With Wyoming’s dire economic and fiscal situation casting a pall over residents, I’m glad to be able to report that there’s cause for optimism: At least one important economic sector promises to rebound in 2021.
COVID-19 hammered the vacation travel industry in 2020. The pandemic’s arrival in the late winter-early spring months couldn’t have been timed worse. With no comparable recent precedent, uncertainty and trepidation drove would-be travelers to cancel travel plans. Nobody wants to risk falling ill far from home.
Specific indicators, however, point to a pleasant and needed rebound in leisure and travel activities, and a strong Wyoming travel year in 2021.
First, although the virus is still present, vaccines are now available to allay the fear of illness while traveling. The industry identified vaccine availability as an imperative for full recovery.
Second, because so many travelers stayed close to home in 2020, there is pent-up demand that will act in the industry’s favor.
Finally, potential travelers have no doubt developed a distaste for confinement and large crowds, and no place does wide-open spaces better than Wyoming.
Both the mineral and vacation-travel industries — two of Wyoming’s largest employment sectors — shed jobs in 2020: 5,700 and 6,500 positions respectively. Market conditions beyond the sector’s control were to blame in the mineral industry. A number of factors continue to stack the deck against, at least, a short run recovery in extractives, and perhaps longer.
When negative conditions persist in one industry, policy makers and analysts naturally look to other sectors of the economy for a lift. Sectors with historically high employment numbers that also exhibit a home-state comparative advantage are the first places they turn to.
A comparative advantage exists for an industry within a state if the share of employment in that industry is higher in the state than is the case for the nation as a whole. The implication is that the more concentrated an industry is, the more likely it is producing goods or services in excess of its own needs. It is the exporting of an industry’s goods and services that results in new income and tax revenue from purchasers located outside of the state.
In Wyoming, travel industry employment as a percent of total state employment is 50% higher than is found in this sector nationally. During normal years, about 40,000 workers are employed in businesses that provide goods and services to the travel industry. Although these are not always high-paying jobs, they do provide crucial income to households that wouldn’t otherwise have it.
Employment growth in most non-mineral-sector businesses is a net-fiscal loser for Wyoming because of the limited diversification of the state’s tax system. But this Catch-22 is offset when an industry is a net exporter of goods and services, i.e. when the taxpayers reside elsewhere and don’t require the raft of government services provided to residents. Other than the mineral and travel industries, it is typical for exported goods and services in other sectors to be untaxed by Wyoming.
In the travel industry, there is a window of opportunity to recover many Wyoming jobs and also increase sales tax revenue for the state and local governments. Vacation travelers are unique in that they spend time in the state and then return to their home location for general services such as public education.
In the pre-COVID year of 2019, tourism research determined that visitors spent nearly $4 billion on Wyoming goods and services in connection with their stay, generating more than $200 million in direct tax revenue for the state. Most, but not all, of this revenue came from sales and use taxes.
As a means of comparison, $200 million in taxes paid by Wyoming travelers equates to 22% of the $900 million in total sales and use tax collected from all sources in Wyoming. The tourism sector is the single largest contributor to the Wyoming sales and use tax. It would contribute even more if there weren’t so many tax exemptions on the services travelers purchase.
Final reports of the 2020 travel season are not yet available. However, those close to the industry are suggesting an overall drop of up to 30% in spending. That translates to a $60 million drop in state and local tax revenue from the travel sector.
If the travel industry can fully recover from the low spending that characterized 2020, the fiscal benefits to the state would be at least $60 million and probably more due to price inflation. As the travel industry grows, each 10% of added spending volume produces $20 million in added revenue to the state and local governments.
In the long term, tourism has the potential to grow even more. Although capacity issues are an increasing concern in and around the national parks, there are existing historic and scenic amenities throughout the state that are often overlooked by the traveling public. Local travel associations and privately owned travel businesses are increasingly active in promoting off-the-beaten-path destinations. In addition, the Wyoming Office of Tourism is expected to increase tourism advertising and promotion activities to better compete with surrounding states. The newly enacted and timely tourism tax adopted by the Legislature in 2020 will be instrumental in funding this effort.
There are also opportunities to expand the range of visitor activities into other areas beyond the traditional tourism regions of the state. National conservation and wilderness areas within much of the Bighorn Basin in Washakie and Big Horn counties have garnered fresh attention in recent years. The Red Desert and other areas in central Wyoming have also been identified as under-utilized attractions. As neighboring states continue to grow in population and lose open spaces, new areas for outdoor recreation will become more and more attractive to vacationing visitors.