March 1, 2011

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Travel & Tourism

Utah Business Staff

March 1, 2011

Industry insiders point to encouraging signs that travel and tourism is on the rebound in Utah. With multiple new luxury properties, Utah has become the go-to place for international travelers, and co-operative marketing dollars are helping rural communities get their message to targeted audiences. We’d like to give a special thank you to Mark White, vice president of Visit Salt Lake, for moderating the discussion, and to Holland & Hart for hosting the event. PARTICIPANTS: Nathan Rafferty, Ski Utah; Brian Hollien, Morris Murdock Travel; Mike Cameron, Christopherson Business Travel; Keith Griffall, Western Leisure; Connie Marshall, Alta Ski Area; Joel Racker, Utah Valley CVB; Bill Malone, Park City Chamber: Sara Toliver, Ogden CVB; Nan Anderson, Utah Tourism Industry Coalition; Leigh von der Esch, Utah Office of Tourism; Erin Grady, Deer Valley Resort; Mark White, Visit Salt Lake; Barbara Riddle, Davis Area CVB How would you describe the current state of the tourism industry in Utah? GRIFFALL: Optimistic. RACKER: A little bit more optimistic than last year. VON DER ESCH: We’re optimistic about how we are trending compared to our competitive set. Last year, the prediction was by U.S. Travel that growth would be about 1.5 to 2 percent, and we’re trending higher. Our national parks visitations have been trending higher than some of the other states, our state parks visitation has certainly been trending higher than other states, and our international travel has been opened up extensively because of the direct flight to Paris, and we’ll be resuming the flight to Tokyo. All in all, the projection for this last year was a 4 percent increase all around. So we have a lot to be excited about for the upcoming year. WHITE: In Salt Lake County, our hotels experienced an 8 percent increase in occupancy over 2009, and we had 9 percent more leisure travelers. But although the occupancy rates are increasing, the hotel rates were actually down 5 percent. We’re seeing an increase in demand a bit; but the optimism among our hotel operators and our suppliers is not strong enough that they’re ready to raise the rates yet. So we’re going in the right direction, but we have a long way to go. MALONE: We do a snapshot looking out for six months forward in terms of what’s on the books at various times, and our latest reports are showing that our occupancy is double-digit up looking forward for the next six months compared to last year. We’re real excited about that. However, it looks like our rate’s about 8 percent below last year at that same time. RACKER: There may not be as much money brought to the bottom line, but the jobs are being created and people are being employed. And hopefully the economy, as it heats up, rates will be able to go up and it will be a more profitable business. MALONE: There’s basically a behavioral change as well that’s occurred: Our customers are shopping around. And especially in the luxury brand, which was not the case years ago. People aren’t bashful about picking up a phone and calling competitive properties and comparing rates and playing one against the other in order to get the best deal. RAFFERTY: There’s a lack of urgency, too, where they know there’s going to be a room available. They’re playing everybody against each other. As a consumer, it’s a great time to travel. RIDDLE: In Davis County we’re finding our occupancy is slightly down. But the impression is that Salt Lake’s rates have dropped and some of our business has moved south, unfortunately. However, our average daily rate has stayed consistent; in fact, we’re just ever so slightly up. New luxury properties have opened in the Park City area. How is that impacting tourism? MALONE: That may have a connection to why our rates are as competitive as they are. Probably five years ago one of our shortcomings was that we just didn’t have flagship luxury brands. We had Stein Eriksen Lodge, which has, for many years, been a great product and great partner in the community. But in the last few years with adding Waldorf, St. Regis, and now the Montage, it puts a lot of luxury product in the marketplace. Some of that obviously is competition in terms of the leisure side, but there’s also a lot of competition on the business side and the group side. VON DER ESCH: And it’s globally branding us. There’s no question these are global brands. We just received word that we’re the number one destination for luxury travel in 2011, which is a designation we haven’t gotten before. CAMERON: I represent two different perspectives in this group: one is that we represent the business travel segment as opposed to the leisure travel segment. The other is that we primarily book outbound travel rather than inbound travel. We have found that our bookings are actually up 20 percent year over year. The dollar amount is up 20 percent, the transactions are only up about 10 percent. We’re actually seeing a higher average cost per trip of about 10 percent this year compared to last year. That’s primarily because the airlines have been able to get some pricing power that the rest of the folks haven’t been able to. GRIFFALL: Foreign travel has actually been very strong. The Utah brand is extremely strong in the international markets. For example, the Amangiri Resort—there are only two in North America, and one’s in Jackson and one’s in Utah. There’s a huge luxury market in the Asian countries, and there are many people who will travel to no place other than an Aman Resort. So that says a lot about Southern Utah, particularly where they’re located, out in the middle of what we would call nowhere, but it happens to be a gorgeous part of our natural environment. Are we seeing continued positive results from the Life Elevated campaign? GRIFFALL: We are still working at breaking down long-term perceptions of travel to Utah. I’ve been in the business long enough to know that 35 years ago when we would put together a tour using the name Utah, it was a little hard to sell because people didn’t necessarily want to say to their friends, “We’re going to Utah for vacation.” They could say, “We’re going to the Grand Canyon or Zion or Bryce.” Now it’s kind of reversed. Because of this marketing we’ve done, Utah’s become sort of an upscale place to go, strangely enough. It has helped a lot, but I think the continued efforts of the Office of Tourism are imperative because we still have a long way to go to break down old-line perceptions. We talk about liquor laws all the time here, and I don’t think we have to worry about them so much at the moment, but we do have to worry about when Davis County’s convention hotel can’t get a liquor license for their club. But as far as the image of Utah, it’s really good, and it always has been in the international market, but it’s even better today. ANDERSON: And the tourism marketing performance fund has enabled partners along with the state to accomplish this. It has been extraordinary. The Office of Tourism has had increased funding now, I believe, for six years, and I don’t think there’s anyone at this table who would not be a million percent supportive of what has happened with the funding and committed to working together to keep that funding coming and showing elected officials what we’ve been able to do. TOLIVER: The marketing performance fund has been instrumental to what we’re able to do as far as our market budget is concerned because it tends to make up a pretty good portion of it. One example is two years ago we secured the Youth World Archery Championship, which was a precursor to the Archery World Cup, which is taking place for the following three years in ‘10, ‘11 and ‘12. It’s the first time a World Cup has ever been held in North America. And for us to be able to say we’re hosting it in Ogden, Utah is a pretty big deal. So we use the co-op marketing funds to target the attendees of that event and encourage some extended stay opportunities not only in Ogden but around the state. That was a great targeted audience that we could focus on with the help of those funds—bringing those folks in and making them aware of what our area has to offer, again, not only in Ogden, but Northern Utah and Southern Utah national parks as well. MARSHALL: Maybe a smaller example, Alta Ski Area and Snowbird have worked with our very small Alta Visitors Bureau, and for several years now, the Office of Tourism has worked with us on some matching dollars to target our key markets. And with the renowned accolades that Alta and Snowbird get in the ski industry, it’s enabled us to work much more closely together with them as well and some very targeted messages have been able to be given as well. It’s just a huge granting opportunity for us. We’re small players in the application process, but it’s very beneficial. RIDDLE: It’s really important for the legislature to know how important those funds are not only for the Life Elevated branding campaign, but also, based on legislation, 20 percent of that funding goes to cooperative marketing funds that help support budgets throughout the state for organizations such as ours. It’s really key in being able to take a marketing budget and doing a dollar-for-dollar match—what you’re able to actually accomplish is huge for our community throughout the state. VON DER ESCH: The system is working in terms of how the legislation created it. While 60 percent of the cooperative marketing dollars go to urban applicants, that’s by size as much as anything else because the matching funds around the state are obviously not as high. Fifty-seven percent of the applications that are approved go off the Wasatch Front. So it’s working in terms of getting the money around the state. Twenty-seven of 29 counties have received funding; the other two have not applied—Morgan and Millard. RAFFERTY: The dollars are designed to facilitate and stimulate business and to try to help businesses like ours go farther, and they do just exactly that. We apply for the maximum amount, which is $175,000, I believe. But we go to our partners. So it’s a co-op of a co-op. It really does work like it’s supposed to. It’s a great way to get Utah’s businesses to be at their very best. RIDDLE: It’s really quite a brilliant approach, and it not only helps our communities but, if you look at it from the state perspective, it’s taking a state dollar and doing a matched dollar-for-dollar approach. Are we finding that this approach gives us a more consistent branding message? VON DER ESCH: I can address it in terms of the mechanics. It is a requirement that the brand is used on the dollar-for-dollar matching applications. It’s not just that funding, though, that helps push the brand. It’s across the board all the things we’re doing. The new welcome signs certainly reinforced the Life Elevated brand. One of the things that the Office of Tourism is looking at in conjunction with the launch of the summer advertising is reaffirmation of that Utah Life Elevated brand, because you have to keep reinforcing it. GRIFFALL: Look at the city of Ogden. Ogden, to me, was a city in search of an identity. Part of the consequence of this whole thing extends to having a lot of companies—outdoor retailers—come to a city and almost give it a new identity. I hear people now talking about Ogden as kind of the outdoor center of Utah in the sense that they have a lot of companies there. But it’s those extended dollars that bring businesses here, bring jobs here, create a whole identity for a town that has plenty of history, but this new young group of people see it as an outdoor mecca. What people see now is that Utah is a natural environment that is established and well-preserved. And all of those things are an extension of a branding idea, so they give dollars to that branding, which gives a boost to tourism. But in the long run, it gives a boost to businesses of all types. MALONE: I really believe we have kind of a maturation of the brand that’s occurring right now, and it’s taking off on the public relations side and the media relations side. I see just the volume of articles and the quality of the articles, not just in tourism publications, but in the New York Times and business publications. This is what happens when you have a good program, you stick to a brand, it’s well thought out, and then you sit back and you watch it morph. That’s a big part of what we’re experiencing now, this popularity that we’re seeing—that Utah is a pretty cool place to go. If you’re from Long Island and your neighbors all go to Colorado skiing and you go to Utah skiing, you’re kind of a trendsetter now. VON DER ESCH: Without this money we would not be able to put our own commercial imbedded into that program being shot in our own state. Imagine if we had that kind of money during the Olympics, to embed some Utah commercials within the Olympic broadcast, how much further the reach would be. So that’s another aspect of the special opportunities funding which comes from the tourism market performance fund. What message would you like to share with state legislators? ANDERSON: Obviously it’s imperative that we work effectively on the Hill and with all of our local elected officials to show them, not only is our return on investment excellent, but we are moving the needle in regards to tax revenue, which is the foundational reason that the legislature looked at making this great investment. It’s an incredible economic generator. We’ve had some challenges with the downturn of the economy. We went from an $11 million fund down to $6.95 million, which is a huge challenge trying to continue the momentum in advertising and marketing when you’ve had that kind of funding decrease. And yet we are still positive. What percentage of state GDP comes from travel and tourism? And how does that compare to what it was years ago? VON DER ESCH: The important thing to look at is where does it rank within job creation in the state and the amount of money that it’s bringing in. And it’s usually six or five and climbing. And that pie continues to grow. The one thing that we haven’t talked about is how does the promotion of the outdoor recreation industry and what we have to enjoy as the Greatest Snow on Earth affect business looking at us and saying, “There’s a fantastic quality of life my employees can enjoy if I move my company or expand my company in Utah.” It’s tandem promotion of Life Elevated for the entrepreneur as well as the new generation that doesn’t want to be in a cubicle or doesn’t want to have a big office. They want the technology and ability to connect while they’re on the ski slopes, and they can do that. RAFFERTY: If you look at tourism as a stand-alone industry and the dollars that we bring in—that’s one section. Our governor and GOED have been very focused on bringing business to Utah. And there’s no better way to open people’s eyes to Utah. We talk a little bit about perceptions. There are probably a lot of great places to move your company that work in a dollars-and-cents fashion. But the lifestyle you can have here—tourism plays a big, big part in that. I’m sure people come out here to look at a new facility and they talk about real estate prices and taxes and all that stuff, but I would hope they take half a day and run up to Snowbird and take a run off the tram or go up to Park City and see some of these places. It’s not just a standalone deal, and people have to realize that business is going to thrive here because of the tourism. RACKER: Duncan Aviation made an announcement a couple years ago about a new facility at the Provo Airport. They’re based out of Michigan and wanted to open a regional facility. They really did an extensive search on what community out West could accommodate their needs. They sent out a group of people to look at education, where their spouses could work. I hosted a gentleman who was looking at quality of life. We were able to take him fly fishing, up to the Olympic Park, up through the canyons. And they said that was one of the key factors in their decision, that it wasn’t just about the jobs, because they were going to bring a corps of about 100 people from the Midwest. They were just overwhelmed with the quality of life that they could have here through the recreational opportunities. So we’re seeing it. What we have to offer definitely plays into that equation. Discuss the economic impact conventions have to the tourism industry and to the entire state. RACKER: When you bring people to conventions, you expose a very large number of people to all that’s good about Utah. In Utah Valley, we’re in the middle of building a convention center, and we are hopeful that the group and meetings business will continue to rebound and improve. Our hope with building that facility is not that we could take away business from Davis or Ogden or Salt Lake, but really to grow the pie and to take advantage of all the academics and the people in the high-tech industry in Utah County who bring conferences and conventions to Utah. GRIFFALL: Marketing efforts are dependent on the visitor to a great extent because the funding source for many of us is transit room tax. That tax actually was up this year from what was expected. We’ve had some pretty big hits, particularly visits in Salt Lake, in the last few years in terms of our budget being slashed simply because the tax dollars weren’t there. It is really significant that the taxes this year that we were able to use for marketing actually were higher than expected. And it does seem to be growing, and because of that, it allows us to go out and market, and you have to continually sell Salt Lake County, Utah, to get people to bring their meetings here. A big part of the economic recovery and growth involves travel. It means going to more meetings to sell. The meetings that we have here do a lot for these companies. Outdoor Retailers is probably a good example—we’ve seen the largest number of people ever to come to the winter show. That just reflects the optimism, but it really is sort of a cycle that we want to participate in and promote—continuing to market Utah because we’re at that point in time where businesses say, “All right. Now is the time to get out and market and see business grow.” HOLLIEN: On the meeting incentive side of our company, we do fulfillment for a lot of companies. Historically, those destinations have been out of Utah. The past year we’ve hosted some buyer events, brought them into St. Regis. We are currently working on a program with the Montage, bringing in these buyers. We had two very significant groups choose Park City as a destination over other international destinations. And the interest is markedly different when we’re offering programs to Fiji or Paris, and now Utah is in the mix. We look for opportunities to bring these decision-makers and these hosted buyers into Utah now. WHITE: Last year, 2010, we had enough convention business that, according to the Bureau of Economic and Business Research, the convention-goers spent $280 million in the community. And BEBR further determined that 25 percent of convention attendees plan on returning with nearly three family members and friends within the next couple of years for vacation. So just as leisure travel introduces people who may bring their business here, business travel leads to people who want to come back and spend their money on the leisure side. And things are certainly going in the right direction for our convention bookings. Right now we have 32 percent more convention attendees on the books for 2011 than we did in 2010. When you figure each one of those spends nearly $1,000, that’s definitely a step in the right direction. How receptive are these incentive travel planners to your message? WHITE: Not that long ago we just didn’t have the product that would appeal to the groups. And even if we did have the product, I don’t think we had the brand or the cachet to attract the groups. We may not be a mature destination, but I think we’re headed in that direction. To bring one person here who’s spending $4,000 versus someone who’s just traveling from Phoenix to Boise and stays one night at a hotel and moves on is a big development for our state. GRADY: For Deer Valley, St. Regis and the Montage are definitely bringing in new game to town. It’s actually something we’re starting to see it pick up, and it’s not necessarily this year. For ‘12 and ‘13 is when we’re really starting to see those groups starting to come back on the books. MALONE: From the Park City perspective, we’ve played in the incentive game for quite a long time and did feel a lot of pain in the initial downturn in the economy. A lot of our incentive business was financial: it was the Morgan Stanleys and the AIGs. So we took a big hit. I don’t believe our community really recognized, until that happened, the value of the incentive business. These are people walking around on the streets that are well-to-do in many cases that are being hosted and have discretionary income to spend in retail and art and a lot of things in the community. How will the newly opened St. George airport impact the state’s travel industry? HOLLIEN: The airport is going to do so much for potential group travel. When you have prop service, you basically can’t get any inventory into a destination. When you go to these regional jets, we’re speaking now of at least 70 to 100 people on a plane. You can get a group space. For the first time, you can go into St. George as opposed to taking groups into Las Vegas and trying to bus them out, which is neither convenient nor desirable. CAMERON: We, too, are excited about the Saint George airport, but I would also like to mention that the Salt Lake airport looks solid. Within the context of the Delta/Northwest merger, there was at least a moment that we all wondered how that would affect the Salt Lake International Airport as a major hub for the newly merged airline. I think that they’ve now done all of their recalibrating, and Salt Lake is a very, very important part of Delta Airlines’ future. It’s been a banner year for the skiing industry. How are the resorts faring? RAFFERTY: By all accounts, this season has been fantastic. You know, a little snow goes a long ways. We’ve had a fantastic start to the year, and you can’t not have a good ski season when you have 250 inches of snow before January 1st. Some of the resorts in the Cottonwoods are bumping up to 300 inches of snow. We surpassed most ski regions’ average annual snowfall almost by Christmas, in some cases. So a great start to the season, especially when you compare it to last year, which was a slow start and an even tougher economy. Two years ago, we had a 4 percent dip, which most businesses would kill for. Last year we had a 2 percent increase. This year, through the holiday—and this is just talking about skier days, so essentially lift tickets sold—resorts across the board are talking about a double-digit increase. People are very optimistic about Utah. It shows in the fact that hotels are popping up like the Montage. People don’t throw $400-plus million at a product unless they think they’re going to be able to sell a few rooms. You’ve got huge upgrades at Canyons Resort in Utah. So in a year when there’s almost a standstill nationwide for infrastructure improvements, Canyons is moving ahead with millions in upgrades. Eagle Point, Utah’s 14th resort, reopened down in Southern Utah, another bright star for rural Utah. What challenges do you see coming down the road? MALONE: We do have a trend in terms of the number of airline seats having declined over the last several years coming in while some of our competitive markets have increased in the number of seats. We need more seats coming in if we’re going to grow the pie here in the future. ANDERSON: Putting on a rural and Southern Utah hat, a big challenge would be infrastructure, especially in some of the smaller areas. I’m talking 30 years from now. Water, roads, search and rescue, all those types of things. We need to be cognizant of the many aspects of tourism and the other ancillary industries that need to help support us in our great effort. GRIFFALL: There are some immediate concerns, one of them being the price of fuel. Travel in a state like Utah—whether it be by motor coach, car or airplane—the price of fuel is going to affect all of us. I believe the airlines said if fuel goes above $101, it won’t be profitable. And right now, people are not real inclined to just get on a plane to go somewhere unless they have to, and that is an issue that needs be addressed long term, particularly in a market like ours that depends on that airline. CAMERON: The sixty-four-million-dollar question is what the national economy is going to look like in 2011. Unfortunately, none of us have a crystal ball. But all of our fortunes are tightly connected to that question. Business travel tends to be a bit of a leading economic indicator, because as CEOs and business owners have more optimism about their future, they will invest in travel, which creates marketing and business activity for the future. And we’re certainly seeing that on our side. HOLLIEN: The U.S. Travel Association just commissioned a survey they completed in September. Travelers were asked, “As your personal finances improve, what do you want to spend your discretionary dollars on?” The number one answer was travel. So there is a huge demand. Here’s just a little indicator. We have our 15th annual travel expo coming up. We have 30 percent more suppliers and venders signed up for this year’s show. There’s an indication that our suppliers feel that their bookings are improving. They’re willing to come and spend money to travel—most of these folks are traveling from outside of the state to attend the show. We expect to have over 5,000 people come through the two-day event, and all indications are that this will be our biggest show ever. We’re absolutely tied to the economy, but when that tide turns, we’ll see a huge increase in leisure travel and discretional spending. We feel like we can expect a 5 to 7 percent overall increase in sales on the leisure side.
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