With Wyoming’s dire economic and fiscal situation weighing on residents, I’m happy to report there is cause for optimism that at least one major economic sector promises to rebound in 2021.
COVID-19 has hammered the vacation travel industry in 2020. The onset of the pandemic in late winter and early spring could not have been worse. With no recent comparable precedent, uncertainty and apprehension have prompted would-be travelers to cancel their travel plans. No one wants to risk getting sick away from home.
First, although the virus is still present, vaccines are now available to allay fear of illness while traveling. The industry has identified the availability of vaccines as an imperative for a full recovery.
Second, because so many travelers have stayed close to home in 2020, there is pent-up demand that will work in favor of the industry.
Finally, would-be travelers have undoubtedly developed a distaste for confinement and large crowds, and no place does the great outdoors better than Wyoming.
The minerals and vacation travel industries – two of Wyoming’s largest employment sectors – lost jobs in 2020: 5,700 and 6,500 respectively. Market conditions beyond the control of the industry were to blame in the mineral industry. A number of factors continue to hamper, at least, a short-term recovery of the extractive industries, and perhaps longer.
When negative conditions persist in an industry, policymakers and analysts naturally look to other sectors of the economy for a boost. Sectors with historically high employment figures that also have a comparative advantage at the home state level are the first places they turn.
A comparative advantage exists for an industry within a state if the share of employment in that industry is higher in the state than it is for the nation as a whole. The implication is that the more concentrated an industry, the more likely it is to produce goods or services beyond its own needs. It is the export of an industry’s goods and services that translates into new revenue and tax revenues from out-of-state buyers.
In Wyoming, employment in the travel industry as a percentage of total state employment is 50% higher than in this industry nationally. In normal years, approximately 40,000 workers are employed in companies that provide goods and services to the travel industry. While these are not always well-paying jobs, they provide essential income to households that would not otherwise have it.
Employment growth in most non-sector companies net tax loser for Wyoming due to the limited diversification of the state tax system. But this Catch-22 is offset when an industry is a net exporter of goods and services, that is, when taxpayers reside elsewhere and do not need all of the government services provided to residents. Besides the minerals and travel industries, it is common for goods and services exported to other sectors not to be taxed by Wyoming.
In the travel industry, there is a window of opportunity to reclaim many jobs in Wyoming and also increase tax revenues for state and local governments. Vacationers are unique in that they spend time in the state and then return home for general services such as public education.
In the pre-COVID year of 2019, tourism research determined that visitors spent nearly $ 4 billion on Wyoming goods and services as part of their stay, generating more than $ 200 million direct tax revenue for the state. Most, but not all, of this revenue came from sales and use taxes.
By comparison, $ 200 million in taxes paid by Wyoming travelers is equivalent to 22% of the $ 900 million in total sales and use taxes collected from all sources in Wyoming. The tourism industry is the largest contributor to Wyoming’s sales and use tax. It would help even more if there weren’t so many tax exemptions on services purchased by travelers.
Final reports for the 2020 travel season are not yet available. However, those close to the industry suggest an overall drop in spending of up to 30%. This translates into a $ 60 million drop in national and local tax revenue from the travel industry.
If the travel industry can fully recover from the low spending that characterized 2020, the tax benefits for the state would be at least $ 60 million and likely more due to price inflation. As the travel industry grows, every 10% of the additional spending volume produces $ 20 million in additional revenue for state and local governments.
In the long term, tourism has the potential to grow even more. While capacity issues are a growing concern in and around national parks, there are historic and scenic amenities throughout the state that are often overlooked by the traveling public. Local travel associations and private travel companies are increasingly active in promoting off-the-beaten-path destinations. In addition, the Wyoming Tourism Board is expected to increase tourism advertising and promotion activities to better compete with neighboring states. The newly enacted tourism tax passed by the Legislative Assembly in 2020 will be instrumental in funding this effort.
There are also opportunities to expand the range of visitor activities in other areas beyond the traditional tourist regions of the state. National Conservation and Wilderness Areas in much of the Bighorn Basin in Washakie and Big Horn counties have received new attention in recent years. The Red Desert and other areas of central Wyoming have also been identified as underutilized attractions. As neighboring states continue to grow in population and lose open space, new outdoor recreation areas will become increasingly attractive to vacationing visitors.