September 25, 2002
Member will hear the condition of the tourism industry after September 11th
Ms. Noel Hentschel
Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to testify. I am Noel Irwin Hentschel, Chairman and CEO of AmericanTours International (ATI), which I co-founded 25 years ago with the specific mission of promoting tourism to and within the United States. As the nation's largest visit USA tour operator, bringing more than 500,000 visitors to the United States annually from 70 countries, All is the only major Visit USA tour operator, which is still American owned. We also promote all 50 states of America as a preferred partner of the American Automobile Association (AAA) by providing online travel services for their 46 million members domestically. The events of September 11 had a profound impact on the U.S. travel industry with international tourism and overseas arrivals down 15% in 2001 over 2000. Some markets have suffered more drastic drops in passenger arrivals than others with the United Kingdom down 11%, France down 14%, Japan down 19%, Italy down 21% and Germany down 25%. According to the Department of Commerce, the total international receipts for travel expenditures and passenger fares were down 12% for a loss of 11.9 billion dollars from 2001 versus 2000 and 2002 will reflect an even greater loss. But the challenges for tourism go beyond the tragedy of September 11 and it is time for America to take tourism seriously. Travel and tourism generates $545 billion in total expenditures and 18 million jobs nationwide, which equates to one out of seven people employed in the private sector. Visit USA international travel and tourism alone generated $90 billion in expenditures and was responsible for over one million jobs nationally. As a service export, international travel and tourism provided a positive balance of trade in 2001 of 7.7 billion dollars. But it seems that the government of the United States does not take tourism seriously. We have had a severe lapse in policy on tourism in America and we are paying the price. We are paying the price economically but also politically. America needs to market and promote the United States as a destination. America spends zero dollars on promotion and yet Cyprus spends over $40 million and Thailand spends over $100 million annually to promote travel to their countries. Exactly one year ago today, I met with Secretary Don Evans and other leaders of our industry and recommended that instead of bailouts, the US needs to allocate $100 million immediately to market and promote America as a destination. This can be done in joint marketing with TIA, States that have individual tourism budgets and with the tour operators overseas who could provide matching funds. We need to be proactive and to create a demand for travel to the USA. Not only will this contribute positively to our economy and employment rate, but it will also have a positive impact on the balance of trade. We should ask the office of Global Communication to work with CNN, CNBC and others to provide PSA's in cooperation with our tourism industry to invite and encourage people to travel to America by showcasing different attractions from Broadway to the Grand Canyon to Waikiki Beach. Many of you will remember that years ago New York launched an “I Love New York” campaign. We need to launch a worldwide “I Love America” campaign and we have the celebrity power to deliver this message. Since September 11, I have traveled extensively to Europe and Asia to meet with tour operators. While they are cautiously optimistic for 2003, they all feel strongly that the US needs to be more proactive in promotion. They are also concerned about the US dollar versus the Euro and the timing of any potential conflict with Iraq so that it doesn't impact the main booking season. Most countries have a Minister of Tourism. We need to create a National Tourism Office and provide them with a budget for marketing and promoting America throughout the world. If Malaysia spends $42 million and Australia spends $87 million, how can we expect to compete as an international destination and spend nothing? Not only will increasing international tourism have a positive economic impact but also a positive political impact. What better way for people around the world to have a constructive view of America than to visit the Grand Canyon, Mount Rushmore or the Grand Ole Opry? When international visitors fall in love with the beauty of our country and the friendliness of our people, they become our greatest ambassadors with personal stories about their American experience. Tourism generates literally millions of goodwill ambassadors spreading a positive image of our country abroad. In addition to spending money to promote tourism, we also need to protect the US Tourism Industry. We need to level the playing field with the foreign companies doing business in America. Tour operators from Europe or Asia need to operate legally and our laws need to be enforced. American companies, that pay taxes and operate within the law, should not be penalized or driven out of business because of unfair and illegal business practices by foreign owned companies. Unfortunately, we are too often viewed internationally as a society where our laws are not enforced. The U.S. Travel Industry needs enforcement to stem the tide of losses of billions of dollars that are flowing overseas each month. Thousands of US workers are being unemployed every day because the INS, Department of Labor and the IRS are not enforcing our laws with foreign corporations doing business in America. Often viewed on the surface as bringing visitors into the United States and therefore presumed to benefit the economy, some foreign tour operators instead host an underground economy that undermines a myriad of U.S. laws while unfairly competing with all law abiding companies. We must level the playing field and protect our US companies. We need to hold foreign corporations and foreign CEO̓s doing business in America to the same standards that we hold American corporations and American CEO̓s. Foreign entities should not be able to hide profits offshore through non-U.S. subsidiaries, transfer pricing or predatory pricing. A recent article that I have attached from Touristic Report in Germany exposes an example of this activity. Second, foreign tour operators need to be forced to abide by U.S. labor laws. Tour guides performing labor in the U.S. should be required to be authorized to work in the U.S. Tour guides without authority to work in the U.S. should be promptly deported. Third, foreign entities should not receive windfall tax breaks or special treatment for tax evasion because collection efforts may be viewed as harder. Companies illegally evading taxes or who have received substantial compromises should be required to pay income tax on the amounts discharged. Finally, companies who charge consumer taxes on travel transactions but never remit these amounts to the respective taxing authorities should be charged with fraud and prosecuted to the full extent allowed by law. As an example, foreign owned operators in New York City have been claiming for the past five years that they are “permanent residents” of the hotels which they contract. They do this in order to evade the payment of hotel occupancy taxes, which they fraudulently collect from the consumer. The wrongful retention of taxes has been a multi-million dollar windfall to these foreign operators who are billion dollar foreign corporations. This unfair competition has driven American law-abiding companies out of the market and into bankruptcy. Stem the tide of foreign tour operators illegally operating tours in the United States and you will add billions to the US treasury and thousands of jobs. Enforcement action will not decrease visitors but will increase revenues to both federal and states governments as overseas operators are forced to legally record transactions, hire US and documented workers and pay taxes in the US. American companies will once again be able to compete with foreign operators who have unabashedly operated unhampered by US laws and regulations. In the materials I have submitted I have provided ten ways to help the industry now by enforcing the laws of this great land. We hope you will help motivate the Department of Justice, INS and State and local governments to take action now before there are no more American owned Visit USA Tour Operators. There is a significant cost to be paid if we do not protect our US tourism industry and aggressively promote the United States of America as the greatest and most diverse travel destination in the world. On the other hand, there are significant political and economic benefits to be gained if we can begin to take tourism seriously in America and provide the funds needed to compete as an international travel destination. Mr. Chairman, tourism is an enormous source of revenue and an enormous opportunity of political influence. Our government's policies of not supporting this critical industry will potentially cost billions of dollars and scores of thousands of jobs. It will also deny foreigners a chance to see the real America, and to go home and confront growing anti-Americanism. On tourism, the train is leaving the station very quickly. I urge your Committee to act aggressively to put tourism on the front-burner of commercial policy. Thank you, Mr. Chairman.
Ms. Ann McDowell
Branson, Missouri Located in the Southwest corner of Missouri, Branson’s population is less than 5,000 yet it attracts nearly seven million leisure visitors annually. Travelers of all ages come to experience the natural beauty of the Ozark hills and lakes as well as an immense and diverse selection of music shows, theme parks and other wholesome, family-friendly attractions. Branson/Lakes Area Chamber of Commerce and Convention & Visitors Bureau Over 900 business members strong, the Branson/Lakes Area Chamber of Commerce fulfills its mission to enhance the economic health of the Branson/Lakes Area. Our vision is to lead the Branson/Lakes Area in becoming one of the most recognized in America for quality of life, business and vacations. The activities of this organization are implemented by four separate councils addressing membership/funding, marketing, small business and tourism development. Marketing Advisory Council The Marketing Advisory Council of the Branson/Lakes Area Chamber of Commerce is responsible for all marketing efforts designed to attract visitors to the area. The dollars expended for these efforts, $4 – 5 million annually, are generated from memberships, donations, fund raising efforts and a citywide tourism tax on area lodging, theaters and attractions. Ann McDowell, Witness McDowell is an elected member of the Board of Directors for the Branson/Lakes Area Chamber of Commerce and currently serves as the Chairman of the Marketing Advisory Council. She has 18 years of experience in travel and tourism marketing. For the past eight years Ann has worked with her husband Bob in their own Branson-based business, Ride The Ducks International, LLC. The company remanufactures amphibious vehicles and carries in excess of 300,00 passengers annually on land and water sightseeing tours in Branson, MO and in Baltimore, MD (as Discovery Channel Ducks.) Their vehicles are also in use in Boston, MA and Seattle, WA with plans to expand to additional markets in the near future. The Impact Of September 11 Attacks On Branson, Missouri While no single event can be blamed with a tourism destination’s results, Branson visitation showed a year-end decline of 2.9% in 2001, for the first time in 20 years. Our area has been more fortunate than most in terms of a 2002 rebound. Our year-to-date room demand is up 3.9% through July 2002 and many other economic signs are positive for our community that is significantly dependent on tourism. Our belief is that our Midwestern, small town location, as well as the predominance of visitors who drive to our destination, as opposed to flying, have been positive attributes under these particular circumstances. In addition, our history of overt patriotism, genuine hospitality, and family values seem to be in perfect alignment with the current mood of our nation and disposition of the traveling public. U.S. Senate Committee On Commerce, Science, and Transportation Subcommittee on Consumer Affairs, Foreign Commerce and Tourism September 25, 2001 Hearing On The State Of The Tourism Industry Senator Dorgan, North Dakota, Presiding TESTIMONY The tragedies of Sept. 11, 2001 created an immediate impact in our vital tourism community of Branson, Missouri, in the same way it did other tourism destinations and other small towns throughout the United States. While we are no longer reeling from the impact, we feel a lingering uncertainty about our economic future. As you might suspect in a community of less than 5,000 residents, that hosts 7 million visitors annually, the people of Branson are significantly dependent on tourism for our economic well-being. Branson History To understand the impact of this incident on Branson, you should know a little about how Branson became a tourism phenomenon. Located in the Ozark Mountains in an area too rugged for farming and too remote for other industrial development, Branson began to develop a tourism industry in the early 1900s. Lakes, mountain scenery and the simple lifestyle of the Ozarks as described in a popular novel, "The Shepherd of the Hills," drew early visitors. Float trips, fishing and water activities sustained the tourism industry until the late 1950s and early 1960s, when several major developments including the theme park Silver Dollar City, made Branson a regional tourism destination. In the mid-1980s, celebrity entertainers who had been occasional guests in family owned music theaters began to move into the community. By the early 1990s, Branson was a household name across America, famous as a live music show and entertainment destination. Andy Williams, the Osmond Family, Mickey Gilley, Moe Bandy, Jim Stafford, Bobby Vinton, Mel Tillis, Yakov Smirnoff, Sons of the Pioneers and many others currently call Branson their performing “home.” 2001 Year End Results No tourism destination can provide a definitive answer to why people come. And certainly no single event or incident can be blamed or credited with a tourism destination's year-end results. It is always a combination of factors that result in success or disappointment in the tourism industry. However for the first time in over twenty years, Branson experienced a decline in visitation during 2001. Year-end numbers indicated a decrease of approximately 2.9%. Impact On Branson Less Severe While Branson has certainly felt an impact since September 11, it has suffered less than other national tourism destinations. We believe this is because of where it is, and what it is. Branson Missouri is located in the Southwest corner of our state, within a day’s drive of about half the nation’s population. About seven million people visit Branson each year, and 96% of them drive to Branson in their automobiles. Across the nation, urban destinations were impacted more severely than drive-to destinations. Losses immediately following the attacks were greatest among the northwest and south regions, to businesses catering primarily to international visitors and airlines, tour operators and travel agencies, according to the Travel Industry Association of America (TIA). Losses were least among rural areas, the western region, and businesses serving primarily the domestic market. As vacationers shifted from air travel to auto travel following the attacks, stable gas prices, a shift to closer-to-home travel and growing interest in family travel helped to support the drive-to destinations, like Branson. Understanding where Branson is located relative to our nation’s population, and the heavy propensity for drive-in traffic explains some of our resilience to this tourism crisis. But and equally important element is the significance of what Branson is. Branson's core values of celebrating the American spirit and patriotism, its longtime reputation of appreciation for military veterans, and its faith-based environment have given it a broad appeal. The TIA shows a shift in core consumer values to focus on the following related qualities: family, community, integrity, balance, authenticity and security. The community's commitment to those values was established a half-century or more ago and supported continuously through its development. Visitors know these values are not just a marketing ploy but rather an intrinsic part of the culture and lifestyle of Branson. American Demographics published a major study in its Sept. 2002 magazine that examined consumer behaviors, including travel habits, in light of the 9-11 attacks. In October 2001, 12 percent of Americans with young children (up to age 11) said they planned to take a family vacation in response to the attacks on Sept. 11. By June 2002, almost twice as many (20%) said they had taken such a vacation with their loved ones. There is also a change in the way people are spending their dollars. Overall 12 percent of those surveyed said they are spending more for vacations than they did prior to Sept. 11. The increased number of travelers has helped to buoy Branson. Because our area is perceived as a value destination, decreased spending on vacations coupled with a softening national economy may well make Branson an even more appealing travel destination. 2002 Results So Far During the first quarter of 2002, tourism taxes collected indicate Branson travel was up more than 10% over the first quarter of 2001. Although these results are promising, it is important to understand that the first quarter is Branson's "off-season" representing a very small portion of the total economic market, where small changes can generate significant percentage growth numbers. A more realistic look is probably our 2002 year-to-date room demand through July that shows a 2.9% increase over the prior year. Still we feel very fortunate to show even minor increases in these lean and turbulent times for tourism. Branson rebounded quickly after the immediate effects of September 11, but not without considerable and ongoing effort. Everyone in Branson is working harder than ever and reaching further than ever before, for new ideas to maintain economic stability. Summary In summary, in the aftermath of September 11, Branson has been more fortunate than most tourism destinations because of where we are and what we represent. While we have not suffered great losses, we also haven't seen our traditional and expected growth. To stay level with last year's numbers, we are working much harder. Where we are. Branson’s location in the heart of America is accessible for many by car, who may be reluctant to drive. For the growing numbers of people in search of a great vacation value and a destination closer to home, Branson is an appealing alternative. What we are. Branson represents the wholesome family values, patriotism and faith-based respect that comfort Americans in times of crisis. It's a comfortable, safe haven of traditional family values in a world that is suddenly more uncertain than ever before. Coincidentally our advertising message for 2002, was a remake of a marketing effort for our community originally created in 1994, so it was by no means a new branding or positioning of our destination, but it was a message clearly more meaningful than ever before. It said… “This year visit a place in the heart of America. A place where you can sit outside and look at the stars, or come inside and do the same thing. A place where getting “high” means a roller coaster ride or a walk on an Ozark mountain top. A place of spectacular sights, and smiles on faces you love. Where family values and the American spirit endure. It’s call Branson, Missouri. And it’s for everyone who wants to rediscover America.”
Mr. John K. Durst, Jr.
Good Afternoon Mr. Chairman and Members of the Committee. Thank you for inviting me to testify today on the topic of the state of our tourism industry post 9/11. The past twelve months have been a time of testing and challenge for South Carolina’s tourism industry; just as it has been for our sister states. But South Carolina has proven to be resilient, and today I’d like to share with you how the tourism industry, the Governor, the legislature and the people of our state have worked in partnership towards recovery of this vital industry. Travel and Tourism’s health and vitality is critical to that of our state’s economy. It is now South Carolina’s number one industry. It generates $14.7 Billion in total economic activity annually. It is our state’s number one private sector employer, creating 240,000 direct and indirect industry jobs. That means that one in every eight jobs in South Carolina depends on the tourism industry. Travel and Tourism generates over three quarters of a billion dollars in state and local taxes, over 10% of the total. In fact, the tourism economy in South Carolina represents 8.8% of our Gross State Product. What is true for South Carolina is also true for most of our sister states. In most southern states, tourism ranks in the top three industries. Mr. Chairman, tourism has been a major factor in the lives of South Carolinians for far longer than most realize. By the 1880’s, wealthy Northerners, attracted by the climate and charm of the state, made up a sizable portion of the residents of winter colonies like Aiken, Camden and Summerville. The City of Charleston produced its first official tourism guide in 1912, and assisted in the creation of the Fort Sumter Hotel on the historic Battery in 1923. In fact, it was mass production of the automobile and the creation of the first national highways that led to the first dramatic increase of tourism into our state. Suddenly, our nation’s middle class could come to visit our historic sites, enjoy the warm sun, and sample the cuisine of the exotic South. In 1929, at a time when South Carolina was already mired in economic depression, Charleston received some 47,000 visitors who spent nearly $4 million. Most South Carolinians were delighted to welcome our paying guests, although one Charleston leader said that "nothing is more dreadful than tourists, whether grasshoppers, bowl weevils, or money-bagged bipeds.” Some folks never come around. It was also in the 1920s, 1926 to be exact, that another landmark step was taken that would set the stage for the modern explosive growth of tourism in our state. It was in that year, that the streets were laid out for a new little town to be called Myrtle Beach. In the years following World War II, literally millions of young American families would pack up the kids and make the beaches of South Carolina a part of their family tradition and memories. Beginning in the late 1950s, Hilton Head Island was added as yet another pearl on the strand of South Carolina’s beach destinations, and today our state's coastal tourism accounts for over 60% of the travel and tourism economy. Now, we have begun to turn our focus to spreading the benefits of managed tourism development. We are drawing new attention to our rich history, culture and natural beauty, and I would like to thank you for your valuable assistance with the creation of our South Carolina National Heritage Corridor, which is serving as a prototype for heritage tourism development throughout our state. Tourism is a great success story for South Carolina. It grew by leaps and bounds throughout the 20th century. It is now our number one private sector employer, our second largest export, our third largest sector for capital investment and the fourth largest contributor to South Carolina’s gross state product. Travel and Tourism was the diamond in the crown of our state’s economic revitalization. Then came September 11, 2001. To be honest our industry was already facing challenges on September 10, as well. The nation’s economy was in a state of stagnation, if not recession. In South Carolina, tourism continued to grow, but at a negligible rate. In fact, in some specific areas of travel, like air traffic, auto rentals, and corporate and business travel, our numbers had already begun to trend into negative territory in the last quarter before 9/11. However, in South Carolina, at least, prior to the attacks, the travel industry as a whole was still outperforming the general economy. That all changed on September 11. The consequences of the terrorist attacks resulted in significant downturns within nearly every sector of our travel industry in South Carolina. In the fall quarter of 2001, room revenue from accommodations fell by 7%, and the taxes received from visitors fell by over 5%. Most hard hit was the airline industry within the state as deplanements fell by 29.5%. Because South Carolina recognized the economic importance of Travel and Tourism to our state, in the aftermath of September 11 we aggressively moved forward to address the challenges presented. Less than one month following the attacks, Governor Hodges convened a Summit on Tourism and Travel to gain input from tourism industry leaders from across the state. This summit produced a 10-point plan for recovery and formed a special Tourism Resilience Committee to work with the industry and the state's Department of Parks, Recreation & Tourism to implement the summit’s recommendations. In response to a request from Governor Hodges, and with bi-partisan support from our legislature, our state Budget and Control Board provided an emergency $2 million to implement an immediate out-of-state tourism marketing and promotion campaign to reinvigorate travel to our state. The Department then leveraged these funds with dollars from our private sector partners to further extend the reach and frequency of our marketing at a critical moment. In addition, we also formed a multi-state research partnership to gauge consumer travel attitudes. Collective action was necessary since the scope of the challenge was far greater than any single state could address. Recognizing that our state does not operate in a vacuum, Governor Hodges called upon his fellow Governors of the Southern Governors Association to form a Tourism Task Force. This was done in November of 2001, and the task force, comprised of an appointee from each state, produced recommendations on tourism policy for both the short and long term health of the travel and tourism industry. The prompt and aggressive action of our Governor, our legislature, the Department of Parks, Recreation & Tourism and our industry began, by Fall, to repair the economic damage of 9/11. By the Winter quarter, while all the tracked sectors were still negative, the drop had been cut in half. Statewide room revenue, which had been down by 7% in the Fall, was now only down by 1.9%. Airplane deplanements, which had dropped by 29.5%, were down 15.9%. We knew our efforts were paying off. The Spring quarter of this year brought even better news. Accommodations and Admission taxes were both up by 3.6%. Room revenue was back in positive territory at 1.7%. It is important to note that these increases are based on comparisons with the same quarter in the previous year. In other words, pre 9/11. One disturbing area continues to be air traffic. Although continuing to improve, it was still down 12.2% from the previous year. It should be noted that our state has always been a major drive destination for leisure travelers. We are not dependent, as many of our sister states are, on air transportation to maintain our industry's travel health. Nor are we as dependent upon the business traveler or conventions and meetings, though they do comprise an increasingly significant segment of our tourism economy. We are, however, extremely cognizant that the travel industry's overall health is dependent upon the continued strength of our sister state's tourism industries - for we are all interrelated and interdependent. Having said that, it should be noted that continued state revenue shortfalls are having major negative impacts on our ability to market, and thus sustain, our tourism industry's momentum, limiting our ability to generate much needed state revenue. At the very time we need to generate revenue the most - our efforts are impaired due to state agency budget reductions due to revenue shortfalls. It is with this in mind that we believe that a strong partnership - based on the successful partnerships we have developed between our state and our private sector partners - must be forged between the states and the federal government, in order to move significantly forward. We would like to suggest that two arenas in which this partnership can have a major and measurable impact involve both the domestic and international travel sectors. First, state tourism development of international markets is dependent upon reliable data to guide our strategic planning. The In-Flight Survey, administered by the Department of Commerce’s Office of Travel and Tourism Industries, is a monthly survey of international air travelers to and from the United States regarding destinations visited, activities enjoyed and dollars spent. Survey information provides much of the basic data required for many of Commerce’s reports on international trade and provides critical statistics on international travel, which are used extensively by the U.S. tourism industry. Inadequate funding levels in recent years have caused fewer and fewer visitors to be surveyed, decreasing the survey’s accuracy and usefulness. We urge you to reverse the trend of shrinking survey samples and increase funding for the In-Flight Survey. Increasing funding would strengthen this research program and allow it to once again produce useful and accurate marketing information. While even more needs to be done, a survey of this size would give travel and tourism businesses, and states like South Carolina, the accurate and detailed information needed to compete in the international tourism market. After the terrorist attacks of September 11, 2001, international travel to the United States declined significantly and has not returned to its prior levels. While changes to U.S. border and visa policies have been necessary to improve national security, they have had the unfortunate, unintended consequence of discouraging legitimate international travel. In order to recapture the millions of visitors who spend billions of dollars in our country each year, destinations must more aggressively market to overseas audiences. Data from the In-Flight Survey will be critical in making marketing decisions in the current environment. Secondly, we would further respectfully submit that it is in both our interests, federal and state, to forge a cooperative partnership that helps leverage existing state government expenditures for travel and tourism advertising and assists with marketing efforts to regain traveler confidence. To this end, we would request your support of legislation similar to that introduced late last year to grant federal funds to states based on tourism advertising dollars expended. As mentioned above, Governor Hodges leadership within the Southern Governors Association led to the incorporation of these two elements into a tourism policy resolution adopted by the Southern Governors Association last February - and which were subsequently adopted by the Western Governors Association in June. As such, they are recognized and supported by over 50% of our nation’s governors as essential to their state’s tourism industries and the health of their economies. Gentlemen (and Ladies), a strong, national travel industry is vital for the economic health of our states and our nation. However, more than our economy is at stake. The right to travel freely and safely, for recreation, for education, for business, has become a hallmark of the American way of life. A strong and dynamic partnership between the federal government, the States and localities, and our thousands of industry partners can keep it so. I ask for your hand in partnership, I pledge you ours. Mr. Chairman and members of the committee, thank you again for the opportunity to testify before you today. I look forward to responding to any questions you may have.
Mr. Jonathan TischChairman and CEOLoews Hotels
Click here for the .pdf file of Mr. Tisch's testimonyI am Jonathan Tisch, Chairman of the Travel Business Roundtable (TBR) and Chairman and Chief Executive Officer of Loews Hotels. TBR is a CEO-based organization that represents the broad diversity of the U.S. travel and tourism industry, with more than 70 member corporations, associations and labor groups. Loews Hotels, headquartered in New York City, operates 18 distinctive properties in the U.S. and Canada, including the Regency Hotel in New York and the Loews L’Enfant Plaza and Jefferson hotels here in Washington. The company employs more than 8,000 people across the United States. I am testifying today on behalf of both organizations about the state of the U.S. travel and tourism industry in the post-September 11 climate. Before I begin, I would like to thank Chairman Dorgan and Ranking Member Fitzgerald for holding this important hearing and inviting TBR to testify. Senator Dorgan, our industry is particularly appreciative of your many years of leadership on issues that affect the travel and tourism industry and the traveling public, as well as your keen understanding of the importance of our industry to the vitality of the U.S. economy. Current State of the Industry Over the past year, the travel and tourism industry has faced significant challenges on several fronts. It became apparent very quickly during the days and weeks following September 11 that the problems facing our industry were not simply airline-related. When people stopped flying – or in many cases traveling by any mode of transportation – they also stopped staying in hotels, eating in restaurants, visiting museums or theme parks, renting cars or shopping. As a result, hundreds of thousands of travel and tourism industry workers were laid off or had their hours reduced, travel and tourism companies faced steep revenue shortfalls and state and local governments saw a rapid decline in tax revenue upon which they were particularly reliant in the recessionary economy. Though lower prices and increased security measures have helped get Americans traveling again, the ongoing economic uncertainty in the U.S. and the perceived “hassle factor” associated with flying remain barriers to the industry’s recovery, and the slight recovery we are seeing in some industry sectors and areas of the country is uneven. As a result, individuals and businesses continue to cut back on discretionary spending, including travel. Vacations are being shortened or canceled altogether, and businesses continue to reduce non-essential travel. In addition, international arrivals continue to lag behind pre-September 11 levels. The numbers speak for themselves: TBR recently conducted a poll on travel patterns one year after September 11 (summary attached). While 89 percent of all travelers think airport security is better now than it was before last fall, three in 10 (30 percent) believe that the current level of security measures imposed so far are “insufficient” and more can be done – an increase of five percentage points from last October. In addition, more than one in 10 travelers (11 percent) have canceled their flights or fly less frequently because of the hassles of airport security. While commercial airline travel is perceived to be very safe, the “hassle factor” associated with heightened airport security, a lack of confidence in the sufficiency of the airport security measures and inconsistencies in the screening process from one airport to another confirm a recent trend by travelers to make trips by car instead of airplane. For example, 44 percent of business travelers said they now travel by car more frequently for out-out-town trips. The September 11, 2002 edition of the Federal Reserve’s Beige Book showed that while leisure travel is up in six of the 12 districts, business travel is off across the country. Even in districts that were seeing increased visitor traffic, room rates are down and travelers are spending less on food and entertainment. The Business Travel Coalition’s 2001 Business Travel Survey reported that businesses cut their travel by 28 percent after September 11. In August, the BTC stated that business travel will continue to be cut an additional 11 percent this year. The U.S. Department of Commerce’s Office of Tourism Industries reported in August that international arrivals to the U.S. were down by 12 percent in the first quarter of 2002. According to the Hotel Employees and Restaurant Employees International Union, in the days and weeks following the terrorist attacks, 30 percent of HEREIU workers lost their jobs due to the decline in tourism. One year later, 15 percent of the Union’s members are still out of work, and many of those who are employed are working reduced hours. The National Restaurant Association reports that while sales at restaurants and bars have been strong in 2002, employment in these establishments remains down by 180,000 jobs since the recent peak in July 2001. Moreover, job growth at restaurants and bars fell well below the overall economy in recent months. In the 12 months ending August 2002, restaurant and bar employment declined at a 1.8 percent rate, or double the 0.9 percent decline in the country’s total non-farm employment rate. New York City’s convention and visitors bureau, NYC & Company, of which I am Chairman, reports that while the City has seen an upswing in domestic leisure visitors in the past year, its recovery is partial, as business travel, visitor spending and lengths of stay are down. Preliminary numbers indicate that international visitorship is down as well. According to the Convention Industry Council, more than 100 exhibitions were canceled last year, and trade show attendance dropped more than 20 percent in the fourth quarter of 2001. Attendance at tradeshows this year is down 8 to 10 percent, and the renewal rate on most exhibitions is off by 50 percent or more. Moreover, international attendance at tradeshows has fallen by 50 percent since last September. Economists and travel planners have said that they do not expect the hotel industry to return to the profit levels experienced in 1999 and 2000 until mid-2004 at the earliest. It is extremely important to note that this unevenness in recovery is not just affecting the employees and owners of travel and tourism businesses. Cities, counties and states that were already beginning to see budget shortfalls due to last year’s economic downturn have also been deeply affected by the decline in the tourism and sales tax revenues that visitors bring to their jurisdictions. Forty-one states are currently experiencing major budget shortfalls, and Governors often cite a dramatic decline in travel and tourism tax receipts as a major cause. As a result of these revenue declines, states and local governments have been forced to reduce services at exactly the same time their citizens – who are also feeling the effects of the economic slump – require more assistance. Where Do We Go From Here? The travel and tourism industry, as well as many states and cities, have undertaken a number of efforts in the past year to encourage people to start traveling again. TBR took the lead last fall to work with Senators and Members of Congress to craft viable proposals to stimulate travel that could be included in an economic stimulus package. We also commissioned two major surveys – conducted at the beginning and end of October 2001 by Penn, Schoen, Berland and Associates and Burson-Marsteller – which we shared with the industry and the federal government, that helped us gain a better perspective of traveler confidence. On the marketing side, the Travel Industry Association launched a Travel Industry Recovery Campaign, funded by all sectors of the U.S. travel and tourism industry, which included a plea from President Bush for people to start traveling again. On the local level, states such as Florida and California, and cities such as New York and Washington, undertook successful public-private advertising campaigns to attract travelers in the region and within their own jurisdictions. We can all be proud of how our industry and state and local governments came together to work toward recovery. And, while we are seeing promising signs that reaffirm the progress being made, we clearly have more work to do as we look to work collaboratively with our elected officials to find solutions that will get more Americans traveling, and spur more international travelers to visit the U.S. The collaborative nature of this effort is key. Included in my testimony are a number of recommendations about how the industry, states and local governments and the federal government can work together to achieve a true recovery for travel and tourism in the U.S. However, the most fundamental thing that you, as Senators, can do right now is listen to us and believe us when we say that the United States and all of the destinations within it represent a unique product that we can and must market to the world with as much effort as we market any other American export product. Just as we worry about losing market share to our foreign competitors for products such as automobiles and computers, Americans need to understand and respond to the fact that we have been losing out to our foreign competitors in the area of travel and tourism for several years now. The events of September 11 only served to exacerbate that decline. The numbers paint a very clear picture. Though travel and tourism generated a balance of trade surplus of nearly $26 billion for the United States in 1996, by 2001, that surplus had plummeted to $7.7 billion. Moreover, for several years now, the U.S. has been ranked as the third most sought-after travel destination behind Spain and France. What do these countries have that we don’t? For one thing, they spend tens of millions of dollars to promote themselves to foreign visitors. In 1997 – the most recent year for which such figures are available – the government of Spain spent $71.6 million to promote the country as a desirable tourist destination. France spent $57.4 million. Meanwhile, the United States spent nothing. In 2000, international visitors spent an estimated $106.5 billion in the U.S. It is well known that international visitors spend more than domestic travelers when they travel. For example, New York City is the nation’s number-one international visitor destination, and though international travelers comprise only a small portion of the City’s visitors, they are responsible for a disproportionately high level of spending. In 2000, though foreign visitors made up only 18 percent of New York’s total visitors, they were responsible for 42 percent of all visitor spending. It seems like good business sense – and good policy – to spend some money on promoting what the U.S. can offer to these visitors in an effort to retain and grow this powerful market share. Beyond the financial benefits, travel and tourism increases awareness and understanding among diverse cultures and can help eradicate prejudices based on ignorance. The need to better define America abroad has become all too clear since the events of last fall. The marketing of the United States overseas would be an ideal mechanism to help combat misconceptions about us around the world. Recommendations TBR has a number of recommendations for both short- and long-term programs and initiatives that Congress can enact to help the U.S. regain its dominance in the international travel and tourism market, as well as stimulate the domestic leisure and business travel sectors. We offer these suggestions with the recognition that the federal government is experiencing the same types of fiscal restraints that state and local governments and the private sector are also facing. As has been the case since our inception, it is TBR’s goal to offer politically and economically feasible solutions. We do not want to overreach or ask for things that are unrealistic or unachievable. However, we hope that you will share our belief that a small investment now will yield multiple returns in the coming years. For several years now, TBR has been calling for the development of an aggressive brand marketing campaign, funded from both private and public sources, to promote the U.S. as a desirable travel destination. The federal government must play a role in this effort, as it is the United States as a whole that will be marketed as a product. TBR has been in discussions with the Commerce Department and is exploring the possibility of undertaking partnered research between the Department and the private sector, to be conducted by an academic institution, that would examine successful international marketing efforts by our largest foreign competitors. We hope that the information derived from this important study will create a roadmap for the development and funding of an economically and politically credible international destination marketing program for the United States. Recognizing that resources are scarce and this year’s congressional timetable is growing shorter, we would like to offer some incremental measures to start us on the path to this longer-term goal: Establish a Presidential Advisory Council on Travel and Tourism: More than a year-and-a-half ago, TBR called for the creation of this body, which is currently under consideration within the Bush Administration. Comprised of 35 presidentially appointed representatives of business, government and non-profit organizations with expertise in policy matters impacting tourism development, the Council would be the ideal body to explore ways that the travel and tourism industry can work for the benefit of our nation. The Council would advise the President on national tourism policy and would help ensure that travel and tourism receives a more sustained and vigorous policy focus at the federal level. It would also help coordinate the activities of the Administration and the many departments and agencies that impact travel and tourism. While the Council would be created by Executive Order under the Federal Advisory Committee Act (FACA), TBR requests your support in urging the President to create this body. Create a Destination Marketing Pilot Program: A pilot program should be undertaken immediately to test the efficacy of international destination marketing initiatives. For example, Congress could select five states and five cities across America based upon geographic and population diversity, and appropriate a fixed dollar pool to underwrite a specific, new international marketing initiative. The participants would select their own international targets and could employ whatever marketing strategies deemed appropriate. Within three months of the conclusion of the outreach, a written report would be due to Congress that defined in measurable terms the tangible success of the program’s ability to increase the targeted international arrival pool. Increase Funding for the Market Development Cooperator Program or Fund a Similar Tourism-Specific Program: We understand that Congress appropriates $2 million annually to the Department of Commerce to run this matching grant program to help state offices, trade associations, chambers of commerce and other non-profit organizations market their non-agricultural products and services overseas. While this could be an ideal tool for state tourism offices and convention and visitors bureaus to leverage to promote their destinations overseas, a Commerce official has informed us that the fund has not been tapped for tourism-related purposes – most likely because no one in the industry has heard about it. Increased funding for this program, or the establishment of a similar program that is specifically aimed at travel and tourism ventures, would help encourage eligible travel and tourism entities to take advantage of this program. TBR pledges its assistance in getting the word out to ensure that eligible travel and tourism entities apply for such funds. Enact the American Travel Promotion Act (H.R. 3321): Last November, Congressmen Foley and Farr, the Co-chairs of the Congressional Travel and Tourism Caucus, introduced this legislation in an effort to encourage states to boost their travel promotion efforts. We urge Congress to pass H.R. 3321, because we believe the $100 million in matching grants to states that this legislation would provide is a much-needed stimulus to states, local governments and the U.S. travel and tourism industry as a whole. Remove Structural Impediments to Expanded International Arrivals: Agencies of the federal government such as the U.S. Commercial Service at the Commerce Department, which staffs commercial officers throughout the world, should be better educated to become tourism promotion savvy. Congress should direct federal officials to aggressively look for ways to promote travel to the U.S. Increase and Restore the Tax Incentives that Spur Business Travel: The reduction of the business meal and entertainment tax deduction from 100 percent to 50 percent and the elimination of the spousal travel tax deduction negatively affected the restaurant and entertainment industries and the business customers they serve even before September 11, particularly harming small businesses. As I noted earlier, even the Federal Reserve Board has recognized the affects of the drop in business travel across the country. TBR encourages Congress to upwardly revise the business meal and entertainment tax deduction and restore the spousal travel tax deduction. Doing so would provide an immediate incentive for small businesses and corporations alike to authorize their personnel to start traveling again. Continue Funding for the Commerce Department’s Request for Travel and Tourism Satellite Accounts (TTSAs): TTSAs serve as a primary source of data for tourism policymaking by establishing a consistent, measurable framework for analyzing tourism expenditures and employment in a systematic manner. The sectors measured include purchases of airfares, lodging, meals and beverages, shopping and other travel activities. This research helps the Department and the industry gain a better understanding traveler preferences and economic trends across the varied sectors that make up the travel and tourism industry. TBR urges Congress to continue funding for this vital research. Ensure that the Industry has a Consultative Role in the Creation of the New Department of Homeland Security: There are a variety of ways in which the activities of the agencies that will comprise the new Department of Homeland Security will immediately affect the vitality of our industry. With that in mind, TBR created a Homeland Security Task Force this summer and sent to Congress a series of recommendations about issues of immediate concern. The goal of creating a central point of coordination to protect American citizens within our borders is a worthy one, and our industry supports this important mission. As Congress considers legislation on the new Department, we hope you will bear our recommendations in mind, particularly with an eye toward ensuring that there is a formal, consultative process that helps the Department achieve its important mission without compromising the industry’s ability to create economic growth throughout our nation. Work with Mayors and Governors to Develop Achievable Travel and Tourism Strategies: America’s Mayors and Governors are on the frontlines and have an intimate understanding of the power of travel and tourism as a driver for economic development and job creation in their cities and states. We urge you to work closely with them to develop strategies that will spur travel and tourism growth across the nation. Conclusion My final request of you requires no congressional action, but would make all the difference in the world to the businesses and employees that comprise the U.S. travel and tourism industry. Above all things, I urge you and your colleagues to help end the indifference that Washington has long held toward the travel and tourism industry. A recent independent Gallup poll found that the restaurant industry is the most highly regarded business sector in the country, closely followed by the travel industry, which ranked eighth. Clearly there is a recognition outside the Beltway of our industry’s importance. The United States, much like the rest of the world, is defined by its service economy. The 1950s industrial economy has given way to the 21st Century service economy. Travel and tourism defines that service economy around the world. We create jobs and careers; we fulfill important social policy goals, such as moving people from welfare to work; we contribute more than $99 billion in tax revenue for federal, state and local governments to drive our economy; and we create an enormous travel trade surplus to offset even the worst national balance of payments deficit. We are in 50 states and 435 congressional districts. In short, we are your core constituency. Please respect our contribution by nurturing our employers and employees with policies that will enable us to accomplish even more. Again, I thank you for inviting the Travel Business Roundtable to present its thoughts and concerns today, and we look forward to continuing to work with you to enact realistic policy solutions to spur increased travel to and within the United States. I am happy to answer any questions you may have.
Mr. Fred Lounsberry
Mr. Chairman and Members of the Subcommittee: On behalf of the 2,100 member organizations of the Travel Industry Association of America, or TIA, I want to thank you for providing me with this opportunity to update this Subcommittee on the state of the travel and tourism industry. I am TIA’s National Chair as well as Senior Vice President, Sales, for Universal Parks and Resorts. Last October, TIA was privileged to present a witness to share with you our concerns about the devastating impact on our industry and on our employees of the terrorist attacks of September 11, 2001. As you will recall, our industry was struggling badly. Business had dropped off 35 percent in the month following the terrorist attacks, with the sudden and dramatic decline in air travel rippling out to hurt all segments of the industry, including hotels, restaurants, rental car companies and – my business – attractions and amusement parks. At your last hearing, our industry asked for help. We were gratefulthat so many of you cosponsored legislation embodying our proposed industry relief plan and other measures aimed at helping keep our employees on the job. For reasons beyond our collective control, however,the legislation did not become law, and the economy has not fully recovered. As a result, many of our former employees are still without jobs or are working significantly fewer hours. Today, I want to describe the current state of our industry and to suggest how you might help our industry share American values abroad, generate jobs, increase tax receipts, and help our nation compete for international visitors in the future. In short, our industry has coalesced around the notion of a public-private partnership that would promote travel to and within the United States for the benefit of every state in the union. We need your support, and hope you will step forward as you did last year to help us. Working together, we can persuade more visitors to visit the United States for the benefit of the country as a whole. ONE YEAR LATER One year later, our industry’s situation has improved, but recovery is neither full nor complete. Most of our progress has been made in domestic leisure travel. Auto travel and travel by recreation vehicles have been leading positive indicators, as Americans have expressed more interest in family travel and staying closer to home. Lower gas prices and a shift away from air travel have reinforced these trends. Domestic air travel recovery, however, has stalled. In the first half of 2002, enplanements were down 10 percent over the previous year’s numbers, according to the Air Transport Association. Airlines continue to struggle financially, grappling with enticing customers back to the skies while managing to reverse the trend of red ink. Business and convention travel, which was down 3 percent in 2001, was down nearly 9 percent in the first six months of 2002. Corporations continue to trim expenses in order to stay profitable in these precarious economic times, and travel continues to bear the burden of this trend. Hotel occupancy is improving slightly each month, but occupancy rates in the first two quarters of 2002 have still been lower than they were one year ago. But the most affected segment by far has been international travel. In 2001, overseas travel to the U.S. declined 15 percent overall, according to the U.S. Department of Commerce. The United States saw even more dramatic drops in visitors from key markets such as Japan, where travel slipped 18.5 percent; Brazil, where inbound U.S. travel declined 22.7 percent; and Germany, which posted a 24.6 percent drop. Industry analysts do not predict that international travel to the U.S. will catch up to 2000 levels until 2004. This disturbing trend, combined with the struggling domestic air market and the decline in business travel, has affected travel industry employment dramatically. From September to December of 2001, travel employment declined significantly. Based on data from the Bureau of Labor Statistics, TIA estimates that more than 273,000 employees working directly for the travel industry lost their jobs during this time. Unfortunately, 2002 is shaping up to be even worse overall than 2001. The first eight months of 2001 showed positive job growth, so the overall trend for the year was flat. However, from December 2001 to July 2002, an additional 47,000 jobs were lost in our industry. While travel industry employment levels have stabilized in the past six months, they are still almost four percent lower than the same months of the previous year. With no positive growth yet this year and none indicated for the coming months, 2002 is likely to show a significant decline. REVERSING THESE TRENDS The single biggest obstacle to a full and complete recovery of our industry is the loss of international travelers to the United States. You may wonder why this segment is so important. The numbers speak for themselves. The average international traveler spends an average of 15.6 nights and more than $1,600 in our country. In 2001, international visitors spent $72.3 billion here and an additional $17.7 billion on transactions with U.S. air carriers. These expenditures directly generated 1 million jobs. One out of every eight travel industry employees is working because of international visitors. International travel to the United States does more than generate jobs; it is a revenue source for federal, state and local governments. According to TIA, international travelers directly generated more than $12 billion in tax revenue in 2001, including income tax of those industry workers who are employed because of international visitors. These economic benefits are not limited to any specific region of the country. International visitors see all parts of our nation. One-third of international travelers visit two or more states. Thirty-one percent visit historical places. Twenty-eight percent visit small towns, and 21 percent tour the countryside. One-fifth of all international visitors spend time at national or state parks. The impact of international travel is felt through the United States. Bringing international travel levels back to the record-setting levels of the year 2000 will help replace the 320,000 jobs that have been lost since September 2001 and generate tax revenue for governments that are struggling with deficit budgets during these difficult economic times. GOING EVEN FURTHER Yet, we should not be satisfied with a return to 2000 levels of inbound international travel. In the past decade, our country has been losing market share of world travelers. While total outbound travel worldwide has increased 49 percent since 1991, arrivals to the U.S. have increased by only 7 percent. Our country’s market share of world arrivals has decreased 28 percent in the past ten years. The United States is no longer the world’s premier destination; we are third, behind France and Spain. We continue to lose share in five of the world’s six largest tourist markets. We are being outpaced by other countries who are promoting themselves aggressively to the growing world tourism market. Increasing our share of international visitors would have tangible economic benefits. Adding just one percentage point to the 2001 U.S. market share of world arrivals would result in an additional 7 million international visitors, an additional $11 billion in expenditures in our country and the creation of 151,000 more travel industry jobs. Such growth would benefit U.S. governments as well. Adding one percentage point to the 2001 U.S. market share of world arrivals would generate an additional $1.9 billion in tax revenue for federal, state and local governments, including income tax. It’s easy to see why our industry is so focused on the international market. GROWING TRAVEL TO THE U.S. As travel continues to grow worldwide, other countries continue to increase their market share of worldwide travel. While some of this shifting is inevitable as former communist bloc countries enter the travel and tourism business, much of it is attributable to the success of sophisticated, aggressive marketing campaigns undertaken by governments that understand the economic value of promoting in-bound travel. The United States is the only western, industrialized nation without a unified national tourism campaign that reaches out to global visitors and encourages them to see America. The most recent report of the World Tourism Organization provides information about national tourism offices worldwide. Here are a few snapshots of the 1997 budgets of our competitors: Australia $87.5 million France $58.2 million New Zealand $32.8 million Brazil $92.3 million Germany $26.6 million Mexico $103.2 million Spain $147.0 million As you can see, we face stiff competition in the global marketplace. Other countries have recognized the value of international travelers, and they are growing their market shares while our share is declining. In order to increase our share of worldwide travelers, the United States needs to engage in a tourism promotional campaign. SUCCESSFUL MODELS Our travel and tourism industry is asking the federal government to help our industry market the U.S. internationally. As an industry, we have long recognized the benefits of leveraging marketing dollars, and there are several successful models in our own country that could serve as examples of how to structure a national tourism marketing campaign. The state of Florida created VISIT FLORIDA, a public-private promotional effort designed to create a unified brand for the state. I am the immediate past chair of VISIT FLORIDA’s private sector board of directors, which oversees the work of this non-profit organization. The state of Florida contributes dollars for marketing initiatives, and those dollars are matched one-for-one by the private sector. In this way, the state is able to generate more in advertising value from its investment of public funds. The state of California has a similar marketing effort. Indeed, combining public and private sector dollars for tourism marketing purposes is common throughout the world. Our industry has already implemented a demonstration campaign, which was developed and administered by TIA. SeeAmerica is our industry’s brand, and SeeAmerica.org is the website that consumers can use to make travel plans. The SeeAmerica name and logo are used at all major international tourism trade shows, such as ITB in Berlin and JATA in Japan. Travel guide inserts in major UK Sunday newspapers utilized the SeeAmerica name, as did a subway advertising train campaign in Japan. These and other projects and programs have been paid for by 225 separate industry sources, including state and local tourism organizations and private-sector companies, and they show the willingness of our industry to put up matching dollars for a broader federal campaign. They also demonstrate the success of the SeeAmerica brand, which has been used by individual travel and tourism companies in their own advertising efforts. WHAT OUR INDUSTRY IS ASKING As we seek to rebuild our industry and to create jobs, our industry now asks that Congress will help us build on the success of these programs by joining us in exploring ways to brand, position and promote the United States as the premier travel destination in the world. Our industry encourages that, like the Florida model, any organization be managed by the private sector. This idea has been unanimously endorsed by TIA’s Board of Directors, which represents all segments of the industry from all regions of the country. The National Council of State Tourism Directors and the National Council of Destination Organizations have passed resolutions supporting this proposal. Additionally, this year, the Southern and Western Governors Associations have called on the federal government to provide a sustained, federally funded international advertising and marketing program that encourages travel and tourism to the United States. We encourage the members of this Subcommittee to support exploration of a public-private partnership for promoting travel to the United States. This is our industry’s best hope of regaining the international visitors that have been lost in the past decades and reversing the decline of visitors since September 11, 2001. This is our nation’s best hope for replacing the jobs and tax revenue that have been lost. And it offers a way for our nation to share our values with individuals throughout the world. Our industry looks forward to working with you on legislation to achieve this goal. Mr. Chairman, I appreciate the opportunity to testify today, and I look forward to answering any questions you may have. Thank you.
Mr. Hal Rosenbluth
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