Idaho’s resilient tourism sector and the increasing costs of travel

As the holidays are upon us, many look forward to traveling and recreational activities as they spend time with friends and family. Idahoans and others from across the country come to see the state’s natural beauty and famous winter sports during the holiday season. The tourism industry is crucial to Idaho’s economy, being Idaho’s third largest industry (behind agriculture and technology) as of 2021¹. Tourism is also a rapidly growing industry. In 2021, $4.8 billion dollars were spent by visitors on direct travel spending (up 12.2% from 2019) with 84% of tourism spending generated by out-of-state visitors (up 8% from 2019)¹. However, with increasing costs of transportation and other economic headwinds, travel and tourism may see some challenges this holiday season.

Industry and employment

Idaho’s tourism sector experienced disproportionate declines in employment during the pandemic as most of the industries’ work needs to be done on site and around lots of people. Travel restrictions created additional complications as potential customers could not easily travel to their desired destinations. However, Idaho’s tourism industries recovered sharply with leisure and hospitality and accommodation and food services returning to pre-pandemic levels by July 2021 with arts, entertainment and recreation breaking even in November 2021. Nationally, the industry’s recovery has been a different story; arts, entertainment, and recreation is the only industry that returned to its pre-pandemic level while accommodation and food services and leisure and hospitality are still slightly below pre-pandemic employment as of September 2023. Idaho was able to recover quickly because of the large in-migration during the pandemic in addition to much of Idaho’s recreation being outside – allowing social distancing.

Source: BLS CES Data

Cost of travel

The U.S. Travel Association publishes a travel price index that measures the cost of travel in the United States. The index is based on the same price data used to calculate the Consumer Price Index, a popular measure for inflation that tracks the change in prices for a basket of goods and services, monthly. Below is the Travel Price Index for September 2023.

Source: ustravel.org

The largest cost increases from the previous month (August 2023) were lodging at 4.2% and motor fuel at 2.2%. Year-over-year changes give us a larger picture of price trends. Lodging (8%), recreation (6.5%), alcohol away from home (6.4%), food and beverage (6%), and food away from home (6%) were all above the yearly change in travel price index (4.4%) and consumer price index (3.7%)². During the pandemic, goods drove inflation as people were stuck at home, therefore, most disposable income went to goods. Once the pandemic ended, people wanted to take those trips and experiences they had to postpone, shifting the drivers of inflation to more service-oriented spending. This shift is reflected by experience-oriented expenditures, like lodging and food and alcohol away from home, increasing in price far more than the consumer or travel price indexes.

Outlook

As of September 2023, the travel price index is higher than the consumer price index and growing larger month over month. If the trend continues, winter travel could be significantly more expensive than last year. Here are a few indicators to watch out for as we plan our winter travel and recreation this winter:

Fuel prices: Fuel prices have been on the decline in recent months but with the Israel-Hamas war in addition to the Russia-Ukraine war, energy prices are on the rise.
El Niño: Warmer weather patterns tend to bring a drier, warmer winter³. This weather pattern could reduce snowfall in Idaho, which can disrupt winter recreation, one of Idaho’s main tourist attractions.
End of COVID relief funds: Recently the remaining COVID relief programs have ended, bringing back student loan payments and ending childcare funds that will sap spending from households. With more spending going to childcare/student loans/food, less disposable income will be available for recreation and travel.
Potential recession in 2024: The Conference Board and many other economists and think tanks are predicting a short and shallow recession in 2024⁴. Recessions tend to hit the leisure and hospitality sector disproportionately hard, which could create decreased job security.

Sources