Tourism outlook: Down slightly for ’08, but plenty of good news ahead

As I sat and listened to Gov. Jennifer Granholm at the Michigan Hotel Conference, I realized just how serious the economic situation is in Michigan, yet how dedicated the hospitality industry is to bring Michigan back to where it needs to be.

No one is saying it will be easy. No one is saying we are in the best place in the world. In fact, Michigan rates at the very bottom in occupancy, rating 50 out of 50 states! Yes, dead last. Yet this year's tourism conference had the most participants in history – many from northern Michigan coming together to learn where we are and what we need to do.

Improving Michigan's economy through tourism is the goal in our industry. The state legislature agrees, passing SB690, sponsored by Sen. Jason Allen (R-Traverse City), which will give a boost of $30 million annually without tax increases to tourism promotion. With more promotional dollars going to our industry, we will attract more visitors and bring more tax dollars and jobs to our troubled economy.

During the conference, Michigan State University professors from the Department of Community, Agriculture, Recreation and Resource Department (CARRS) presented a past performance and future expectation presentation. Afterward, we all agreed that the news was disheartening, but also felt the future expectations were not as bad as we had thought. Travel and tourism is still the largest generator of wealth and jobs in the world, and its contribution to the GDP is expected to rise from 9.9 percent in 2008 to 10.5 percent in 2018.

In Michigan, we have seen a 6.8 percent increase in travel-related expenditures since 2005. Over the past year, much of the success of the travel industry in northern Michigan can be attributed toward our warmer summer, giving visitors more outdoor time and a very favorable winter season for outdoor recreation.

Traffic counts among Michigan highways, bridges and welcome centers were down slightly in 2007. Gasoline was up 12.4 percent in 2007 over the previous year, with occupancy up slightly at 3 percent and sales use tax up 2.8 percent.

As we look toward 2008, the travel industry acknowledges we may have slipped into a long-term slower growth pattern. Large issues that could dramatically slow tourism over the coming years, include unemployment rate remaining high, gasoline prices rising significantly, the housing crisis (mortgage defaults and price declines), a weak dollar and more.

Disposable income is always a factor in the travel industry; in 2000 the average across the country was 3.5 percent and 1.9 percent in Michigan. In comparison, disposable income is expected to dip down to 1.8 percent nationwide this year, with Michigan's at 0.1 percent. This shows that promotional dollars for out-of-state advertising is a must to attract new visitors, as in-state travel will be down significantly.

The lodging sector forecasts, however, show a modest pace of growth in regards to revenue. The largest declines will be seen by luxury hotels, but could still benefit with room rate increases.

Our wild cards – consumer spending, inflation, energy prices – could affect us a little, but bottom line, expectations are a 2 percent decrease in Michigan travel volume with a 3.4 percent increase in travel prices for 2008 for the state. Southwest Michigan is expected to grow the most, at 3 percent. Northern Lower Peninsula, unfortunately, is expected to see a 4 percent decrease.

The good news

We do have a lot of bright spots. The heavy snowfall gave us our best ski season in many years, and raised the lake levels. With the Canadian dollar strengthened, we expect to see more Canadians making their way into Michigan for vacations. We also are seeing a lot more retirees from early retirement packages, thus more leisure time could generate more travel (in both peak and off season).

We're also going to see the full impact of post-Labor Day schools this fall, which could provide more vacations up north in late August. The "Pure Michigan" advertising campaign is going into more markets (St. Louis is the newest), which will help attract even more visitors to Michigan.

I walked away from the conference remembering what the governor stated in her keynote: All these new projections don't take into account the new money provided through SB 690 and the dedicated staff members throughout the industry and the dedication shown by lawmakers to make tourism a priority. The future of Michigan tourism is bright and will boost our economy to where it needs to be. Tourism will take Michigan and put it back in the spotlight.

Nick Trahair is president of the Grand Traverse Area Hotel & Motel Association and GM of AmericInn in Traverse City.

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