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Tuesday, September 21, 2010

U.S. Travel and Tourism Industry

Suzanne M. Kirchhoff
Analyst in Industrial Organization and Business

The U.S. travel and tourism sector, the main economic and employment engine in a number of states, suffered a steep decline in 2008 and 2009 as the nation sank into recession. Though the United States remained the world’s top travel destination by dollar value, spending by foreign visitors in the country plunged 15% in 2009—a record. U.S. tourism-related businesses shed nearly 400,000 workers in 2009. The layoffs exceeded the job loss in 2001, when the September 11 terrorism attacks crippled business and pleasure travel. Travel and tourism—which account for 6% of U.S. employment—began to rebound in 2010, but there have been concerns about a possible decline in business along the Gulf Coast due to the April 2010 BP oil spill.

Partly in response to the sharp downturn in the sector, Congress passed, and President Obama in March 2010 signed into law, the Travel Promotion Act (P.L. 111-145), creating a nonprofit corporation that will receive up to $100 million annually in federal funds through 2014 to market the United States as an international travel destination. Lawmakers have proposed initiatives to aid Gulf tourism-related businesses affected by the oil spill, and legislation (H.R. 4676) to provide $50 million in government grants over five years for domestic tourism marketing efforts. At the same time, a number of states and localities have increased taxes on tourism-based businesses, including levies on hotel rooms and car rentals. Such efforts are spurring a pushback by consumers and businesses that is spilling into Congress, including a bill (H.R. 4175) to limit the ability of states and localities to impose future taxes on automobile rentals. In addition, the online hotel booking industry is seeking legislation to set a national standard for hotel taxation.

While lawmakers have enacted or proposed specific legislation to aid travel and tourism, most congressional activities that affect the sector, sometimes in a major fashion, are indirect. The sector feels the impact of congressional action on such issues as the minimum wage; funding for national parks, forests, and historical sites; gaming industry regulation; and visa and immigration policy. As travel and tourism have developed from an “invisible” area of the economy—one that businesses and officials considered important, but for which there was little comprehensive data—to a widely analyzed sector, it has become a larger factor in legislative give-and-take in select areas. For example, some lawmakers from states with major coastal tourism businesses oppose proposals to expand offshore oil and gas drilling, based on tradeoffs or perceived tradeoffs between the energy and tourism industries. Likewise, many tourism-related businesses have weighed in on debates regarding homeland security and immigration, asking Congress to streamline the process for obtaining a visa to visit the United States or to go through airport security, arguing that current policies serve as a deterrent to would-be visitors.

Date of Report: September 15, 2010
Number of Pages: 32
Order Number: R41409
Price: $29.95

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