The Real Story Behind Gas Prices and Other Travel Industry Numbers

Quit Griping about Gas Prices

The current price of gasoline is actually less now than in 1980 when adjusted for inflation (Hargreaves, 2006).

"Not only is the recent price per gallon lower in real terms than the high hit in 1980, the recent price also represents a lower percentage

of the average worker's income. Nationwide, gas recently averaged around $2.60 a gallon — the inflation-adjusted high in 1980 was around $3.15. Moreover, in 1980, the average American had to work 105 minutes to buy enough gas to drive the average car 100 miles," according to David Wyss, chief economist at Standard & Poor's. "By 2006, the average American needed to work only 52 minutes, thanks in part to better fuel efficiency but mostly due to higher wages."

Gas prices and the effect on travel has been the most frequently asked question at the Institute for Tourism and Recreation Research (ITRR) for the past two years. Our reply is always that Americans have not hit their threshold on the price they are willing to pay for gasoline. We are still traveling and will continue to do so. Only when a shortage occurs, will we see a decrease in travel-related activities. However, if the price increase continues as seen in the past three years (Figure 1), America may have something to gripe about.

In terms of nonresident spending in Montana, higher gas prices reflect a larger portion of the average daily expenditures than in past years (Table 1). In 2002, only 21 percent of nonresidents' daily expenditures were on gasoline and oil. Today, that has risen to 28 percent. It is also the one purchase that nearly all nonresidents incur while visiting the state.

Interestingly, as gas prices climb, indicators within Montana';s travel industry do not show a negative correlation such as higher gas prices and slower travel industry growth. In fact, the opposite appears to be true. As gas prices go up, the travel industry continues to grow.

Growth in Montana's Travel Industry

Montana's travel industry has been on a growth projection for years. Looking at just the past 10 years, even though minor fluctuations have occurred, the overall trend has been continual growth. In 1995, Montana's nonresident travel industry contributed 6.4 percent of the state's total employment and grew to 7.5 percent of total employment in 2005. Ten-year trends show increases in nonresident visitors (17 percent increase, Figure 2) and nonresident expenditures (50 percent increase, Figure 3), as well as travel-generated personal income (128 percent increase) and travel-generated employment (41 percent increase). Other trends show increases in lodging demand, employment, and revenues; Amtrak deboardings; airline deboardings; food service employment and revenues; and arts, entertainment and recreation services employment, income and revenues (Grau, Dubois, & Nickerson 2006). The industry is experiencing continual growth and is contributing jobs, revenues, and taxes to Montana's economy.

Comparing 2006 to 2005, growth occurred in virtually all travel indicators within the state. Estimates show nonresident visitor numbers growing 2.5 percent from 2005 to 2006. Recreational visits to Glacier and Yellowstone National Parks grew 2 percent and 1 percent, respectively (Figure 4). Not surprisingly, a good snow year (following a bad snow year), showed a 30 percent increase in skier visits in the 2005-06 ski season (Figure 5). The number of motel rooms sold in the state increased 4.5 percent over 2005 (Figure 6). The only indicator down for 2006 was airport deboardings at 2.8 percent (Figure 7). This decrease represents the airline industry changes which brought smaller jets to many Montana airports and resulted in decreases in passenger deboardings. As shown in Table 2, the Missoula and Billings airports were the only ones in the state that showed an increase in deboardings in 2006.

Travel Numbers by Geography

Nonresident dollars distributed throughout Montana show the geographic concentration of tourism in the state. Yellowstone and Glacier Country travel regions receive nearly 60 percent of all nonresident travel dollars (Figure 8). Vacationers outspend all other travel types at $183.37/day — $38 more than visitors here for business, $44 more than those visiting friends/relatives, $87 more than those passing through (Grau 2006). Additionally, 73 percent of vacationer nights are spent in the two travel regions: Yellowstone region, 39 percent of all nights and Glacier region, 34 percent of all nights (Oschell & Nickerson 2006).

Geographically, vacationers arrive in the state on nearly every highway entering Montana. However, the highest percent of vacationers arrive on Highway 20 coming up from Idaho toward West Yellowstone (12 percent), or into West Yellowstone or Gardiner from Yellowstone National Park (10 percent each), or from the west on Interstate 90 (10 percent). Only 13 percent of vacationers fly directly into Montana even though a full 30 percent fly on a portion of their trip.

2007 Outlook

According to Suzanne Cook, Travel Industry Association (2006), the United States should experience a 2 percent growth in domestic travel in 2007. Respondents to the ITRR Outlook Survey show a positive view for tourism in 2007 as well. A full 64 percent of tourism industry businesses expect an increase over 2005, while 31 percent expect it to remain the same. It appears that Montana's travel industry will continue in a slow but steady growth of 2 percent in 2007.

References

Cook, S. (2006). Outlook for U.S. Travel and Tourism, Presentation at the Travel Industry Marketing Outlook Forum, Oct. 13, 2006.

Energy Information Administration, (2006). http:// tonto.eia.doe.gov/dnav/pet/hist/d120440302A.htm.

Grau, K., Dubois, M., & Nickerson, N.P. (2006). The Economic Review of the Travel Industry in Montana: 2006 Biennial Edition, Institute for Tourism and Recreation Research, The University- of Montana: Missoula, MT.

Grau, K. (2006). 2005 Montana Nonresident Expenditure Profdes, www.itrr.umt.edu/nonres/05NonresExpProfile.pdf.

Hargreaves, S. (2006). Quit Griping about Gas Prices. CNNMoney.com.

Oschell, C. and Nickerson, N. (2006). Niche News: Glacier Country Traveler Characteristics, www.itrr.umt.edu/NicheNews06/ GlacierCountryChar.pdf.

Oschell, C. and Nickerson, N. (2006). Niche News: Yellowstone Country Traveler Characteristics, www.itrr.umt.edu/NicheNews06/ YellowstoneCountryChar.pdf.

Norma P. Nickerson is director of The University of Montana's Institute for Tourism and Recreation Research. Melissa Dubois is ITRR's program assistant and Web coordinator.

Table 1
Nonresident Average Daily Group Expenditure, 2005

                            Average
                             Daily
                              per
                          group (^) *
                            (group      Allocation       Total
                            size =          by        Expenditures
                             2.45)       Category          **

Gasoline, Oil               $39.91         28%         $773,300,000
Restaurant, Bar             $30.66         21%         $586,400,000
Retail Sales                $22.80         16%         $433,700,000
Hotel, B&B, etc.            $13.61          9%         $257,800,000
Groceries, Snacks           $12.07          8%         $232,900,000
Auto Rental and Repairs      $6.94          5%         $129,400,000
Outfitter, Guide             $6.21          4%         $118,700,000
Transportation Fares         $3.16          2%          $55,200,000
Licenses, Entrance Fees      $2.80          2%          $56,300,000
Misc. Services               $2.22          1%          $39,700,000
Campground, RV Park          $2.05          2%          $44,900,000
Gambling                     $1.52          1%          $27,400,000
Total                       $143.95        100%      $2,755,700,000

(^) Reflects average expenditure distribution over all visitor groups,
regardless of how many actual groups spent money in any particular
category.

* Based on total year expenditures.

** Based on totaled quarterly expenditures.

Source: Institute for Tourism and Recreation Research,
The University of Montana- Missoula.

Table 2
Percent Change in
Airport Deboardings by
City, 2005-2006

                   Change
                    from
                    2005

Statewide            2.8%
Missoula             5.0%
Billings             0.2%
Bozeman             -6.2%
Helena              -6.3%
Great Falls         -6.6%
Kalispell           -7.2%
Butte              -12.7%
West Yellowstone   -15.7%

Source: Institute for Tourism and
Recreation Research, The University
of Montana--Missoula.