Don't Kill Md 'S 'golden Goose' - Tourism

July 30, 2009|By Joseph L. Kroart III

Much has been made recently about Maryland's budget shortfalls and the need to cut spending. Certainly, this is a time when difficult decisions will have to be made by our state leaders, and there are few easy answers.

But during this period of such harsh economic conditions, sustained funding for tourism expenditures at the state level is of paramount importance. Tourism is a pathway of investment. It is Maryland's fourth-largest industry, and it serves as a powerful engine for both economic growth and the creation of tax revenue.

Tourism should be treated as a golden goose for the coffers of Maryland. Our state's economy benefits any time people visit from out of state for business or leisure. Current jobs are sustained and new jobs are created for Marylanders, and money spent continues to flow hand to hand throughout our state, creating further tax revenue with every transaction. By some estimates, for every dollar invested in promoting Maryland tourism, roughly $30 is generated in returns to the state's economy, along with more than $2 collected as state tax revenue.

However, state budget cuts have already reduced annual tourism funding to amounts not seen since 1997. The most recent round of the governor's proposed cuts, approved last week by the Board of Public Works, includes a $1.1 million reduction for tourism funding, leaving only $4.9 million. Given the need for roughly $420 million more in budget cuts in the coming weeks - and the misperception that reductions in promotional spending will not translate into a significant loss in visitors - tourism funding remains vulnerable. Returns on promotional investments decline precipitously as funding decreases. A minimum threshold of spending must be reached before attaining positive returns, and Maryland may be sliding toward this threshold.

The case of Colorado during the mid-1990s provides a good example of how following such a path can be harmful. Colorado slashed its promotional budget in 1993, resulting in an immediate plunge in leisure travel. Within four years, Colorado fell from being the most-visited summertime vacation destination in the United States to being ranked 17th, resulting in great declines in tourism-generated revenue. Lawmakers restored tourism funding in 1997 to previous levels, but it took years for visitor numbers to rebound.

This illustrates that investments in tourism must be constant and consistent to maintain desirable returns. We should heed the Colorado experience, for nothing suggests that Maryland would not suffer a similar fate if state tourism funding would continue to be trimmed. But if Maryland's leaders can avoid the knee-jerk, budget-trimming reaction in relation to tourism spending, we might just be able to emerge victorious among our tourism competition. As neighboring states are cutting their promotional budgets, thereby constraining their own marketing efforts, holding the line on the state tourism budget could well provide Maryland with a competitive advantage.

Consider a more recent development in one of Maryland's primary summertime vacation competitors, the city of Myrtle Beach, S.C. Because of tourism funding cuts at the state level, the Myrtle Beach city council passed a bill several weeks ago to create a 1 percentage point increase in their tax on retail, prepared food (to 9 percent) and accommodations (to 13 percent) to fund tourism promotions. This move might seem risky, but the town's leaders recognize that returns from tourism investments will far outweigh any potential backlash that might arise from the introduction of a tax increase.

Tourism has shown over time to be an essential contributor to economic development in Maryland, and investing in tourism is a proven formula for achieving strong financial returns. Maryland's leaders would be wise to consider the dangers that would accompany any approach similar to that of Colorado, as well as the benefits of the forward-thinking strategy of tourism funding sustenance adopted by Myrtle Beach. Maryland must maintain its financial and philosophical commitments to tourism so that the bounties of these investments can and will be seen to fruition, thereby helping the state along on the path to economic recovery.

Joseph L. Kroart III is vice president of Ocean Gallery Fine Art Centers Inc. in Ocean City. His e-mail is joeykroart@gmail.com.

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