Column: Local tourism industry sees quick rebound after Great Recession
Dr. Rick Harper serves as associate vice president for research and economic opportunity at the University of West Florida in Pensacola. He directs the University’s Center for Research and Economic Opportunity.
By RICK HARPER | rharper@uwf.edu
Leisure and hospitality has been the fastest growing sector in the Pensacola economy for the last several years. This can be seen both in employment growth and in increased retail sales.
From the time the post-Great Recession job market began to expand in January 2010 until it took a breather in August of 2015, our two-county metro area added 10,300 jobs in sectors other than leisure and hospitality, for a cumulative increase over 5 ½ years of 7.6 percent. Leisure and hospitality accounted for another 5,300 net new jobs over that same period, thus accounting for just over one-third of total job growth in our metro. Leisure and hospitality sector jobs expanded by a cumulative 30.5 percent, or four times the rate of other sectors in the local economy.
The quick recovery of our leisure and hospitality sector was completely predictable. After all, the health of businesses that serve our tourist trade is driven not so much by local conditions as it is by the financial health of our visitors, and their ability to enjoy a weekend or week on our beautiful beaches. The real estate boom and bust hit our state harder than other states and left Florida homeowners underwater on their mortgages, destroying wealth and bankrupting many. Because non-Floridians tended to be financially healthier than locals, spending in the visitor sector picked up first.
New visitor spending by out-of-town visitors as the recovery began drove local job growth and payrolls. This was certainly true in Pensacola for the first months of 2010. After a strong initial start to the year, the 2010 Deepwater Horizon oil spill dampened visitation and replaced visitor spending with remediation spending during the summer of 2010. After the well was capped and the remediation workers largely gone, spending and employment were slow until 2012.
Retail sales in tourism also outpaced sales in other sectors. The chart below shows retail sales growth for the nation (blue), and for Pensacola in tourism (red) and non-tourism (gray), with the annual average of 2000 set to be 100 percent. While the data are seasonally adjusted so that average July peaks and January troughs over the 15 years are taken out, it is plain to see that the seasonal pattern has changed over time, with recent years showing sharper summer peaks, as well as higher overall levels, than in previous years. Tourism is becoming a more important driver of total retail sales, and has grown more quickly than sales in non-tourism categories.
The period following hurricanes Ivan (September 2004) and Dennis (July 2005) drove non-tourism retail spending as much as 30 percent higher, as people replaced cars, trucks, appliances, carpets and homes. Tourism spending fell because of destruction of lodging inventory and did not recover until after the Recession and oil spill. Non-tourism spending fell for four straight years as hurricane repair waned, and is still below the peaks it reached more than a decade ago.
The downside of leisure and hospitality as the major jobs driver is that these jobs tend to occupy the lower rungs of the job ladder. While the problems of job growth are far preferable to the problems of job stagnation, median household incomes in tourist metro areas are lower than in areas that successfully grow high-skill jobs. Federal statistics show that median household income in Florida in 2014 (the most recent data available) was 14 percent lower than in 2006, in inflation-adjusted terms. For the nation, the drop over the same period was 5.2 percent. In Pensacola, and Florida more generally, our issue is not job quantity; it is job quality.
