News from: CalChamber

May marks the celebration of Tourism Month in the United States, highlighting what for California is a significant sector of the state’s economy.

Travel spending totaled $100.2 billion in 2021, according to Visit California’s annual Economic Impact of Travel in California report. That total represents a 43% increase from 2020, but is still down 30.9% from the historical peak in 2019. The gross domestic product (GDP) of the California travel industry was $67.3 billion, making up approximately 2% of California’s total GDP in 2021.

The travel industry in California is experiencing a recovery, and according to Visit California President and CEO Caroline Beteta, the recovery is accelerating faster than initial projections estimated. As the summer travel season begins, Beteta expects the state tourism industry will experience a full economic recovery by 2023, a year earlier than expected.

The state’s economic forecast will brighten with the full recovery of the travel industry, which is still experiencing effects from the COVID-19 pandemic, now coupled with the economic drag of inflationary policies, war in Ukraine, and the global supply chain crisis.

In 2021, the travel industry supported approximately 927,000 jobs in California, a 6.4% increase from 2020, but a 21.2% decline from 2019 levels. At its peak in 2019, California tourism employed 1.17 million Californians. Considering the secondary effects that tourism has on employment, 1.56 million jobs in the state may be tied to the travel industry. The professional and business services sector, and education and health services sector reap the most secondary benefits.

A healthy tourism industry is important for the Golden State; travel generated $15 billion in tax revenue in 2021. The local tax revenue generated by travel is essential to many California tourist destinations. In 2021, local tax, typically in the form of lodging taxes, generated $5 billion in revenue for cities and countries. Beteta notes that many California cities depend on tourism to fund critical services, including public safety and other essential municipal operations.

In 2021, California residents accounted for 70% of all in-state travel spending — defined as trips taken by individuals who stay overnight away from home or who travel more than 50 miles one way on a nonroutine trip. U.S. residents from other states who visited California accounted for 24% of travel spending, while international visitors accounted for 6% of spending.

Before the COVID-19 pandemic, international visitor spending made up about 20% of total travel spending in California. Beteta notes that it is California’s largest cities that are affected the most by the decrease in international visitors. Visitor spending remains at barely 60% of 2019 levels in both the San Francisco Bay Area and Los Angeles region.

Other counties in California with tourism that is geared toward outdoor recreation have seen visitor spending bounce back more quickly toward 2019 levels. Travel spending in the North Coast, Central Valley, and Desert regions of California has returned to within about 10% of pre-COVID-19 levels. For these rural California communities, the return of tourism has accelerated the regions’ recovery of jobs, economic activity, and tax revenues.

Beteta notes that the increase in tourism to California’s outdoor destinations has even led some to realize the need for, and take actions toward, updating infrastructure and better managing of wilderness areas and facilities.

At the national level, tourism month will look forward with the theme of the “future of travel.” Numbers on the impact of the COVID-19 pandemic on the travel and tourism industry were released in March by the U.S. Bureau of Economic Analysis. As expected, economic output generated by the travel and tourism industry decreased by 50% in 2020 from 2019, accounting for more than half the decline in U.S. GDP in 2020. A decline in tourism-related employment from 9.5 million people in 2019 to 6.3 million in 2020 represented more than a third of the total overall employment decline in the United States between 2019 and 2020.

The tourism industry is looking to the future as localities and the country recover from the COVID-19 pandemic. Business travel is increasing once again and many Americans and Californians have travel plans for summer.

Unfortunately, as the United States faces the possibility of a recession, the travel industry, instead of a renaissance, might be facing another crisis as rising gas prices may deter many would-be travelers. The continued recovery of travel and tourism will have a huge impact on whether California’s economic outlook remains positive.