fedgazette

Tourism may be a young industry, but its impact is anything but small

Tourism has become one of the leading Ninth District industries, supplying thousands of jobs and billions of dollars in economic impact, but the relatively young industry face big challenges in the coming years.

Kathy Cobb - Associate Editor

Published April 1, 1997  |  April 1997 issue

"Tourism is now where the ag industry was 60 years ago."

That comment from William Gartner, professor and director of the University of Minnesota Tourism Center, reflects the changes and challenges currently facing the tourism industry in the Ninth District and nationwide. Like family farms, many tourism ventures that began as small, family businesses, Gartner says, now face changes as the industry matures.

But unlike agriculture, upon which much of the Ninth District was settled and upon which much of the district economy still relies, tourism is a relatively young industry. And, as such, it is an industry that also faces challenges.

Tourism's economic benefits are not just seasonal

While many tourism operations are perceived as only cyclic in nature, some Ninth District communities offer year-round attractions, and others reap long-term benefits from their seemingly seasonal operations.

With an aging population, many resort communities are drawing retirees for year-round living. Steve Markuson, director of the Minnesota Office of Tourism, says that Crow Wing County in the central part of the state may experience a conversion of 50 percent of vacation homes to year-round residences over the next 5 years. The same phenomenon is occurring along northern Wisconsin lake shores as well. In the Black Hills, refurbished motels are turning into retirement homes, according to Gary Brown, president of the Best Western Town 'n Country Inn in Rapid City, S.D., and a member of the Minneapolis Fed's Advisory Council on Small Business, Agriculture and Labor.

"Tourism is economic development," says Melissa Ward, rural development specialist in the South Dakota Department of Tourism. "We work closely with the Governor's Office of Economic Development," Ward says. She notes that 47 of the 95 GOLD communities participating in a program of the Governor's Office of Economic Development have tourism-based economic development goals. Ward adds that tourism projects are a great alternative to traditional economic development efforts, such as luring a new business to town, because tourism builds on existing resources.

Travel Montana, through its bed tax, funds and administers two programs that directly relate tourism and economic development efforts. The Community Tourism Assessment Grant Program awarded grants in 1996 to five communities to identify tourism-related projects that would stimulate their local economy. And the Tourism Infrastructure Investment Program has invested $670,000 since 1995 in 10 tourism-related projects, including the National Lewis and Clark Interpretive Center in Great Falls and Pictograph Caves State Park restoration project in Billings.

Changing demographics create new opportunities

To remain competitive, tourism businesses must meet changing visitors' needs. Some of the success of Ninth District tourism rests on businesses' ability to change as the markets change.

"We need to look at catering to the baby boomers and upgrade resorts. Baby boomers want microwaves, TVs and fireplaces—they don't want the old rustic cabin," says Richelle Kruse, owner of Kruse's Pinewood Lodge in Rhinelander, Wis., and another resort in nearby St. Germain, pointing to the need for traditional, small lake resorts to address a changing market. And if resort operators don't change, they're apt to go out of business.

With 12,000 Americans per day reaching the age of 50 over the next 10 years, the overall direction of the travel industry may change. Ninth District states can benefit from a group of aging Americans interested in outdoor recreation. And they may see the effects of the recreational vehicle industry's three-year campaign extolling the benefits of recreational vehicle ownership to baby boomers.

More good news for Ninth District states comes from the 1996 Recreation Roundtable survey by Roper Starch Worldwide that asked participants about outdoor recreation. Survey results indicated that one in three Americans took an outdoor recreation vacation during the year; and two in three who earn $50,000 or more participate monthly in outdoor recreation.

The popularity of winter tourism is evidence of that large outdoor recreation market. "Winter tourism has shown sizable growth over the last several years," says Minnesota's Markuson. Snowmobiling, snowshoeing and dog sledding now compete with the more traditional skiing and ice-fishing for winter activities and allow more summer resorts in the district to operate year-round.

"The winter [tourism] market is big," says Paul Schurke, co-founder of Wintergreen Dogsledding Lodge, Ely, Minn. At the World Winter Cities Conference in February in Marquette, Mich., Schurke talked about the growth not only of winter tourism, but of specialty packages that also encourage sharing business opportunities. Wintergreen offers dog sledding camping trips for people over 60, an example of special group marketing and one that Schurke predicts will grow as active baby boomers age. In addition, six lodges on the Gunflint Trail participate in cross-country ski and dog sledding trips from lodge to lodge.

Schurke and other tourism businesses near the Boundary Waters in northern Minnesota have looked to ecotourism as a twist on standard outdoor vacations. "It educates people and puts them in touch with the environment; it engages them culturally and physically," Schurke says. The 26 outfitters in Ely once just rented canoes and equipment, he says, but now they offer packaged trips led by a naturalist and guided visits to the nearby International Wolf Center.

But tourism is still the Rodney Dangerfield of industries, some say

Figures show that travel and tourism is the nation's second largest private industry employer, and employment in the major sectors of the travel industry is expected to increase nearly 35 percent by the year 2005, compared to a 23 percent growth in total nonagricultural employment. Nonetheless, tourism officials don't believe their industry gets the respect or status it deserves.

At a tourism forum in January at the Minneapolis Fed that included state and regional tourism agency officials, resort operators and tourism research staff from state universities, discussion centered around the status of tourism in district states. Participants covered a wide range of industry topics, but what stood out were two questions: How can tourism industry activity be measured with reasonable accuracy and uniformity, and then how can legislators and taxpayers be convinced that investment in tourism-related programs pays dividends? And, how can the industry attract workers and dispel the perception that tourism jobs are temporary and low-paying?

Financing tourism ventures not always easy

Imprecise gauges of tourism activity sometimes cause difficulties in the financial arena. Resort owners often find securing loans for renovations and expansions a formidable task, they say, because tourism is by nature a somewhat risky business.

Wisconsin resort owner Kruse says bankers simply don't understand the industry. Kruse is uncertain if they ever will. "With the changes in banking laws, now local bankers have to report to bankers 400 miles away."

"There's been more interest by financial institutions in tourism-based ventures, but not near enough," says the University of Minnesota's Gartner. But he agrees that the product can be a hard sell.

Larry Atkinson, editor of the Mobridge, SD, Tribune and a member of the South Dakota Governor's Tourism Advisory Board, says, "We haven't done a good job of educating bankers. In the Mobridge area, bankers understand ag but not the tourism industry." At the same time, he adds, people in the tourism industry haven't learned what bankers need from them.

Convincing communities of tourism's value sometimes a challenge

In a study by the University of Montana Institute for Tourism and Recreation Research, residents of three communities (Glacier County, Deer Lodge and Livingston) and a statewide sample were surveyed on their perceptions of the impact of tourism. Neal Christensen, the research specialist who co-authored the survey report, says that towns with a preponderance of older people generally are glad to have tourism to provide jobs that keep young people in the community. But in some towns with more diverse economies, tourism is often perceived as an annoyance and a costly drain on infrastructure.

Overall, the survey showed that Montanans think the benefits of tourism outweigh the negatives and that state tourism promotion benefits their community economically. But the majority of survey participants also did not believe that they personally benefited financially from increased tourism, that tourism would help their community grow in the right directions or that increases in tourism would improve their quality of life. The negatives of tourism heard in the survey were increased traffic and crowding, higher prices, increased crime and pollution and low-paying jobs.

Mark Kinders, director of the St. Croix Valley Regional Tourism Alliance, says his group has a difficult time making environmentalists understand that "we're as concerned as anyone else." Tourism in the St. Croix River Valley's six counties in Minnesota and Wisconsin accounts for about 6,000 full-time equivalent jobs, Kinders says. "These jobs bring substantial income to the river valley," he says. "If the resource is destroyed, that will hurt the tourism industry. We are responsible partners."

Ninth District tourism shares a crowded market

Las Vegas has 100,000 hotel rooms and is building another 20,000; Universal Studios in Los Angeles is expanding its attractions, Disney announced plans for a $1.4 billion project called Disney California Adventure to be built next to Disneyland, and a new theme park is going up in Orlando for about $800 million. With developments like these, cheaper charter air fares and a growing number of cruise ships, it's hard to anticipate what their effects will be on Ninth District vacationers and attractions. Even South Dakota's biggest destination resort, now under construction, may be in a different league. "The Costner Brothers venture in Deadwood (the Dunbar, scheduled for completion in 1999) has a marketing budget of $2 million, but even they can't compete with the Las Vegases," says Rapid City's Brown.

Tourism links:
University of Montana Institute for Tourism and Recreation Research
Travel Industry Association of America
World Travel and Tourism Council


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