Key Takeaways from the Civitas and Tourism Economics Webinar: Navigating Economic Uncertainty and How to Prepare Your Destination

The following provides NYSTIA Data Analyst Ryan Maercklein's insight and takeaways from the Navigating Economic Uncertainty and How to Prepare Your Destination webinar presented by Civitas and Tourism Economics.

This webinar was highly informative; insights were provided regarding the intensity of the potential recession and how that could be reflected in a variety of metrics including inflation, consumer debt, GDP, unemployment, and hotel room demand. Additionally, the latter part of the presentation detailed how a destination might go about preparing and implementing risk mitigation practices. We would like to thank Civitas, as well as Tourism Economics, for the thoughtful insights and information presented during this webinar.

1. Economic Uncertainty: With the looming concern of an economic recession weighing heavily on many people’s minds, it is extremely valuable for destinations to understand how best to navigate through economic uncertainty. However, while the risk is real, it
   may be less severe than you think.
   1. Adam Sacks, President of Tourism Economics, surmises that “the travel industry is in a unique position to defy economic gravity” for a multitude of reasons and predicts only a mild recession in 2023.
   2. US households are in a position of strength.
   3. Household debt service, that is their financial obligations to pay off debt, remains lower than previous years with a significant portion of that debt locked into lower interest rates.
      1. Meanwhile, household net worth continues to follow an overall positive trend, despite coming off a peak in late 2021. This is in part due to the pandemic pressuring people to save their money.
         1. At their peak, households had saved a collective $2.4 trillion and still currently hold onto $1.5 trillion.
   4. There also continues to be a prioritization of travel as a result of pent-up demand.
      1. Consumer spending on goods has plateaued over the past year or two with their focus shifting towards spending on services.
         1. This can be seen in the expected annual travel budget which is currently 13% higher than it was at the beginning of 2022, now residing at $4,677.
   5. There remains gradual return to business travel with the momentum expected to continue.
   6. Additionally, inbound international travel is expected to recover.
      1. In 2022, US inbound travel recovered only 65% while outbound recovered 81%. With the prediction that this gap will narrow in 2023, the deficit that was created last year will likely be alleviated.
2. Risk mitigation: There are a variety of ways in which a destination could prepare itself for a time period of economic uncertainty. However, the presentation highlighted 6 key actions to take. 
   1. Review planning documents.
      1. Look at your key planning documents and reflect as to whether they are guiding you in the right direction given the current market situation.
      2. There are an additional 6 key points to think about when reviewing these documents: Is it flexible, is it relevant, have you researched other destinations, is it sustainable, is it achievable, and what is the stakeholder involvement?
   2. Sustain messaging about the importance of tourism to the economy.
      1. Continue to promote the economic importance of tourism to your local communities, governments, and organizations. Now is not the time to lessen those efforts.
   3. Explore innovation and technology for efficiency.
      1. Consider innovative data technology to gain insights into visitor behavior, preferences, and trends.
   4. Diversify revenue streams.
      1. There are both private and public sources of funding. Consider the impact on your destination should a single revenue stream take a hit.
         1. Private: Memberships, grants, event revenue, contract services, licensing.
         2. Public: Untethered allocations, tethered tax allocations, property tax increment financing, grants.
   5. Collaborate with partners and stakeholders.
      1. Partner for content creation, collaborative advertising, data sharing, and seeking feedback.
   6. Build reserves and monitoring cash flows.
      1. It’s important to take account of what you have with relation to your cash vs. assets and non-liquid assets.
      2. Develop reserves; pre-pandemic recommendations focused on 3-6 months of reserves while post-pandemic recommendations settle in closer to the 6 months to 1 year range. It is also just as important to maintain a good reserve policy to defend why you are keeping those reserves.

Once again, we would like to thank Civitas and Tourism Economics for hosting this webinar and educating our community.