ON THE COVER North Coast Journal Weekly

The tourism myth: Visitors' impact on local economy overblown


With MEMORIAL DAY JUST A FEW away, North Coast business owners are looking forward to the seasonal jump in sales that arrives with the tourist season.

Gary Cortopassi, owner of Harbor Lanes in Eureka, makes a point of welcoming tourists. "Whenever we see a strange face, we introduce ourselves and ask where they're from," said Cortopassi. He estimates that about 500 tourists visit his bowling alley annually, spending $10 to $15 each.

According to the California Tourism Division, Cortopassi could do a lot better with the tourist trade. The agency says that visitors to Humboldt County spend more than $50 million annually on recreation, which includes bowling.

"How much?" Cortopassi asked when told of the estimate. "Fifty million? Come on. I want to know what those guys have been smoking."

Cortopassi's incredulity is well-founded.

By comparing the Tourism Division's estimates with data from state and local agencies -- and applying the insights of local business owners -- a North Coast Journal investigation reveals that the state is overestimating travelers' spending by as much as 500 percent.

At least one local business leader has doubted the state's numbers for some time. "This has concerned me," said Charlotte McDonald, director of the Old Town/Downtown business group Eureka Main Street. "There's definitely a value to tourism, but I think it's been weighted way too highly" by the state.

But in most quarters, the numbers seem to have been accepted as gospel since they were first generated in the late 1980s. They've been reported annually by the Humboldt County Convention and Visitors Bureau, cited in countless media reports and published in economic profiles of the county.

[below left, Carson Mansion in Eureka]


Carson MansionSo what? Why should we care if the state gives our tourism economy some extra weight?

While many government statistics have little impact on our lives, these numbers matter to anyone who cares about Humboldt County's future. If they are indeed as inflated as this investigation indicates, then they create a false sense of optimism about the potential for tourism to compensate for declining natural-resource industries.

They also offer a profoundly inaccurate yardstick for local governments and agencies to measure tourism's impacts in sales taxes and other factors. And they can mislead people who are starting a new business or deciding whether to pursue a career in a visitor-serving field.

"Tourism is an important component of Humboldt County's economic development; consequently it is important that we have the right numbers from which we can gauge how well we're performing in attracting tourists and producing income for local residents," said Steven Hackett, professor of economics at Humboldt State University.

Don Leonard, head of the Convention and Visitors Bureau, said the state "made a substantial downward adjustment" a few years ago in the way it estimated tourist spending, and that he felt the current data was accurate. "I have a lot of reason to believe these figures," he said.

Of course, the bureau is in the business of promoting tourism; Leonard is hardly an unbiased observer. On the other hand, Leonard has every reason to trust the figures since they come from what should be a reliable source.

But the Journal's investigation shows that there is an enormous gap between the state's estimates and the reality of Humboldt County's tourism economy.


The spending figures heard most often are the estimates for total visitor spending, most recently: $271 million in 1999; $285 million in 2000; and $291 million in 2001.

Such big numbers are hard to argue with. Who's to say tourists don't spend money in such sums? There are, after all, hundreds of thousands of travelers coming through the county annually, patronizing hundreds of establishments from antique shops to the zoo.

But when the estimates for total spending are broken into their parts -- spending by type of business -- questions immediately come up.

The Tourism Division says that visitors to Humboldt County consumed $80 million worth of food and drink in restaurants in 2001.

But the state Board of Equalization (BOE) -- the agency that collects sales taxes -- reported that Humboldt County's 335 restaurants took in just over $105 million in that year. Adding 15 percent for tips (not subject to sales tax), total spending in restaurants came to about $120 million.

Elk in field, trees and red schoolhouse in background[Right: Roosevelt Elk near
Redwood Park on Highway 101]

It does not take a keen observer of the local restaurant scene to know that tourists do not account for eight of 12 dining customers in the county -- not even in August.

Restaurant owners in Old Town who were interviewed for this story estimated their annual revenue from tourists at five to 10 percent of the total. Old Town draws more tourists than most of the county's commercial districts, but even if one attributes 10 percent of county-wide restaurant sales in 2001 to tourists, they would have spent $12 million -- not even close to $80 million.

Sales tax reports also challenge the state's estimate of what visitors spent in 2001 on souvenirs, gifts, artwork, camping gear and other non-food items: $60 million.

According to BOE reports, sales of jewelry, sporting goods, novelties, art, gifts, books, musical instruments, cameras and many other goods sold in "specialty retail" shops came to $107 million in 2001.

Could tourists have been responsible for more than half of specialty retail sales? In areas where summer tourist traffic is heavy in relation to the year-round population, perhaps.

In Ferndale, one Main Street retailer, Barbara Garbutt of Itsy Bitsy Quilt Shop, estimated her tourist trade at 30 to 40 percent; Chris Boynton of Abraxas, which sells jewelry, hats and accessories, figured visitors account for at least half of her business.

But in most of the county, visitors probably accounted for a much lower percentage of specialty-good shoppers. The owners of two outdoor gear shops in Arcata -- Larry Buwalda of Adventure's Edge and Vince Smith of Life Cycle -- said their sales to tourists amount to less than 5 percent annually. (They both reach out to tourists with ads in the annual Humboldt Visitor magazine.)

Stretching the imagination to assume that tourists bought 10 percent of the goods sold by specialty retail shops in Humboldt County in 2001, that would mean they spent $10.7 million -- not $60 million.

For goods and services that aren't subject to sales tax, such as recreation and groceries, there is no tally of business revenues to compare the state's figures to.

[Below left: Rafting on the Trinity River]

Bigfoot Rafting Company raft holding 7 people, on the riverBut Cortopassi isn't the only business owner to question DRA's estimate of recreation spending -- $54 million in 2001. "I've always scratched my head over those numbers," said Marc Rowley, owner of Bigfoot Rafting.

Observers of the local recreation industry believe that river trips are the largest fee-based activity in the county. (While much of the river action happens in Trinity County, most of the companies are based in Humboldt.)

Rowley estimates that Bigfoot and all the other river-guiding outfits working the Trinity River make a combined total of about $1 million per year in gross revenue-- some portion of which comes from locals. "Eighty percent, plus, of [Bigfoot Rafting's] business is from the classic traveling tourist, [but] I'd say we're the highest in the industry," he said. "A lot of the other companies really go after the locals."

The North Coast's signature form of recreation -- gazing at and strolling among the redwoods -- is available free or at very low cost. The national and state parks collected about $800,000 in parking and day-use fees in 2001, according to state reports.

Like river rafting, a chunk of the park fees were paid by North Coast residents. But even attributing all of the estimated $1.8 million spent on river trips and park visits to tourists, that would leave another $52 million to account for.

Many travelers golf, and Don Harling of Beau Pre Golf Course estimates that tourists spend about $50,000 a year at his McKinleyville course. But even if the handful of other local courses took in twice that amount from visitors in 2001, that would still mean the state's $54 million estimate was way, way out of bounds.

There are no amusement parks or large commercial attractions here -- the closest thing, Trees of Mystery, is across the county line in Del Norte -- so it seems unlikely that visitors spend even $5 million a year on recreation, let alone $54 million.


How could the state's figures be so far off?

The answer lies in something called the Regional Travel Impact Model (RTIM) developed by Dean Runyan Associates (DRA), a Portland, Ore., consulting firm that is retained by California's Tourism Division to make county-by-county and state-wide estimates of how much tourists spend annually. DRA performs similar services for Oregon, Washington and four other western states.

DRA used surveys of travelers to develop RTIM as a predictor of what travelers spend. The key criteria is what type of lodging they use. For example, a person staying in a public campground will tend to spend less in restaurants and shops than someone staying in a motel or B&B.

DRA estimates how many people visited each California county annually -- and what kind of establishment, including private homes, they stayed in -- based on national surveys conducted by D. K. Shifflet & Associates of Falls Church, Va.

In reviewing material on DRA's website (www.deanrunyan.com) and interviewing company President Dean Runyan and his California Project Manager Bill Klein, it appears that RTIM runs afoul of the facts on the ground in Humboldt County in several important ways.


DRA assumes that visitors spend the same kind of money dining, shopping and amusing themselves here as they do in Napa, San Francisco, Monterey, Santa Barbara, Los Angeles, San Diego and other California destination areas.

Runyan denied this, saying that DRA discounts its visitor spending estimates for rural areas. "People spend more in San Francisco than they do in Humboldt County," he said. But DRA's estimates clearly show visitors spending in virtually the same amounts and patterns here as they do statewide.

Motel owners and tourism specialists in Humboldt County have said for years that the North Coast's tourism economy struggles because most visitors spend just one night and head on down the road.

Those who come for the music festivals or Godwit Days spend more time and money, but they are not typical. There are probably far more travelers leaving town with just a tank of gas and a quick breakfast than there are those who stick around and spend several hundred dollars a day in shops, restaurants and elsewhere.

But in DRA's model, the average North Coast tourist is a very big spender.


DRA's model finds many travelers visiting Humboldt County without spending the night. Day-trippers, the company estimated, spent $67 million on gas, food, restaurants, shopping and recreation here in 2001.

With the closest metropolitan area -- Redding -- a three-hour drive away, it seems highly improbable that large numbers of free spending day-trippers come to Humboldt County.


"These days ... people travel in part to do retail," Runyan told me, in defense of his estimate that tourists spent $60 million shopping here in 2001. "[In Portland] people come from Washington to make major purchases because there's no sales tax in Oregon.

"The same thing will happen in Spokane [Washington]," he said. "Rural visitors will come in and they're not buying stuff in gift shops. They're going to WalMart and loading up ... They're buying washing machines, tires for their cars."

It goes without saying that Runyan is not very familiar with Humboldt County, where there is no WalMart, and where some residents leave the county to make major purchases because of the relatively narrow selection of large retailers.

In studying the local retail scene, Bay Area Economics estimated in 1999 that Humboldt County residents spend more than $50 million per year outside the county on clothing, furniture, appliances, cars and tires. It is difficult to imagine visitors traveling to Humboldt County to make large purchases of things that are more available where they live.

[Below right: South of Klamath along Highway 101]

Tour-thru tree with car emergingMYSTERY LODGING DOLLARS

What travelers spent on accommodations should be easy to get right because private campgrounds and lodging establishments report their gross incomes when they pay transient occupancy taxes (TOT). In 2001, they brought in about $32 million.

Some motel and campground owners don't report all their income, but DRA figures that any under-reporting is offset by reported revenue for business travelers and truckers. "We just assume that neither of those numbers is very large and they compensate for each other," said Runyan.

Adding $4 million for untaxed RV parks in county jurisdiction (a rough estimate based on the number of campgrounds) and $1 million for camping in state and national parks (as reported by state parks), total accommodations spending came to about $37 million for 2001.

DRA estimated $51 million. Where did the extra $14 million come from?

DRA California Project Manager Bill Klein estimated that rented vacation homes brought in $10 million in 2001. While the rent payments would have been subject to TOT (unless visitors stayed over 30 days), Klein implied that most rental owners would dodge the tax man.

But it seems very unlikely that there is a $10 million untaxed market for vacation rentals here. According to several sources, rental homes are actually quite rare.

In Trinidad, where there seem to be more rentals than in any other area of the county, Curtis Clark of the Abalone Cove Rental outfit estimated, "There are probably fewer than 20 individual rental units [around Trinidad]. It's an extremely small market." (And, by the way, Clark does pay his TOT.)

Clark and other sources reported that some homeowners in the county rent their own houses when they leave on vacations.

 Inflated estimates?  Here's what the state says visitors to Humboldt County spent in 2001:  Restaurants: $79.5 million; Retail stores: $59.9 million; Recreation: $53.7 million; Gasoline, taxis and buses: $29 million; Food stores: $18.2 million; Accommodations: $50.9 million.

But even if 1,000 homeowners brought in $2,000 each renting their homes in 2001 (and didn't pay any TOT), that would add $2 million and bring accommodations spending to $39 million -- still $12 million short of DRA's figure.

This is no minor point, because DRA's travel impact model multiplies the non-existent $12 million into $30 or $40 million in non-existent sales of rafting trips, T-shirts, beer, groceries, gas and bowling games.

The harshest reality confronted in downsizing DRA's estimate of the local tourism economy is employment. Visitor spending, DRA says, supports about 6,000 jobs here -- nearly 10 percent of total employment. That should be good news for any unemployed job-hunter. But most of those 6,000 jobs seem to be as mythical as DRA's visitor-spending estimates.

For 2001, DRA attributed 2,780 jobs in restaurants to visitor spending, but the Employment Development Department (EDD) reported that restaurants employed about 3,900 people in the summer of 2001. Even if tourist dollars supported 10 percent of local restaurants' payrolls -- a doubtful prospect -- that would mean just 390 jobs.

DRA estimated that 960 workers in the recreation field owed their salaries to visitor spending in 2001. But EDD data shows that only 600 to 800 people were employed in "amusement and recreation" in 2001. We can only speculate how many of those positions were supported by tourist dollars.

DRA's estimate for lodging and campground employment seems to be fairly accurate. It estimated 1,150 jobs, while EDD reported 900 to 1,000. Add in the many self-employed business owners -- who don't show up in EDD figures -- and DRA's estimate looks reasonable.

But in measuring tourism's broader economic impact, it should be noted that most motels and RV parks pay relatively low wages: the average annual salary is about $11,500, according to EDD.


Making an accurate estimate of total visitor spending is beyond the scope of this story.

But even downsized, hypothetically, to a $50 million industry supporting 1,500 jobs, tourism should still rank as an important industry. Many of DRA's mistakes reflect the errors committed by other out-of-town consultants who have made unrealistic projections about our economy because they didn't grasp just how small and slow-growing it is compared to most of California.

And because tourism brings in money from outside the area, it makes sense that the county prioritized it as one of the base industries in its economic-development strategy.

"When we do get tourists' dollars, they always look a little greener because they're out-of-the-area dollars," said Larry Buwalda of Adventure's Edge.

Tourism does seem to be growing. According to an analysis of TOT data by Humboldt State University's Index of Economic Activity in Humboldt County, spending on accommodations in Humboldt County has increased more than 30 percent in the last five years (before inflation).

In the year after September 11, 2001, lodging and campground occupancy here increased more than in the previous two years. If this pattern holds true, travelers' fears and uncertainties about air travel in the wake of war and terrorism may steer more of them than ever to the North Coast.

And when the tourists come, they'll be bringing lots of those "greener" dollars -- but not in the hundreds of millions estimated by DRA.

Jim Hight is a frequent contributor to the Journal. His last cover story was on the North Coast real estate market (Oct. 10, 2002).

Figures off-base elsewhere, too

THE JOURNAL'S INVESTIGATION REVEALED significant exaggerations in visitor-spending estimates for Humboldt County, but the estimates for neighboring Del Norte and Mendocino counties may be even further off base.

The state Tourism Division and its consultant, Dean Runyan Associates (DRA), estimated that travelers spent $28 million dining and drinking in Del Norte County restaurants in 2001. But the state Board of Equalization (BOE) -- the agency that collects sales taxes -- reported that the county's 61 restaurants brought in a total of just $17.5 million for the year.

In Mendocino County, DRA estimated visitors spent $93 million in restaurants in 2001, more than the total sales reported by the BOE: $85 million.

While one can argue about how important visitors are to the restaurant business, their patronage certainly could not exceed the total.

When asked about these obvious errors, DRA Project Manager Bill Klein said that "the BOE numbers you cite do not include restaurants in hotels, casinos, etc."

Klein is correct about tribal casinos, but food and drink sales by hotel restaurants and room service are reported along with other eating and drinking places, according to a BOE spokesperson.

Because DRA uses its own model of visitor spending patterns -- and conducts no local surveys -- the firm's estimates of what visitors spent on recreation, gas, food and other services in Del Norte and Mendocino counties may be as inflated as the restaurant spending estimate.

DRA's mistakes in Mendocino, Humboldt and Del Norte counties seem to arise from its assumption that visitors spend the same kind of money in rural areas as they do in areas with boutique shopping, amusement parks and high-dollar attractions.

But independent economic analyses by the San Diego County Convention and Visitors Bureau show that DRA's estimates may be erroneous for the entire state. While DRA estimated travelers to San Diego spent $8.5 billion in 2001, the SCCVB's study showed just $5.1 billion.

The SCCVB study conducted by CIC research established typical visitor spending patterns in San Diego based on surveys of 3,300 actual visitors. DRA's estimates were developed without the benefit of any local surveys.

-- reported by Jim Hight




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