Lake Havasu City Travel Impacts, p

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1 Lake Havasu City Travel Impacts, p photo courtesy of Lake Havasu Convention & Visitors Bureau JUNE 2011 PREPARED FOR Lake Havasu Convention & Visitors Bureau Lake Havasu City, Arizona

2 LAKE HAVASU CITY TRAVEL IMPACTS, P Prepared for the Lake Havasu Convention & Visitors Bureau 314 London Bridge Rd Lake Havasu City, AZ Prepared by Dean Runyan Associates 833 S.W. Eleventh Avenue, Suite 920 Portland, Oregon June 2011

3 LAKE HAVASU CITY TRAVEL IMPACTS, P This study, prepared for the Lake Havasu Convention & Visitors Bureau, documents the economic significance of the travel industry in Lake Havasu City from 2005 through The 2010 estimates are preliminary. The estimates contained within this report are consistent with the state and county estimates prepared by Dean Runyan Associates for the Arizona Office of Tourism. 1 A general description of the methodology can be found in that report. Additional source data was utilized for this report to more accurately reflect the unique characteristics of Lake Havasu City. This included U.S. census data from the American Community Survey, the Economic Census and zip code county business patterns; the 2006 and 2009 Arizona Watercraft Surveys; 2 the 2007 Lake Havasu City Tourism Survey; 3 and the 2010 Lake Havasu City International Visitor Study. 4 In interpreting the findings, it should be noted that: The visitor spending estimates in this report are expressed in current dollars. There is no adjustment for inflation. Although the findings reported herein are consistent with the county and statewide impacts prepared by Dean Runyan Associates, local area estimates such as these are subject to more data constraints. For this reason, many of the findings are reported at a more summary level than is the case for Arizona and Mohave County. The economic impact measurements represent only direct economic impacts. Direct economic impacts include only the spending by travelers and the employment generated by that spending. Secondary effects related to the additional spending of businesses and employees are not included. The employment estimates in this report are estimates of the total number of full and part-time jobs directly generated by travel spending, rather than the number of individuals employed. Payroll and self-employment are included in these estimates. The estimates refer to the place of work, not the residence of the employee. Earnings include wages and salaries, paid benefits and proprietor income. Most applicable state and local taxes are included except property taxes. (See page 4 for a detailed listing.) 1 Arizona Travel Impacts, p (June 2011) prepared by Dean Runyan Associates for the Arizona Office of Tourism Arizona Watercraft Survey (September 2009) prepared by Behavior Research Center, Inc. for the Arizona Department of Transportation. 3 Lake Havasu City Tourism Survey (July 2008), prepared for the Arizona Office of Tourism by the Arizona Hospitality Research & Resource Center at Northern Arizona University. 4 Prepared by Prism Travel and Hospitality Consulting for the Lake Havasu City Convention and Visitors Bureau. DEAN RUNYAN ASSOCIATES PAGE 1

4 After two years of steep declines, the Lake Havasu City travel industry stabilized in Spending, employment and tax revenue were essentially unchanged from However, both employment and visitor-generated tax revenues are below levels. Motor fuel costs and the weakness of the larger regional economy in the southwest are have contributed to the sluggish rebound in travel activity. Nonetheless, the travel industry remains an important component of the larger Lake Havasu City economy. Visitation to Lake Havasu City is responsible for approximately ten percent of all employment in the city and a significant share of tax revenue. Lake Havasu City Travel Trends, p Spending Earnings Tax Revenue (000) (Million) (Million) Jobs Local State Total 2005 $194 $44.0 2,390 $4,170 $7,770 $11, $205 $46.8 2,520 $4,340 $8,040 $12, $207 $47.5 2,360 $4,270 $7,980 $12, $196 $45.5 2,180 $3,880 $7,280 $11, $164 $41.8 2,000 $3,560 $6,630 $10, p $171 $41.4 1,980 $3,630 $6,870 $10,490 Annual Percentage Change p Detailed travel impact estimates follow. It should be noted that these impact estimates are based, in part, on two key assumptions. First, it was assumed that room rates declined slightly (-3.1 percent) from 2009 to This estimate is based on Smith Travel Research reports for Mohave County prepared for the Arizona Office of Tourism. 5 Second, the spending estimates for watercraft activities are based on the 2009 watercraft survey cited on page 1. There is no survey for Much of the decline in visitor spending from 2006 to 2009 was based on the surveys administered for those two years. 5 The Smith Travel Research reports can be found at the Arizona Office of Tourism website: DEAN RUNYAN ASSOCIATES PAGE 2

5 Visitor Spending by Type of Commodity, 2010p (Millions) Arts, Ent. & Rec. 14.4% Food Stores 8.7% $24.5 $14.8 Food Service 25.1% $42.9 Leisure & Hospitality 57% $6.0 $38.8 $4.5 Local Tran. & Gas 22.7% $24.8 State & Local Tax Receipts Generated by Visitor Spending, 2010p (Millions) Retail 43% Retail Sales $ % Accommodations 14.5% Visitor spending in Lake Havasu City is widely distributed among different commodities and services. In 2010, more than one-half of all visitor spending was for leisure and hospitality services (recreation, accommodations and food services). Most of the state and local tax revenue generated by visitor spending occur at the point of sale such as bed, restaurant, sales and gasoline taxes. The distribution of these tax revenues is similar to visitor spending. (Retail purchases include motor fuel.) Visitor-Generated Employment by Industry Sector, 2010p (Jobs) Retail 12% 240 1,740 By contrast, the employment generated by visitor spending is primarily in the leisure and hospitality sector. This is because leisure and hospitality services are much more labor intensive than retail businesses. Leisure & Hospitality 88% DEAN RUNYAN ASSOCIATES PAGE 3

6 State and Local Visitor-Generated Tax Receipts by Type, 2010p (Millions) Motor Fuel $2,230 Income $770 Sales $5,490 Lodging $1,990 Visitor-Generated Tax Revenue Distributed to Local Entities, 2010p (Millions) St-Loc Lodging $340 Co. Sales $170 Co. Lodging $50 City Sales $1,040 In 2010, state and local tax revenue attributable to Lake Havasu City tourism amounted to $10.5 million. The vast majority of this tax revenue was paid by visitors in the form of lodging, sales and motor fuel taxes, as opposed to income taxes paid by residents and businesses. Visitor spending in Lake Havasu City generated $3.5 million in local tax revenue in Local taxes include city taxes, county taxes and the distribution of the state lodging and sales tax receipts to local entities throughout Arizona. (Property taxes are not included.) St-Loc Sales $1,000 City Lodging $900 (City Lodging taxes include the 2 percent tax and the 3 percent additional tax. City sales taxes include all 2 percent taxes and the 1 percent additional restaurant and bar tax.) Visitors to Lake Havasu City in 2010 generated $470 in state and local taxes for each resident household in the city. About 10 percent ($1.4 million) of all city sales and lodging tax revenues in 2010 were attributable to visitor spending on lodging, food services, amusements and other retail goods. This is equivalent to $61 for each resident household. (This does not include the 1% and 3% additional taxes on restaurant/bars and lodging.) DEAN RUNYAN ASSOCIATES PAGE 4

7 Detailed Lake Havasu City travel impact estimates for the years 2005 through 2010 are shown below. Lake Havasu City Travel Impacts, p p Visitor Spending by Commodity Purchased ($Million) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Destination Spending Earnings Generated by Travel Spending ($Million) *Leisure & Hospitality **Retail Total Direct Earnings Employment Generated by Travel Spending (Jobs) *Leisure & Hospitality 2,110 2,220 2,070 1,920 1,760 1,740 **Retail Total Direct Employment 2,390 2,520 2,360 2,180 2,000 1,980 Government Revenue Generated by Travel Spending ($Million) Local Tax Receipts State Tax Receipts Total Direct Gov't Revenue Details may not add to totals due to rounding. *Leisure & Hospitality includes Arts, Entertainment, Recreation; Accommodations; Food Services and other services related to maintenance of lodging properties. **Retail includes shopping, groceries and gasoline service. DEAN RUNYAN ASSOCIATES PAGE 5

8 APPENDICES APPENDIX A. REGIONAL TRAVEL IMPACT MODEL (RTIM) METHODOLOGY Appendix B: Travel Impact Industries Matched to 2007 NAICS DEAN RUNYAN ASSOCIATES PAGE 6

9 APPENDIX A VISITOR SPENDING REGIONAL TRAVEL IMPACT MODEL (RTIM) METHODOLOGY Spending estimates are derived from two types of data: (1) the visitor spending patterns of specific types of visitors; and (2) the amount or volume of visitation associated with each visitor category. The types or categories of visitors include hotel/motel guests, condominium and second home rentals, campers, unpaid overnight stays in second homes or in the private homes of friends and relatives, and day travelers. The spending patterns refer to the average amounts spent on specific commodities, including accommodations, food service, groceries, ground transportation, entertainment, and other retail purchases. The average daily spending patterns of these different types of visitors are estimated from available survey data pertaining to Lake Havasu City. The visitation estimates are derived from a variety of sources, including room tax data, camping attendance data, visitor survey data, and census housing data. The resulting calculations provide detailed estimates of visitor spending for specific commodities. EARNINGS, EMPLOYMENT, TAX RECEIPTS The detailed spending estimates are used to estimate the related earnings, employment, and tax receipts for each commodity or business category. The earnings attributable to visitor spending on specific commodities are derived from payroll-receipts ratios and output-compensation ratios. 6 Earnings include payroll, other earned benefits and proprietor income. Employment is estimated from the average annual earnings for each job associated with a particular commodity. State and local tax receipts are estimated by applying the appropriate sales and income tax rates to sales and earnings. Property tax collections are not estimated due to data limitations. VALIDITY CHECKS Travel-generated earnings, employment, and tax receipts are estimated from visitor spending, rather than from industry and government data per se. Published government data on industry employment, earnings and taxable sales by business type are used to evaluate and, where necessary, refine the travel-generated estimates. 6 The initial visitor spending or sales estimates are adjusted by removing all excise tax collections by the business. Payroll-receipts ratios are calculated from the Economic Census, reported every five years by the U.S. Census bureau. Output-compensation ratios are estimated from the U.S. Bureau of Economic Analysis and other proprietary input-output models. DEAN RUNYAN ASSOCIATES PAGE 7

10 APPENDIX B TRAVEL IMPACT INDUSTRIES MATCHED TO 2007 NAICS TRAVEL IMPACT INDUSTRY Accommodation & Food Services NAICS INDUSTRIES* (code) Accommodation (721) Food Services and Drinking Places (722) Residential Property Managers (531311) Arts, Entertainment & Recreation Performing Arts, Spectator Sports (711) Museums (712) Amusement, Gambling (713) Scenic and Sightseeing Transportation (487) Miscellaneous Industries (see note**) Retail Food & Beverage Stores (445) Gasoline Stations (447) Clothing and Clothing Accessories Stores (448) Sporting Goods, Hobby, Book, and Music Stores (451) General Merchandise Stores (452) Miscellaneous Store Retailers (453) Ground Transportation Interurban and rural bus transportation (4852) Taxi and Limousine Service (4853) Charter Bus Industry (4855) Passenger Car Rental (532111) Parking Lots and Garages (812930) Notes: *Government enterprizes (e.g., park systems) are included in this classification. **Includes parts of industries in other sectors (e.g., accommodation, charter bus). A more detailed description of these industries can be found at DEAN RUNYAN ASSOCIATES PAGE 8