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Shaken, Not Deterred

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  • | 10:03 a.m. July 30, 2010
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  • Florida
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What. Economic impact of oil on the Gulf Coast.
Issue. Tourist industry and legislators take on the challenge.
Impact. Worst-case scenarios look less likely, but winter tourist season outlook shaky.
By the Numbers. Click here for more information on the decline in the sales tax base.

In coastal Northwest Florida, the normally busy summer tourist season looks more like January in July.

That's according to a recent economic study capturing that theme in the wake of April's Deepwater Horizon oil spill. Sales are off 40% and hotel occupancy rates are down to 40% in the area.

The hope for tourism-dependent businesses along the southern Gulf Coast is that it doesn't look like a typical July in January 2011.

“That would not be good,” says D.T. Minich, executive director of Visit St. Petersburg Clearwater, that area's convention and visitors bureau. “That's our fear, that typically in the summer the bulk of our business is in-state; in the winter, it's from up north — the Midwest. Their sense of geography up there is different than what Floridians' are,” observes Minich.

He echoes concerns of other south Gulf Coast hoteliers and tourism officials that too many out-of-staters don't understand that the area is 300 miles from the Deepwater Horizon well and untouched by oil or tar balls.

A July in January scenario here would be devastating, not only to beachfront hotels and resorts and the other touristy haunts along the coast, but also everything from retail stores to health care to real estate.

That's one of the key findings of Rick Harper, an economist at the University of West Florida in Pensacola.

Harper's study shows taxable sales — for tourism businesses in the three Northwest Florida coastal metro areas — peaks in the summer season at roughly $350 million per month and drops below $150 million a month in the winter.

Tourism's share of Pensacola's taxable retail sales has been as high as nearly 24%, which it reached just last summer. In Bay County, home to tourist haven Panama City Beach, it spiked to about 40% last summer while dipping below 20% last February.

But it's the oil spill-related declines in tourism sales that “cascade into other sectors of the local economy,” according to Harper. Harper's data shows that for every $1 million in lost tourism spending, real estate services lose nearly $125,000 in revenue, health-related practitioners lose $30,363, food services and drinking places lose $29,576, and so forth.

Leaving “L.A.”

Indications among beach resorts and tourism groups along the Gulf Coast from Tampa Bay southward offers a mixed bag. Although it's nothing near what panhandle tourism is experiencing, the comments foretell what could occur here.

Asked about his recent experience with occupancy rates and cancellations, Russ Kimball, general manager of the 390-room Sheraton Sand Key Resort on Clearwater Beach, says, “Yes, it has affected occupancy. It affected occupancy over the 4th of July though you wouldn't think it would.”

On the plus side, Kimball, who's also a member of the Pinellas County Tourist Development Council, claims his resort hasn't lost any business from cancellations. “But,” he says, “we had a few groups, in 2011, saying they were going to San Antonio or San Diego or something like that, and, 'we'll get you next time.'” Kimball and his colleagues can only hope those don't become “famous last words.”

Minich confirms Kimball's assessment, saying, “We've had a few small meetings cancelled for next fall and winter,” including an international volleyball tournament where players were coming from Australia. But he says they didn't want to take the chance, though the National Oceanic and Atmospheric Administration (NOAA) peg the odds of oil hitting the south Gulf Coast at just 1%-3%.

Further down the coast at the Longboat Key Club, General Manager Michael Welly says he's seen some drop-off, but not much. “We haven't lost many groups. It's all individual travelers,” says Welly.

He adds that it's mostly European travelers not making or canceling reservations, who don't know Florida's geography and lump in the lower Gulf Coast with the “Gulf Coast oil spill.” “They perceive Florida to be affected or soon to be affected,” Welly says, though only 10% of the state's beaches have been impacted — though they remain open — and less than 2% of Florida's 1,260 miles of coastline are closed to fishing.

At the Lee County Visitor and Convention Bureau, Nancy Hamilton, the group's communications director, emailed, “Local accommodations have reported 23 cancellations for the May-August period for a loss of $27,510.”

Hamilton points out that it's only what's reported, so the numbers are surely higher. Still, there's probably some offset from visitors choosing to come down the peninsula instead of going to the panhandle. “It will take a while to gather all the information to gather a true picture to what's happening in this area,” adds Hamilton.

The subject of redirected travel came up at a July lunch meeting in Sarasota where a panel including two area tourism officials, discussed oil spill related communications issues.

Elliott Falcione, president and interim director of the Bradenton Area Convention and Visitors Bureau, noted that both Sarasota and Manatee counties are seeing increased business from travelers shifting vacation plans from the panhandle.

Virginia Haley, executive director of the Sarasota Convention and Visitors Bureau confirmed that afterward, saying that tourist tax collections for Sarasota were up in May.

Haley's Communications Director, Erin Duggan, who sat on the panel, notes that Sarasota may also have gotten a nice assist from “Dr. Beach” — Florida International University Professor Stephen Leatherman — who ranked Siesta Beach the No. 2 beach in the world this spring.

July in January less likely

Going forward, however, projected sales on which tourist taxes are applied look inflated. Taxable sales reported by transient rentals statewide were down 13% from 2008 to 2009, and estimated to be flat this year at $10.1 billion. (See table.)

But that estimate by the Florida Department of Revenue, and a projection for a 3.9% gain in 2011, doesn't take into account the oil spill's economic effects, according to Renee Watters, chief of public information at the agency.

A worst-case preliminary analysis by University of Central Florida economist Sean Snaith estimates the oil spill could cost the state nearly 195,000 jobs and $10.9 billion in spending. That's worst-case because it assumes that 23 of Florida' Gulf Coast counties would lose 50% of their tourism, leisure jobs and spending.

Now with the well capped, and holding, a more likely scenario shows those counties losing 10% of that. Still, 39,000 jobs would be lost and $2.2 billion in spending.

Florida already has nearly 1.1 million unemployed and the jobless rate as of June stood at 11.4%. Recent economic indicators suggest it may rise in coming months.

Snaith calculates that tourism produces 269,000 jobs and roughly $12.4 billion in annual spending. The state tourism agency claims it's a $60.9 billion industry based on all taxable sales for tourism and recreation last year. In 2009, the state had 80.9 million visitors.

A third study, by Moody's Analytics, written by Marisa Di Natale, calculates worst-case impacts through the fourth quarter of 2011. That's compared to a baseline scenario measuring the economy absent the spill. The report, however, assumes under the worst-case scenario that the oil leak would continue through the end of 2010.

If the cap on the Deepwater Horizon well were to fail, then the biggest effects would be felt in the first quarter of 2011. And, as Di Natale notes, that's Florida's moneymaking winter tourism season.

January starts to look like July very quickly.

That's because Florida loses 45,100 jobs, $4.4 billion in personal income and $5.1 billion in gross domestic product, or about 0.9% of the state's GDP. Without the spill, the state still loses 9,200 jobs, $810 million in personal income and $480 million in GDP just due to the dragging economy.

Florida takes the biggest hit of the Gulf Coast states impacted by the spill according to Di Natale. She writes, “ ... Florida loses out the most, since more of its metro areas are directly affected by beach closures and the loss of tourism dollars.” Those metro areas, however, only include those as far south as Tampa Bay — and not Sarasota-Bradenton, Punta Gorda, Cape Coral-Fort Myers or Naples — so worst-case could possibly be worse.

As it is, all tolled, the five Gulf Coast states lose $9 billion in personal income compared to a baseline scenario of losing $1.15 billion just due to the economy.

There's still some big pluses not to be ignored, not the least of which is BP PLC's $20 billion commitment for clean-up and restitution.

Visit St. Pete-Clearwater received $1.15 million of BP's $25 million payment to the state for tourism marketing. Minich, the tourism group's director, says his group normally spend $1 million through the summer on marketing, but spent most of that in May. “Now we're able to spend it through August,” says a now more optimistic Minich.

Hamilton, at the Lee County Visitor and Convention Bureau, took the $500,000 it got from the fund and spent it partly on “fresh TV.” In the morning, she says, they'd film a commercial on the beach, and it would air that evening on ABC's World News.

And many beachfront hotels continue to fight the oily perception. For instance, the Longboat Key Club and Resort, now offers guests a “Confident Clean Beach Guarantee — with no strings attached.”


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