Staycation… All I Ever Wanted?

boys playing fountain in chicago

boys playing fountain in chicago

So, what do you do when you’re going nowhere? Millions of would-be vacationers are asking themselves this very question as the steep rise in gasoline prices and household staples is forcing them to forgo travel vacations.

And now there’s even a term the media has come up with to capture this phenomenon… one they can prattle on endlessly about: the staycation. But behind the cutesy play on language is the beginning of a very real shift—one that promises to have some serious implications for both the economy and how Americans will (or won’t) spend their leisure time.

What People Are Doing

Across the country, news and television media stories tell the tale of three trends: people staying home for their family vacations, families cutting back on other vacation expenses in order to afford the travel costs or, often because of other financial pressures, families forgoing their vacations altogether.

On this Fourth of July holiday weekend, nearly a million people who traveled last year are staying home. And campgrounds all over the country are reporting larger numbers of visitors. According to a recent CNN poll, 1/3 of Americans have canceled or shortened their holiday vacation plans because of gas prices. “72 percent said record gas prices have caused them to make changes in their daily lives, and 30 percent said those changes were major ones.”

The U.S. Department of Transportation reported last month that Americans drove 1.4 billion fewer highway miles in April 2008 than the previous April, a decline of 1.8 percent. After six straight months of reduced driving, we’re talking about 20 billion or so fewer highway miles driven in the States. At less than 2 percent reduction, that says more about how much Americans actually drive than how much their behavior has changed as a result of record high gas prices.

But consider just a few of the ripple effects on the economy and a 2 percent reduction doesn’t seem all that small. For instance, the loss of government receipts from the $0.31/mile gasoline tax. Half way through 2008, Americans have driven 20 billion fewer miles than last year. That equates to about $167,000,000 less in federal tax dollars. (Let’s ignore for a second the question of whether or not the government would make good use of that money.)

Impacts on the Economy
World tourism is arguably the largest service sector in the global economy. In 2007, tourism accounted for nearly 900 million international arrivals alone. In 2008, world tourism is expected to generate close to eight trillion dollars. International tourism is the U.S.’s largest service export—accounting for more than a quarter of service-industry exports and eight percent of exports all together.

And these numbers don’t account for domestic tourism, which are much harder to calculate.

Not surprisingly, industry groups are either in complete denial about the prospects for dramatic reductions in travel and tourism or just trying to paint a rosy picture.

Overall, the new TSA results reveal a moderate impact on the Travel & Tourism industry as a result of the global economic downturn, with its annual growth rate experiencing a slowdown in 2008, to 3%, in comparison to 3.9% in 2007.

Looking past this present cyclical downturn, the long-term forecasts point to a mature but steady phase of growth for world Travel & Tourism between 2009 and 2018, averaging a growth rate of 4.4% per annum, supporting 297 million jobs and 10.5% of global GDP by 2018.

WTTC President Jean-Claude Baumgarten explained “Challenges come from the US slowdown and the weak dollar, higher fuel costs and concerns about climate change. However, the continued strong expansion in emerging countries – both as tourism destinations and as an increasing source of international visitors – means that the industry’s prospects remain bright into the medium term.” (Source)

In either case, once you see the writing on the wall, it’s hard to take statements like those of the World Travel & Tourism Council seriously. And yet the impacts are very serious, indeed. Across the globe, governments are beginning to worry about the economic impacts of tourism.

Just this week, Caribbean leaders met to discuss the impacts of soaring oil prices on tourism, their core industry. In Australia, the Managing Director the Australian Tourism Export Council (ATEC), urged government assistance.

He said the federal government needed to give financial incentives for Australians to holiday in Australia in the next school holidays to help the industry recover.

“It’s got to happen or there are going to be thousands of small businesses across Australia who are going to go broke, they’re on their knees at the moment,” Australian Associated Press quoted Hingerty as saying.

He said high fuel prices had damaged tourism the same way the drought had hit the farming sector.

The pain will be felt most acutely in communities that depend on tourism as a staple of their local economy. In Post Carbon Institute’s little corner of the world, for example, tourism accounts for $1 billion annually—serving as a central component of Sonoma County’s workforce and revenue. Each year, the $23 million in tax receipts from visitors provides helps local governments fund much needed social services.

So how are communities responding?

It’s early days yet, but some communities have shifted their focus to promote local attractions to those living nearby. Though I have to give the City of Burlington, North Carolina points for creativity, I doubt this strategy will be enough. Perhaps if high oil prices only impacted travel expenses, a shift to promote local tourism might work. But the truth is that vacation travel is only the tip of the proverbial iceberg.

One has to wonder how far down from its perch as the world’s largest service sector the tourism industry will fall.

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