Michigan Tourism Industry Expected to Decline in 2008, MSU Experts Say

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Hoping to rebound from no growth in 2007, Michigan’s tourism industry is instead expected to decline by about 2 percent this year, according to a forecast presented at the Driving Tourism 2008 Conference in Grand Rapids.

After a review of last year’s economic, transportation and weather conditions and a summary of 2007 Michigan tourism activity, MAES researcher Sarah Nicholls and Robert Richardson, both of the Department of Community, Agriculture, Recreation and Resource Studies, gave their projections for 2008 Michigan tourism volume, prices and spending. These projections are based on discussion with a dozen of the state’s industry experts of several factors likely to influence the coming year’s tourism activity.

The team projects that the number of travelers will decrease 2 percent in 2008 compared with last year, and travelers’ spending will be flat. Unfortunately, travel prices are expected to rise 3 percent to 4 percent.

“National and state economic conditions will present a challenge for the tourism sector in the coming year,” Richardson said. “This is particularly true in Michigan, where the tourism sector seems to have slipped to a trend of slower growth.”

Unemployment rates have increased nationally and remain high in Michigan. The housing crisis has hit the state particularly hard, and the decline in housing values has been steep. Inflation-adjusted gasoline prices have risen to record levels, and food prices also have increased significantly, he noted.

The combined effect of these conditions has left residents of the state and region with a loss of personal wealth and real income. An economic recession is likely to hurt the tourism industry as households reduce overall discretionary spending.

Higher costs of travel also are likely to slow tourism activity nationally, and travel forecasts for the United States project only modest growth. Projections of slight revenue growth in the lodging sector are due mainly to higher prices for accommodations. In Michigan, though, projections have tended to be even less optimistic, Richardson added.

“In the face of deepening economic woes at the state and national levels and in spite of drier and warmer than normal weather conditions throughout the spring, summer and fall, Michigan’s tourism industry remained essentially flat in 2007,” Nicholls observed. “Key indicators of tourism activity such as traffic counts (down 1.2 percent) and Mackinac Bridge crossings (down almost 2 percent) indicate a continuation of the downward trend in tourism volume in evidence since the late 1990s, a trend likely to accelerate should recent rises in gas prices persist in the longer term.”

Despite the less than optimistic tourism predictions, there are some bright spots, Richardson noted.

He said the declining value of the dollar means that U.S. travel and products are relatively less expensive for foreign visitors, and this may entice greater numbers of Canadians and other international visitors to travel to the state. And, Michigan residents may decide to take vacations closer to home to save money.

“The ‘Pure Michigan’ advertising campaign has been expanded, and increases in state tourism promotion funding seem nearly certain,” Richardson said. “The tourism industry in Michigan continues to be resilient, and if it directs its marketing efforts toward these bright spots, the negative impacts may be mitigated.”

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