BRADENTON, Fla. - Already suffering the impacts of the soft economy, the complex tourism industry was the first- and hardest-hit sector by the Sept. 11 terrorist attacks, according to the Travel Industry Association of America.
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Almost $40 billion in revenues, including those from airlines, were lost within the first 100 days after Sept. 11. Some 273,000 jobs disappeared in that time, according to the U.S. Bureau of Labor Statistics.
Travel and tourism are the U.S.'s largest services export industry, its third-largest retail sales industry, and one of its largest employers.
The U.S. travel industry, which plays a key role in tourism, had revenues of more than $545 billion from domestic and international travel in 2001. Travel generated 7.8 million jobs with nearly a $166 billion payroll in the U.S., according to the TIA.
The tourism industry covers a lot of territory, including entertainment and theme park venues, hotels and other forms of lodging, air travel, retail sales, and restaurants -- all vital to the economies in California and Florida, the first and second most frequently visited states in 2001, respectively.
Although both states depend considerably on tourism, as well as the sales taxes and tourism-related taxes it generates, the credit ratings of the two states have not suffered during the last year.
California's insured general obligation debt is rated A1 by Moody's Investors Service, A-plus by Standard & Poor's, and AA by Fitch Ratings. Florida's insured GO debt is rated Aa2, AA-plus, and AA, respectively, by the agencies.
People are staying closer to home, traveling more often by car, traveling more with family, attending more reunions, and making more connections with the natural environment and America's heritage and culture.
The decline in travelers by air has impacted the Walt Disney Co. operations in Anaheim, Calif., where Walt Disney World is located, and Orlando, Fla., where Disneyland is located, although both states seem to have weathered the mega-theme parks' problems thus far.
On Aug. 26, Fitch downgraded the senior unsecured debt rating of Disney to BBB-plus from A-minus, reflecting "persistent weakness in key measures of cash-flow leverage, resulting from higher debt from the $5.2 billion Fox Family cable television network acquisition in October 2001 and the declining operating performance of Disney's businesses." Disney also opened the Walt Disney Studios in Paris on March 16.
Standard and Poor's placed Disney's A-minus long-term corporate credit rating on CreditWatch with negative implications, and Moody's placed the A3 long-term credit rating on review for possible downgrade in early August.
Last October, however, Standard & Poor's downgraded the Reedy Creek Improvement District's utility revenue bonds to A-minus from A. Reedy serves mainly Disney World. Standard & Poor's cited concerns about Disney's then-planned acquisition of Fox, a 50 million share repurchase, and the possible effects of the Sept. 11 terrorist attacks as reasons for the downgrade.
No state has been able to escape the problems the economy and Sept. 11 cast on the hotel industry, which is an integral part of tourism, according to a study released in late August by PricewaterhouseCoopers LLP.
The hotel industry has also been rocked by the sharp decline in stock values and erosion in consumer confidence, as well as the inconvenience of air travel and fears of U.S. action against Iraq.
"We do not anticipate a robust recovery of the sector until the first quarter of 2004, and factoring out inflation, even then revenue per available room will only be equal to 1996 levels," said Bjorn Hanson, an expert in PricewaterhouseCoopers' Hospitality & Leisure Practice.
Here's a look at how some regions have fared during the last year:
ARIZONA
Tourism dependent Arizona has been hard-hit by the drop-off in travel since the Sept. 11 attacks. After covering a nearly $1 billion shortfall through drastic cuts for the current budget, the Legislature is again falling short of revenues, with the total likely to rise to another $1 billion by June 30, 2003.
In addition to declining income tax revenues, Arizona is suffering a major drop in sales tax receipts amid declining tourism and business travel. The ongoing revenue shortfall led Standard & Poor's to lower the outlook on Arizona debt this summer to negative from stable.
Despite those problems, Arizona has continued to develop its tourism industry through investment in sports facilities, including plans to build a $350 million Arizona Cardinals football stadium in Glendale and new stadiums for Major League Baseball's spring training operations. The Cardinals' stadium will be financed through $250 million of revenue bonds to be sold through the Arizona Tourism and Sports Authority. Next door to the Cardinals stadium will be a new Phoenix Coyotes National Hockey League arena financed in part through $180 million of bonds issued by Glendale.
CALIFORNIA
As the most-visited state in the nation in 2001, accounting for 11.6% of the overall market, California is back in action attracting tourists and recovering from the downturn in the industry resulting from the terrorist attacks.
Although the international market was significantly down at winter sports resorts due to Sept. 11, the local markets sustained the Golden State, with tourism industry revenues increasing 5% to 6%.
A campaign to keep Californians in state succeeded.
More residents got into their vehicles and traveled throughout the state to parks, beaches, deserts, and cities for recreation and popular attractions. The state Department of Parks and Recreation reported a 9% rise in attendance at state parks, despite a decline in national parks.
The tourism industry pumps $75 billion in revenues to the state annually. Billions of dollars more are then passed along to state and local governments through taxes.
Slow to recover, however, are the hotel and restaurant industries. Revenues for restaurants are projected to grow 1.4%.
CHICAGO
In Chicago, shortly after the attacks, city, state and tourism officials initiated discount programs on hotel rooms and on some tourism attractions to lure visitors to the city.
The city depends on its convention business as a major source of tourism, and officials were relieved when no conventions were cancelled. However, the conventions did draw fewer attendees initially.
The drop was evidenced in hotel occupancy rates that plunged in September to 58%, compared to 82% in 2000. Officials with the Chicago Convention and Tourism Bureau said those numbers have rebounded, though they still fall short of rates posted last year. For example, June's occupancy rate was at 71% compared to 74% last year, and in July the rate was at 66% compared to 69% last year.
Hotel occupancy levels impacted a handful of outstanding revenue bond issues that are partially repaid by hotel tax revenues, including the $400 million of bonds issued by the Illinois Sports Facilities Authority for the renovation of Soldier Field, home of the Chicago Bears football team. City finance officials were so concerned about hotel occupancy rates in the aftermath of the attacks that they opted to capitalize interest in the Soldier Field deal that priced last fall to give rates several years to recover.
Hotel revenues also help repay bonds issued by the Metropolitan Pier and Exposition Authority, which sold $800 million of new money debt earlier this year. The authority manages McCormick Place Convention Center and Navy Pier.
NEVADA
Nevada took a double hit in its economy from both external and internal forces resulting from Sept. 11 and a fast growing populace, but Lieut. Gov. Lorraine Hunt said Nevada is resilient, and moving forward.
"By the year 2005, we will have well over 175,000 rooms in Las Vegas hotels , and we already have 126,000 in a four-mile radius," Hunt said.
Still, air travel to Nevada dropped for nearly a year, affecting the state budget along with other factors such as the reduced number of gamblers high and low rollers visiting the state.
The number of air passengers entering and departing Las Vegas in particular dropped 9% by end of the fiscal year on June 30. At the same time, operating revenue rose 1.2%, or $2.5 million, according to R. Ross Johnson, assistant director of finance.
NEW YORK CITY
Despite experiencing a drop in domestic visitors following Sept. 11, New York City welcomed slightly more domestic visitors in 2001 than in 2000. However, spending was down by almost $1 billion, according to NYC & Co., the city's private, nonprofit convention and visitors bureau.
In 2001, New York City welcomed 29.5 million domestic visitors, an increase of 0.3% over 2000. This rate of increase was slightly larger than the 0.1% growth in domestic travel nationwide.
Preliminary spending estimates from the TIA reflect a 10% drop in domestic visitor direct spending in New York City to $8.8 billion in 2001, from $9.7 billion in 2000.
As the nation's number-one international visitor destination, New York City stands to have lost a significant number of international visitors and their corresponding spending in 2001.
HAWAII
Since Sept. 11, Hawaii had experienced some lows in tourism, but that is now changing.
More visitors from the mainland are going to the Island State than ever before due to some bargain packages, according to Lloyd Unebasami, chief administrative officer for the Hawaii Tourism Authority.
But the good news is mixed.
"We say the number of visitors is over and beyond what we had in the past, but not enough to offset the decline of Japanese tourists," Unebasami said. "We have heard from people from Japan and they are still not settled as to what may happen in the U.S."
The Japanese are the big spenders when they stay in Hawaii.
Unebasami estimated that between 25,000 and 30,000 Japanese tourists were stranded on any of the Hawaiian Islands in the aftermath of the terrorist attacks on the U.S.
Yvette Shields, Rochelle Williams, and Richard Williamson contributed to this article.
