State of the State 2022: Tourism industry will return as a ‘bright spot’ for Arkansas economy

COVID-19 has been anything but hospitable to Arkansas’ leisure and hospitality sector. Jobs in the sector reached a record 122,900 in December 2019. Just four months later sector employment would plummet almost 39% to an estimated 75,100 jobs in April.

In the decade before the pandemic, the sector was one of the fastest-growing in the state and one that was benefiting from significant investment from public and private sources, according to Mervin Jebaraj, director for the Center for Business and Economic Research at the Sam M. Walton College of Business at the University of Arkansas.

“We had invested as a state a lot into that particular sector. We have great hunting and fishing facilities,” he said. “We’re seeing kayaking, biking and those types of activities really pick up. People are into hiking. … We’ve seen a lot more investments in restaurants and bars in downtown areas, not just in Northwest Arkansas, not just in central Arkansas, but across small cities, Blytheville and El Dorado, for example, across Arkansas.”

Sector employment was 97,800 in January 2010 and rose 22.8%, or 24,700 jobs, to the employment of 122,500 in January 2020, according to the U.S. Bureau of Labor Statistics (BLS). Arkansas’ 2% tourism tax revenue was $11.49 million in 2010 and rose every year to a record $17.6 million in 2019.

But government-mandated shutdowns that began in March 2020 and fear among the public to be in public closed many doors – some, unfortunately, permanently – at restaurants, bars, hotels and other tourism-related businesses in the state. The 2% tax revenue dropped to $13.61 million in 2020. The Arkansas Tourism Ticker, produced by Talk Business & Politics and sponsored by the Arkansas Hospitality Association, showed an 18% decrease in 2020 hospitality tax revenue among 17 Arkansas cities reviewed for the Ticker compared with 2019. The Ticker also showed a 22.7% decrease in Arkansas’ 2% statewide tourism tax revenue and a 14.35% decrease in the monthly average of Arkansas’ tourism industry jobs compared with 2019.

2021, even with surges caused by the Delta and Omicron COVID variants, has shown resiliency and recovery in the sector.

Arkansas’ 2% tourism tax revenue between January and October was $17.582 million, up 50% compared with the $11.72 million in the same period in 2020 and up 15.6% over the same record period in 2019. Collections of the tax set monthly records for the six months between March and October. July set a new series record for the tax with $2.486 million in revenue from the tax.

The Arkansas Tourism Ticker for the January-October 2021 period showed a 30.1% increase in hospitality tax revenue among the 17 Arkansas cities reviewed, and a 7.6% increase in the monthly average of Arkansas’ tourism industry jobs compared with the same period in 2020. The state’s hotel sector is still struggling. Hotel tax collections among the 17 cities totaled $11.27 million in January-October 2021, up 51.5% compared with the same period of 2020, but down 7.7% compared with the previous record of $12.217 million in the same period of 2019.

Also, tourism job numbers haven’t fully returned to pre-pandemic levels. Of the eight metro areas in or connected to Arkansas, the BLS provides tourism employment data on five. Of the five, only the Northwest Arkansas metro had tourism jobs above the pre-pandemic period in 2019.

Enplanements at Arkansas’ three largest commercial airports – Clinton National in Little Rock, Northwest Arkansas National Airport (XNA) and the Fort Smith Regional Airport – began to recover in 2021 but are still well below pre-pandemic traffic. Clinton National reported 850,422 enplanements in 2021, well above the 490,544 in 2020, but below the 1.124 million in 2019. XNA had 621,942 enplanements in 2021, better than the 360,133 in 2020 but below the record 922,533 in 2019. Fort Smith enplanements in 2021 totaled 45,218, up 22.8% compared with 2020 but 50.8% below the pre-pandemic year of 2019.

The jobs and the hotel visits will return, as will the previous pace of growth when the pandemic ends or significantly subsides, Jebaraj predicts.

“Leisure and hospitality is still the bright spot for the economy in Arkansas,” he said. “It just is going to have to wait until the pandemic is over. But, you know, I think people are trying to continue to do the best they can, even during the pandemic.”

The recent Travel Recovery Insights Dashboard managed by the U.S. Travel Association also suggests an uptick in the national travel and tourism industry. The recent report included a note that travel spending almost reached pre-pandemic levels in December 2021.

“Total travel spending tallied $92 billion, which reflected a drop of just 2% below December 2019 levels. This was, by far, the strongest performance since the start of the pandemic,” the group noted in its December report.

Following are other notes in the report.
• For the first time since the onset of the pandemic, hotel room demand fully recovered back to 2019 levels in December.
• There are 10.6 million job openings in the United States, roughly one in seven, or 1.5 million, in leisure and hospitality alone as of the end of November
• More than nine in 10 American travelers have travel plans in the next six months.
• 79% of U.S. companies plan to conduct business travel in the next 90 days as of January, which is comparable to October 2021 before the Omicron variant hit.

Editor’s note: Link here to connect to the State of the State section.