Florida legislators are expected to take up a bill today to reduce corporate and industrial welfare in the Sunshine State, including Visit Florida, the state's tourism marketing arm. Some believe cutting tourism marketing subsidies will hurt the state's entire economy. Our evidence shows it will hurt neither the economy nor the tourism industry.
Our 2016 study, "An Analysis of State Tourism Promotion Funding," examined the economic impact of state promotional efforts in 48 states, including Florida. We examined economic activity and incomes of employees in the three sectors of the economy most likely to benefit from state marketing efforts. These were the accommodations industry (hotels and motels); amusement and recreation; and arts and entertainment.
We found that when a state spent $1 million in taxpayer funds to promote itself, its accommodations industry saw its economic activity go up by $20,000. That's no typo. It's not $200,000 or $2 million, nor does it refer to the total taxes that flow to state treasuries as a result of the promotional efforts. We also found that such work does not translate into higher incomes for industry employees. When you compare the outlay with the increase in economic activity, it's clear that state subsidies for tourism promotion produce huge negative returns on investment.
The meager benefit enjoyed by the accommodations industry was the most positive impact we found in our analysis. We found no impact on economic activity or income in the amusement and recreation sector. Due to limits in the data, we were unable to measure economic activity in arts and entertainment. We did, however, find that a state spending increase of $1 million led to a total increase in income of $35,000 in the arts and entertainment sector, shared by all those who worked in it.
Our statistical model was built only after a thorough review of existing academic literature. The methodology and 39 years of data we use for 48 states is explained and publicly available. Not every tourism-related study can make the same claims. Our model controls for effects that might impact tourism such as weather (including the amount of sunshine), distance to water and elevation in a state and changes in the economy. Our work can be replicated by any earnest scholar. These qualities are the hallmarks of sound scholarship.
A recent column in the Tampa Bay Times in defense of Visit Florida spending by Jonathan Tisch, chairman and CEO of Loews Hotels, warned of grave consequences for cutting tourism promotion spending. He cited evidence from consultant Longwoods International, which claimed that travel for leisure in Colorado dropped 30 percent after tourism funding was eliminated there. There are several problems with this assertion.
No one knows exactly how their claims are derived. Longwoods itself has bragged on its website about its ability to help tourism agencies engage in "budget justification," and pointed to Colorado as an example. We used public data and updated our model to examine Colorado's experience more closely. We added a variable to measure any impact on the accommodations industry from Colorado's suspension of tourism promotion between 1993 and 2000. We found none.
We aren't the only scholars to examine possible economic impacts from state promotion spending. A 2010 paper in the Journal of Travel Research authored by Matt Seevers and John Deskins and titled "Are State Expenditures to Promote Tourism Effective?" found that such spending can have a positive impact but it depends on initial levels of expenditures.
The state of Florida's publicly financed spending level was relatively high in 2003 when the Seevers and Deskins data set ends, and spending has recently leapt from a reported $54 million in fiscal 2012 to $76 million this fiscal year. The Seevers and Deskins paper concludes that "for states with very high levels of initial tourism expenditures, employment can decline following increased tourism promotion spending funded through own-source revenues."
Translation: Visit Florida may hurt employment growth.
Visit Florida takes money from millions of Floridians and gives it to a lucky few. That's unfair, but the scholarly evidence also suggests that it is ineffective for creating jobs and wealth overall.
Michael LaFaive is director of the Morey Fiscal Policy Initiative with the Midland, Mich.-based Mackinac Center for Public Policy, a nonprofit conservative think tank that advocates free-market policies. Michael Hicks is director of the Center for Business and Economic Research and professor of economics at Ball State University. He is also an adjunct scholar with the Mackinac Center.