How to Preserve Your Tourism
Budget in Slow Economic Times
Tennessee Assoc.
of CVB’s
January 22, 2009, Nashville, TN
Stephen C. Morse, Ph.D.
Director & Economist
Tourism Institute
University of Tennessee
Knoxville, TN
Ph: (865) 974‐6249:
email: smorse@utk.edu

3 Topics To Discuss Today
1) Economic Health of U.S. &
Tennessee
2) How is tourism different
than other government
spending?
3) Tips for telling how tourism
generates new taxes for
your area

Today’s U.S. & Tennessee’s
Economic Health
• Slowest growth since 1986
3rd & 4th Qtr. Negative U.S.
U.S.
Economy
Economic Growth
has Slowed
•TN sales tax collections
Tennessee
•lowest levels in 12 years
Sales Tax
Revenues
• Decreasing tax revenues for each
Tennessee
Tennessee County
County Tax
Revenues
3
Source: U.S. Dept. of Commerce

Special Challenges in 2009 for the
Tennessee Tourism Industry
Tourist spending will be down in 2009
Tax revenues from hotel occupancy
taxes will be down in 2009
County “General Fund” tax revenues
will be down in 2009

TN County Newspaper Headlines
• County Tax Revenues • Hotel Bed Tax to
Fall Short Cover Economic
Development Projects
• Budget Shortfall
Worries • Tourism Budget Cut to
Commissioners Save Road Paving
Project
• County Workers Face
Layoffs • Tourism Promotion &
Marketing Budget
• City Officials Mull
Eyed for County
Spending Cuts
Deficit

In this slow economy…
Tennessee City & County
governments are searching
for new tax revenues

Benefits of Tourism to Your
Community
Diversifies the economy
•
Generates many support businesses
•
Brings in “new money” creating growth
•
Generates additional tax revenue helping to
•
fund community services and infrastructure
• Creates jobs & new business growth
• Promotes business development – today’s
visitor may be tomorrows investor
• Improves appearance of a community
7

During a Normal Economy, Equally
Emphasize Both Private & Public
Economic Benefits of Tourism
Private Sector Public Sector
Benefits of Benefits of
Tourist Spending Tourist Spending
Local Taxes
Profits Generated
Job Creation &
State Taxes
Employee
Generated
Payroll
Econ. Dev.
New Business
Creation Effect

During a Slowing Economy, More
Emphasis on Public Sector Benefits of
Tourism as a Tax Generator
Private Sector Public Sector
Benefits of Benefits of Tourist
Tourist Spending Spending
NEW
EMPHASIS

Tourism is a Net Tax Revenue
Generator for Other Govt. Programs
& Services
Additional
Generates Taxes Fund
Additional
Other Non‐
Local Tax
Tourism
Tourist
Revenues
Spending in Programs &
Your Local
Services
Area

What Makes Tourism a
Different Program & Investment?
• Unlike other government programs
that only take in tax revenues to
operate…
• Tourism programs attract tourists to
spend money in an area, and
ultimately generates additional
new tax revenues for an area

Tourist
Spending
Employ‐
Payroll Impacts of ment
Travel on
Your
County
State Local
Taxes Taxes

Example: Impacts of Tourism on
Wilson County, TN, 2007
Source: TN Dept. of Tourist Dev. & TIA
Employment:
Payroll:
Spending:
880 Jobs
$18.64 Million
$97.59 Million
State Taxes: Local Taxes:
$5.75 Million $2.86 Million

Many officials in your county may not
have a complete definition of
“Tourism”
• Some officials think tourism is just
hotels
• Some think it’s restaurants
• Some think it’s attractions and events
• Some may thin tourism does not exist
at all!

Five Blind Men and the Elephant
Task: Describe the elephant based on what
part of the elephant you are feeling

It’s a big
leaf
It’s a horse
It’s an
anteater
It’s a
snake
It’s a
tree
trunk

It’s attractions, It’s restaurants
entertainment & & food service
retail
It’s travel
& transp. It’s hotels
& lodging
Tourism Industry
It’s marketing
destinations &
conventions

Reality – tourism is not one sector, but
all sectors combined as a system
Hotels & Lodging
Restaurants & Food
Service Tourism Industry
Attractions,
Entertainment, Retail
Travel & Transportation
Conventions & Visitor
Bureaus

Average Tourist Spending in
Tennessee, 2007
Entertainment
Foodservice
& Rec.
11.0% 32.5%
Retail
11.8%
Lodging
17.3%
Transportation
27.3%
19
Source: TN Dept. of Tourist Dev. & TIA

Tourists Generates Many Taxes
(Example)
5% Hotel 7% TN 2.5% Local
Tourist
Occupancy State Sales County Sales
Spending Area
Tax Tax Tax
Lodging
Restaurant &
Food Service
Transportation
& Fuel
Shopping &
Retail
Attractions &
Amusements

Tax Relief Generated by Tourism:
County Tourism Economic
Fact Sheets
• Tax Relief: Defines how
much tourism benefits
each household in your
county in terms of less
taxes paid per household

Tourism Taxes Generated in
Wilson County, TN
2006 Tourism spending in Wilson Co.
generated:
• $5.4 million in TN State Taxes
• $2.67 million in local Wilson Co.
taxes
Source: TN Dept. of Tourist Development & TIA

Taxes & Wilson County, TN
On an average day in Wilson County:
• Tourist spending generated $7,319
daily in local county taxes
• Tourist spending generated $14,793
daily in TN State taxes

Tax Relief Example:
Wilson County, TN, 2006
As a result of taxes generated by
tourist activity in Wilson County:
Each household pays $201 less in
local and State taxes
Each household pays $67 less in
local county taxes
Each household pays $134 less in
State taxes

Be Dramatic – Present the Big Check
Check Payable to:
Each Wilson Co.
Household
Amount: $201
For: Tax Relief of
State & Local
taxes generated by
tourists

To Protect Your 2009 Tourism
Budget:
Show local officials that tourism
budgets used in promotion &
advertising…
Is a good investment that generates
additional and new tax revenues
UT Tourism Institute at
www.utk.edu/tourism

Your County’s Fact Sheet Available at:
• UT Tourism Institute’s Web Page at:
www.utk.edu/tourism

Spring Meeting &
SE TTRA Symposium
Montgomery, Alabama | March 23 – 25, 2009
www.southeasttourism.org/spring
“The Heart of the Economic Matter”
• Roger Dow, United States Tourism Association
• Bob Stewart, former commissioner of Kentucky
• David Bohan, BOHAN
• Dr. Suzanne Cook, U.S. Tourism Association
• Dr. David Bronner, Retirement Systems of Ala.

Thank you for inviting me
Questions? Comments?
Stephen C. Morse, Ph.D.
Director & Economist
Tourism Institute
University of Tennessee
Knoxville, TN
PH: (865) 974‐6249
Email: smorse@utk.edu