Tourism Outlook Is Perking Up

March 12, 2004
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EAST LANSING — A positive outlook for Michigan’s $15 billion tourism industry makes it a good time for destinations and attractions to step up spending on marketing and promotion, an industry researcher says.

Rising consumer confidence and an improving economy have people in a better mood to travel during 2004 than in recent years, creating a ripe environment for a strong return on investment in marketing and promotional budgets, said Don Holecek, director of Michigan State University’s Tourism Resource Center.

Tourism businesses and promoters that have held the line on promotional spending in recent years because of tight finances or lower activity need to find a way to increase budgets and “get back in the market” in order to take advantage of the improved climate this year, Holecek said.

“This is the year, I think, that marketing and promotion will really yield good dividends. The market is right and we’re ready to travel again,” Holecek said last week in presenting his annual tourism industry outlook in East Lansing.

“We think there’s an underlying growing demand for travel,” he said. “Things are looking up this year.”

After three difficult years, tourism in Michigan is looking to return this year to the average growth rates the industry experienced from the mid-1980s through 2000.

Holecek is forecasting a 3 percent to 4 percent increase in travel volumes and a 4 percent to 5 percent growth in travel spending for 2004.

Travel prices are forecast to increase only 1 percent to 2 percent this year, reflecting a continuation in the pricing pressures the industry has experienced in recent years as travelers use the Internet to search for deals and favor attractions that offer discounts.

“People are traveling, but they are traveling on the cheap,” Holecek said. “People are going to be very tight-fisted in their spending.”

In the years leading up to a tough three-year period that resulted from the economic downturn that began in late 2000 and the subsequent Sept. 11, 2001, terror attacks, tourism in Michigan averaged a 3.7 percent increase annually in travel volumes and a 4.7 percent increase in travel spending.

Travel volumes during 2003 grew just 1 percent, half the rate the Tourism Resource Center predicted, and spending increased 1 percent after it was forecast to fall 2 percent.

MSU’s forecast for 2003, Holecek said, turned out “too gloomy” because all economic indicators pointed that way when he prepared the outlook in March. “Everything was tanking,” he said.

Though small, the increase in travel spending last year did reverse a two-year slide. Travel spending fell 10 percent in 2002 and 5 percent in 2001, according to the MSU Tourism Resource Center.

Now, with consumer confidence and the economy rebounding, the tourism industry is facing more favorable conditions for 2004, he said.

“There’s a lot of positives out there,” Holecek said.

But on the downside, continued high unemployment rates both nationally and in Michigan — and the resulting economic uncertainty — could become a large drag on business this year, Holecek said. “That’s really the one big negative we have to contend with going forward,” he said.

Rising gasoline prices are another potential negative, although Holecek believes the effect is minimal until pump prices hit $2.50 per gallon. Gas prices are forecast to rise steadily but gradually, allowing consumers time to adjust and largely easing industry concerns, he said.

“Let’s not worry about them too much. They’ll have some impact on the margins,” Holecek said.

By market sector, shopping is forecast to post the biggest gain this year over 2003, at 4 percent to 6 percent, followed by outdoor recreation/camping and gaming at 4 percent to 5 percent each. The MSU outlook sees 3 percent to 4 percent growth for lodging and 2 percent to 3 percent for golfing and upscale resorts.    

MSU Forecast

Here are the highlights of Michigan State University’s annual outlook for the state’s tourism industry, including projected growth rates by sector:

Travel volumes: 3% to 4%
Travel spending: 4% to 5%
Travel process: 1 % to 2%

Outdoor recreation/camping: 4% to 5%
Golfing (upscale resorts): 2% to 3%
Gaming: 4% to 5%
Shopping: 4% to 6%

Lodging: 3% to 4%

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