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Arizona’s Travel Industry is a Driving Force in the State's Economy

July 11, 2006

(602) 364-3697

Arizona’s Travel Industry is a Driving Force in the State’s Economy
New Economic Impact Study compares travel to other industries in the state

Arizona’s travel industry is thriving and Arizona residents are reaping the benefits, as the industry continues to bring prosperity to every county by providing jobs and generating more business taxes than any other export industry in the state, according to the Arizona Travel Impacts study released today by the Arizona Office of Tourism (AOT).

The Arizona Travel Impacts study provides the first-ever, full-scale picture of the economic impact of travel in Arizona. By looking at an eight-year trend of direct spending, jobs and taxes generated by travel, AOT is able to have a complete understanding of the true and significant impact that this industry has on the State of Arizona. In addition, the Arizona Travel Impacts study includes county level information, giving further weight to the importance of travel in Arizona’s rural counties.

In looking at an overall snapshot of the travel industry in Arizona, this study paints a robust picture of the industry and how it has changed over time. In 2005, travel was a $17.5 billion industry in Arizona, and this direct travel spending generated 168,100 jobs with earnings of $4.5 billion and $2.1 billion in state, local and federal tax revenue. These numbers have been on the rise since 2002, demonstrating a strong and resilient industry with tremendous growth potential.

One of the most effective ways to measure the impact of the travel industry is to stack it up against other industries that are considered vital to Arizona’s economic success. The Gross State Product (GSP) for the travel industry, which is the sum of earnings, indirect business taxes and other operating surplus, amounted to $6.4 billion in 2005, which is 3 percent of the total Arizona GSP. The travel industry generates a high proportion of tax revenue in relation to its GSP, with indirect business taxes comprising 14 percent of the travel industry GSP. The comparable figure for the other four export industries (aerospace, micro-electronics manufacturing, agriculture and food production and mining) is two percent.

In contrast to other industries, the taxes generated by the travel industry are imposed on visitors rather than residents, as about 80 percent of visitor spending in Arizona is made by international travelers and residents of other states. By comparison, California and Texas each only receive 50 percent of their visitor spending from out-of-state and international travelers, meaning that Arizona has more new money flowing into the economy. In addition, the 3 percent of Arizona’s GSP that can be attributed to the travel industry is significantly higher than the U.S. average of 2.6 percent, showing that the travel industry is relatively more important to the Arizona economy than to the U.S. as a whole.

One of the other key components of the Arizona Travel Impacts study is the analysis of travel impacts on a county level. Arizona is comprised of two populous, urban counties (Maricopa and Pima) and 13 counties with smaller, more rural populations. Although the urban areas often have a highly developed and sophisticated travel industry infrastructure, it often in the less urbanized areas of the state where the economic significance of travel and tourism is relatively more important. In fact, travel spending and earnings are up in every Arizona county over the last eight years, showing a trend of growth and vitality throughout the entire state.

More than three-fourths of all travel generated earnings occur within Maricopa and Pima counties, but as a group, the less urbanized counties in the state actually have a higher proportion of travel-generated earnings in relation to total earnings. About 3 percent of all earnings in Maricopa and Pima counties are travel-generated, while the proportion is more than 5 percent in all other Arizona counties. In addition, tax revenues generated by the travel industry are relatively more important for the non-urban areas of the state than for the more urbanized areas of greater Phoenix and Tucson. For example, the percent of travel-generated taxes in Santa Cruz County is 30 percent and Coconino County is nearly 30 percent, as compared to less than 10 percent in Maricopa County.

“Travel is a rapidly maturing industry and the Arizona Travel Impacts study gives AOT the tools to keep pace with the industry and measure its importance in more precise ways,” said AOT Director Margie A. Emmermann. “The ability to look at trends over the last eight years and to assess county level data offers a never before seen picture of how travel is a cornerstone of Arizona’s economy.”

The Arizona Travel Impacts study was conducted by Dean Runyan Associates using their proprietary Regional Travel Impact Model (RTIM). The RTIM was developed specifically for the constantly evolving travel industry and analyzes travel impacts on a state, regional and local level to provide a precise and in-depth analysis of the industry’s role in an overall economic picture. A full copy of the Arizona Travel Impacts study can be found on www.azot.gov.

Created as an executive agency in 1975, the Arizona Office of Tourism is charged with enhancing the state economy and the quality of life for all Arizonans by expanding travel activity and increasing related revenues through tourism promotion and development. AOT works to serve the Grand Canyon State’s travel industry and related businesses, the traveling public, and the taxpayers of Arizona.

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