Oregon Office of Economic Analysis

Earlier this month Mark and I had the opportunity to discuss tourism and its impact on the Oregon economy to the Transient Lodging Tax Workgroup, setup following the passage of HB 4146 which raised the statewide lodging tax. Our slides are below. However first I wanted to provide a few summarizing thoughts.

Travel and tourism has been booming in recent years. Nationally the share of consumer spending spent on travel and tourism really has never been higher. Hotel occupancy across the country is at or near record highs. Hotels also have more pricing power today given the strong demand even as new hotel construction picks up.

In terms of employment — borrowing the Federal Reserve Bank of Kansas City’s methodology — the sector in Oregon has just recently regained all of its lost jobs during and after the Great Recession. Consumer spending is back and now too are the jobs across the state. It is no secret that most travel and tourism jobs are low-wage and the industry overall has lower productivity, or value-added in state GDP calculations, than nearly all other sectors in the economy. Even in the economic multiplier world, leisure and hospitality sectors are in the 1.3 or 1.4 range. However there are a few related points here worth mentioning.

First, the flipside of low productivity and low wages coupled with strong industry demand is that it is a large employment sector. 1 out of every 8 jobs in Oregon are within a sector directly tied to travel and tourism. Now, not every single job in these sectors is dependent upon it, but the sectors in a broad sense do rely upon spending from visitors more than some other parts of the economy. This share of jobs varies across the state and the travel and tourism industry has a wide geographic footprint. 28% of all such jobs in Oregon are outside of the Willamette Valley, matching the shares seen in the overall population and public sector employment. Other industries, like the high-wage and fast-growing Professional and Business Services are more heavily concentrated in the urban centers. So the industry is not only important overall but particularly so in some regions like the North Coast where 1 out of every 4 jobs are travel and tourism related and 1 out of every 4 homes are second homes or vacation homes.

Second, these jobs do fill a void and a need in the economy. This is something we (well, me) did not cover in our initial presentation. Representative Davis asked us about it and for good reason. The point being that in the ideal world the economy would produce employment opportunities for everyone along the skills spectrum (and also geographic spectrum too). Of course this is not always how the world works. Job polarization in recent decades has resulted in strong growth in the high- and low-wage occupations. The strong growth in travel and tourism jobs are a result of the strong demand for these types of services in the economy. They can also not easily be outsourced and certainly cannot be offshored, although automation plays a role here too.

Overall the outlook remains bright for the sector. The Baby Boomers today are in their peak travel and tourism years which coincides with their late career and active retirement years. Based on demographics and consumption patterns, growth will likely be slower in the coming decade than in the past, however it is certainly a positive outlook. The Millennials today do not spend as much on travel and tourism but this is due to their age and income levels. As they move into their peak-career and family years, spending will increase, offsetting the future decline of Boomer spending. What does remain an open question are tastes and preferences of the younger generations. They will travel and spend in the future, however will their preferences match their parents’ or will they prefer different locations and activities in addition to lodging type?

Here are our prepared slides for the work group.