Arkansas tourism industry hopes to build off two-year ‘hot streak,’ may face some economic headwinds in 2017

After a record-setting year in 2015, Arkansas’ dynamic tourism and hospitality industry bolstered the state’s economic growth in 2016 and is forecasted to end the year by eclipsing last year’s historic benchmarks.

And even as final year-end numbers are being tallied, the Arkansas Department of Parks and Tourism and state trade officials believe the Natural State is well-positioned to keep that same momentum going forward in 2017 despite some expected economic headwinds that could slow recent growth.

Collections of the statewide tourism tax were down 3.7% year over year for the month of September 2016, but Arkansas was still on pace to beat 2015 in overall collections, according to the latest available data from the Department of Finance and Administration.

Overall, the pace of the tourism industry’s growth slowed in 2016 but was still on an upward trend in terms of revenue and also industry jobs, up 4.16%, according to the Talk Business & Politics Tourism Ticker, published Nov. 15. For the first eight months of 2016, hospitality collections in 17 Arkansas cities were up 3.75% compared to the same period in 2015.

Montine McNulty, executive director of the Arkansas Hospitality Association (AHA), said the state’s tourism and hospitality sector has been on a two-year hot streak highlighted by summer news that the industry led Arkansas to the strongest economic expansion in the U.S. among all 50 states in the first quarter.

In July, the U.S. Bureau of Economic Analysis (BEA) reported that Arkansas led the nation in real Gross Domestic Product (GDP) among the 50 states at 3.9%, led by a 2.21 percentage point contribution from the state’s agriculture, forestry, fishing and hunting sector.

“We are leading the Arkansas economy in a lot of different ways, and that is exciting for our industry,” McNulty said of the state’s 113,000-count service sector that employs workers in the hotel, restaurant, arts and entertainment industries. “We’ve been leading in tax collection, in job creation and it’s really been a really good two years and hopefully it will continue.”

TOURISM ‘LEADING THE WAY’
That economic highpoint was later followed up by a state Tourism and Parks Department report in September that Arkansas hosted a record 28 million visitors spending $7.2 billion in total travel expenditures, $374 million in state taxes and $137 million in local taxes in 2015. The economic impact of travel and tourism on the state’s economy showed an 8.69% increase in total travel expenditures.

That same report also shows growth in tourism jobs has also tracked with the gains in statewide tourism tax collections, state tourism officials said. For example, Arkansas’s travel and tourism industry travel generated payroll has grown from $240 million in 1979 to $1.3 billion in 2015, an increase of 447.6% over the last 36 years.

“Economic development is my number one priority, and tourism and hospitality is leading the way,” Gov. Asa Hutchinson said at the AHA’s annual summer convention in Little Rock.

Year-to-date, Washington County has seen growth of 15%, following by Pulaski and Sebastian County at 6.9%, and Benton county at 5.5%. September was particularly strong in Pulaski and Sebastian counties, which saw growth of 30.2% and 25.9%, respectively, compared to the same period a year ago.

On the employment front, Arkansas’ jobless rate in 2016 fell to an all-time low of 3.8% in June, and now stands 4% with 1,349,512 workers in the brimming labor pool. Of that total, the Arkansas’ leisure and hospitality sector had 113,300 workers through the end of November, up 500 from a year ago. Typically, hiring levels begin in rise in the first quarter has hotels, restaurants and tourism destinations prepare for the first rush of tourist to the state in the spring.

McNulty said she was pleasantly surprised that the year-over-year tax collections were well-ahead of 2015. However, she said industry growth is forecasted to continue in Arkansas and the rest of the nation well beyond 2017. For example, the National Restaurant Association projects employment growth in the hospitality sector over the next decade of 11.3% in Arkansas, in line with 11.6% growth for the rest of the nation.

“I think there is a possibility it can be sustained,” she said.

FLEXIBLE MARKETING
For the upcoming 2017 tourism season, state officials have unveiled a $7.6 million spring and summer advertising and marketing campaign that makes greater use of mobile, social media and other web-influenced digital products to get adventure-seeking millennials and other travelers to visit the Natural State.

Parks and Tourism Chief Kane Webb, who took over as the department’s executive director in 2015, has said publicly that the state is in a great position to take advantage of recent momentum that has brought a record number of visitors to the state in 2015.

“Arkansas is a great place. It is one of the most beautiful places in the world, and now we have international attractions like Crystal Bridges, the Clinton Library and Johnny Cash’s boyhood home,” Webb said at the AHA’s annual convention unveiled the 2017 marketing campaign. “We plan to take advantage of them all.”

CJRW Chairman and CEO Darin Gray, whose firm is handling the department’s 2017 campaign, said historically the state’s yearly ad campaign does advance work 14 to 16 months before any actual TV spots, print ads, and other marketing is unveiled. This year, he said, the advertising reach of mobile phones and other digital products is changing the way he and other marketing executives operate such campaigns.

“It is not just print or online with the web, it is social media like Snapchat that changes so quickly that we can’t tell you 14 months out what things will look like,” Gray said.

Gray said the challenge of offering the parks and tourism department a nimble and flexible campaign strategy is staying on top of changing trends and adapting media strategy to reach those audiences that travel or plan to visit Arkansas in the future.

CHALLENGES AND OPPORTUNITIES
McNulty admits the state will likely face some economic headwinds in the new year that present some challenges. For one, Arkansans and travelers to the state have enjoyed record low gasoline prices the two-year growth spurt. The U.S. Energy Information Administration has forecasted pump prices to rise to an average of $2.30 per gallon in 2017, well above the national average of about $2 per gallon in 2016.

In addition, Arkansas’ minimum wage rose to $8.50 per hour on New Year’s Day, nearly $1.25 about the federal standard. Under the 2014 ballot initiated act, Arkansas’ minimum wage rate was increased from $6.25 to $7.50 per hour in 2015, from $7.50 to $8 in 2016. It will rise the last time from $8 to $8.50 under the voter referred act on Sunday, Jan. 1, 2017.

Nationally, the restaurant and hospitality industry has opposed raising the U.S. minimum wage standard and new overtime rules for salaried employees working over 40 hours a week. In Arkansas, McNulty said she believes employers have had three years to prepare for the new minimum wage standard.

“It has been anticipated since it passed on the (2014) ballot so it is not surprise, and hopefully people have built that into their business plans.”

Going into the 2017, McNulty said the AHA does not have any major bills or issues that face the hospitality industry going into the 91st General Assembly, but will monitor the committee hearings for any legislation that affects the business environment in Arkansas.

McNulty said another key reason she believes the tourism and hospitality sector will continue to see strong growth projections in the future is the leadership of Gov. Hutchinson, who she called the state’s top advocate for the industry. At the AHA convention in Little Rock this summer, tourism officials from across the state rolled out a “red carpet” for the popular GOP governor when he attended the first day of the annual meeting.

“The governor’s excitement over our industry and his support is very important. He raises the level of recognition,” she said. “He recognizes the importance of our industry to the Arkansas economy and telling that story is really good for the state, and I think it makes people proud of where they live.”