Southeast Enjoys Record Travel but Growth Expected to Ease

August 24, 2016

Southeast Enjoys Record Travel but Growth Expected to Ease

Editor's note: This is the first in a series of articles taking a look at tourism in the Southeast.

The U.S. Southeast has seen strong growth in tourism as an improving economy boosts domestic leisure travel and states spend more on their marketing efforts.

Tourism is a vital driver of jobs and revenue for southern states. It accounts for nearly 15 percent of jobs in Florida; 9 percent and 10 percent of jobs in Louisiana and Georgia, respectively; 7.6 percent of jobs in Mississippi; and 6.2 percent of statewide economic activities in Alabama. Tourism is the second-largest industry in Tennessee, accounting for just over 5 percent of its jobs.

Falling gasoline prices and expanded lodging accommodations have spurred travelers from other U.S. regions to go to Southeast beaches, amusement parks, and other venues in recent years, producing record levels of visitors to the region. For example, the Great Smoky Mountains in Tennessee and Natchez Trace Parkway from Mississippi to Tennessee were among the nation's most visited national parks last year.

New Orleans saw 37 percent growth in international visitors last year, the most of any U.S. city, according to data from the National Travel & Tourism Office of the U.S. Department of Commerce.

Tourism is Florida's biggest industry, contributing $89.1 billion in sales to the state in 2015. "There's a really strong sense of momentum," said Will Seccombe, chief executive and president of Visit Florida, the state's tourism marketing organization. "All areas of the state are showing real strength in terms of tourism numbers and spending."

Challenges and caution

Despite the current strength, challenges to continued travel growth loom. The most recent Federal Reserve Beige Book report noted that hospitality contacts in some heavy tourism areas across the Sixth Federal Reserve District—Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee—cited "softer activity" in July and expect this trend to continue through the rest of summer.

Major U.S. airlines have cut service between the United States and the United Kingdom for the winter, expecting less travel to America because of the weaker British pound, which has fallen in the wake of the United Kingdom's vote this summer to leave the European Union.

"The post-Brexit impact is yet to be determined," said Ina Lee, owner and president of Travelhost Magazine of Greater Fort Lauderdale. She is cautious about the future, noting that the stronger dollar, which makes U.S. goods more expensive for foreigners, has already hurt travel to southern Florida from Canada and South America.

Visit Florida's Seccombe said he isn't concerned about effects from Brexit this year, but added that industry partners and tourism operators have cited concerns that travel-booking timeframes might shorten as people watch the value of the dollar.

Of late, the Zika virus has emerged as a potentially serious threat to tourism. The first cases of local transmission of the mosquito-borne illness, which can cause birth defects, were confirmed in recent weeks in Florida. The Centers for Disease Control and Prevention, in an unprecedented move, has urged pregnant women not to travel to a section of Miami where recent cases of infection were found.

Zika, which has steadily spread from South America over the past year, could give consumers second thoughts about traveling to the Gulf region should the U.S. outbreak expand. Florida has set aside more than $26 million to fight transmission of the disease. "If this virus continues to spread, it could have a material impact on Florida's tourism," said Bob Dearden, chief financial officer of the Florida Restaurant and Lodging Association.

Nationally, the travel outlook is also softening. The U.S. Travel Association expects domestic trips to be the main driver of growth for the time being as Brexit fallout and the strong dollar continue to hamper international travel. The association's most recent Travel Trends Index cited a slowdown in trips to or within the United States involving a hotel stay or flight in the last 12 months, and it forecast "tempered" travel growth through the end of this year.

"The indicators are showing that things are going to go down slowly," said Brian London, a former research analyst for Visit Florida who now publishes Travel Industry Indicators. If tourism cools off from the current pace, there's no reason to panic, he adds. "There might be some declines year over year, but the reality is these are declines off record peaks," he said.

Tourism's post-recession recovery

Whatever the future brings, the Southeast region overall has seen multiyear growth in tourism since the Great Recession.

Florida, Georgia, and Tennessee had a record number of visitors in the most recent years. Louisiana, which was hard-hit after Hurricane Katrina in 2005, has made a strong comeback, with guests to the Pelican State climbing to 28.9 million in 2015, a record high for the fourth straight year.

Southeast Enjoys Record Travel but Growth Expected to Ease 

Miami, New York, and Los Angeles were the top three ports of entry for overseas travelers in 2015, according to the National Travel & Tourism Office. Orlando ranked eighth, Atlanta ninth, and Fort Lauderdale was 14th.

States have looked to develop unique experiences to boost travel. Georgia and Tennessee provide grants for tourism projects in local communities. A GRAMMY Museum opened in the Mississippi Delta region this year—only the second official such institution outside of Los Angeles—to highlight the area's music history and draw tourists.

States have also been forging partnerships with each other and other organizations to promote attractions as part of a package deal. Southeastern cities have been constructing new hotels to be in a position to accommodate more visitors.

"Atlanta is in the midst of another development boom" 20 years after it hosted the Centennial Olympic Games, said Mark Vaughan, chief sales officer with the Atlanta Convention and Visitors Bureau. "As this trend continues over the next three years, Atlanta will open another $2.5 billion in new hospitality development including several hotels, attraction expansions, and two new stadiums."

Southeastern states have also boosted funding for tourism marketing efforts. In Florida, public funding for tourism has steadily increased to $74 million for 2015–16 from $28.5 million in 2009–10. Those additional dollars have allowed the state to extend marketing efforts year-round rather than just seasonally.

"That has real positive net results in terms of having increased awareness of Florida as a tourism destination," said Seccombe. "We're competing across a bigger geography and more international markets."

In the next segment of this series on tourism in the Southeast, we'll take a look at hotel performance and construction.

photo of Karen Jacobs
Karen Jacobs

Staff writer for Economy Matters

 

photo of Marycela Diaz-Unzalu
Marycela Diaz-Unzalu

REIN Director

 

photo of Rebekah Durham
Rebekah Durham

Economic Policy Analysis Specialist for the Research Department