While we don’t have all the data to estimate the performance of Michigan’s tourism industry for the summer of 2003, what we see in the data that are available and what we are hearing from other industry observers is that tourism in the summer of 2003 was about the same as last year.  The number of Michigan tourists was at best up a couple of percent but tourists’ spending was probably down as much as five percent.  Less than ideal weather conditions, the weak economy, reduced promotion spending, and relatively high gasoline prices likely contributed to the lackluster performance of Michigan’s tourism industry during the peak summer tourism season this year.
 
Looking back over the past three summers, the pattern of tourist volume increasing but their spending decreasing, has been a consistent trend.  This is the exact opposite of what we have observed in our industry tracking data since the Tourism Resource Center was established in 1985.  Spending growth, in part due to rising prices, has increased faster than growth in the number of Michigan tourists.  One might logically ascribe this trend reverse to the industry holding prices down, which has been true across much of the industry especially the lodging sector.  But, I’ve come to think that there is more to this story since businesses would increase prices if they could and tourists could certainly have spent more on their Michigan trips than they did.  So, I have come to ask:  Where have all of the big spenders gone?
           
Over the past few days, several articles in the business news media have shed some light on where Michigan’s “High Roller” tourists may have gone.  A prerequisite for being a big spender is having money to spend, in particular what economists refer to as high disposable income.  Four groups of tourists come to mind as meeting this prerequisite: seniors (high disposable income even though their gross income may not be high), small business owners, employees in the manufacturing industry, and business travelers.  Some highlights from what I have been reading about each of these groups follows. 
 
SENIORS–There are more and more of them, and they like to travel and do travel more frequently.  But, many of them are earning less on their interest-bearing investments (e.g., money market and CDs) and have seen the value of their stock investments plummet.  Things have gotten so bad that some have been forced out of retirement or have delayed their retirement because of the poor performance of their retirement account investments.

SMALL BUSINESS OWNERS – The U.S. economy has generally provided opportunities for the risk takers among us to open a business and earn more than the risk adverse who elect to work for others.  However, in some sectors, opportunities for operating a small profitable business are disappearing.  Few retailers can compete successfully with the “Wal-Marketing of America.”  Small manufacturing firms, such as suppliers of auto components, have seen profit margins erode as their buyers, facing global competition, increasingly seek higher quality and lower prices from suppliers.  The weak economy has, of course, hurt small business profits, but Wal-Mart and imports from China aren’t going away when the US economy rebounds.   

HIGH PAYING MANUFACTURING JOBS – The U.S. economy has lost 2.7 million manufacturing jobs (The New York Times, 9/13/03) over the past three years.  States like Pennsylvania, Michigan, Ohio, Illinois and Missouri have been especially hard hit by their loss in manufacturing jobs.  Unfortunately, these are the very states from which Michigan draws most of its tourists.  There is no shortage of manufactured goods to buy in America, so who is making all the things we are buying?  Much of it is being made elsewhere (a.k.a. China), and the productivity of our own factories has grown rapidly.  Despite ample political rhetoric to the contrary, the decline in numbers of high paying manufacturing jobs in Michigan’s prime tourist market area is not going away, even if sustainable long term economic growth returns to Michigan and the U.S.            

BUSINESS TRAVEL – Business travel spending has waxed and waned in concert with the ups and downs of the economy.  There is recent evidence that business investment and travel are finally coming back in response to rising business profits.  But, there is also evidence that spending on business travel will not expand as rapidly as it has in past economic recoveries because businesses have learned to substitute new technology for travel during this economic recovery, and corporate travel offices are exhorting business travelers to limit their spending on travel.  Travel providers ranging from airlines to hotels have found that their ability to extract premium prices from corporate travelers has severely eroded, and their pricing power erosion is likely to be long lasting.
 
With the exception of the seniors’ market, these four groups of big travel spenders are unlikely to fuel major future increases in tourists’ expenditures in Michigan.  So, what might be done to stimulate tourist spending?
 
- First, there is the option of building volume to offset the reductions in per visitor spending.  This could be accomplished by increasing investments in promotion and/or enhancing the Michigan tourist product offering (e.g., better faculties and service).
 
- Second, we could seek new geographic markets, especially regions not as hard hit by the manufacturing industry’s decline. 
 
- Third, we could work to extend the season.  The school calendar issue is relevant here, but past Labor Day school opening is but one of many options that should be investigated. 
 
- Fourth, we should seek new market niches—new product, new customers.  Across most of northern Michigan, the tourist visitor base is predominately Caucasian.  This region needs to devise effective strategies to attract other more rapidly expanding segments of the population. 
 
- Finally, new categories of big spender prospects will emerge as the economy evolves.  These need to be identified along with their needs and preferences.  Once this information is available, appropriate product will need to be developed and effectively promoted.
           
None of these suggestions for reversing the erosion in Michigan tourists’ expenditures will be simple to implement.  Yet, if we do nothing, and hope that economic recovery will solve the problem, it is likely that the recent declining trend in per capita tourist spending will continue.