used to. Some states relied on one-time stimulus payments to fund ongoing expenses. One of the things I learned in Texas is that with the appropriations currently in place (meaning no new spending, and no inflation adjustments), the state is facing a $4.3 billion shortfall.

Just like a business does when revenues are less than expenses, state governments are looking at ways to cut spending and/or raise revenue. How they go about this is something members of the attractions industry should pay close attention to.

Most states have agencies dedicated to promoting travel to the state. These agencies are funded in different ways, but in most of the agencies I am familiar with it's through taxes on hotels, rental cars, and other travel expenses. In Texas, 1/12th of the revenues generated by the state's hotel occupancy tax are dedicated to state travel promotion.

Travel promotion is a great return on investment for states: promoting travel to a state is like free advertising for the attractions within the state. The attractions get more visitors, who generate revenue from sales, hotel stays, admissions, and other taxes, which is money for the state and its residents.

Unfortunately, when there’s a budget shortfall everything’s on the table, including state tourism promotion in some states. While I am generally in favor of reduced government spending, cutting state travel promotion actually costs the state money: In a year after defunding its state tourism promotion program, Colorado lost tax revenues that totaled 11 times the amount of tourism promotion funding the legislature cut. Years later, Colorado is still fighting to regain its footing in the tourism market.

If your state tourism bureau is facing budget cuts, speak up! Call your state representative and senator—or, better yet, set up a meeting with them. Don’t know your state elected officials? Look them up on IAAPA’s website. Tell your elected officials not to cut funding for the state tourism office. Explain how it’s a great return on investment, and remind them of the Colorado mistake. For more talking points, or if you need help, contact me.

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