Advocates call Arizona tourism a $1 billion industry, and despite a serious downturn after the Sept. 11, 2001, terrorist attacks, a slow but steady recovery is under way.

Behind the rebound are the Arizona Office of Tourism (AOT) and two privately funded organizations that work in tandem to see that the state agency is adequately funded.

The push for funding is paying off. In 2001, the AOT appropriated budget was $8.8 million. For the current fiscal year, the appropriated budget is $11.9 million, but funding from two ballot propositions approved by voters boosts the total to $19.8 million.

Margie Emmerman, director of the Arizona Office of Tourism, explains what she means by a $1 billion dollar industry — that’s $1 billion a year in tax revenue generated directly and indirectly by tourism and related industries.

Ms. Emmerman applauds the lobbying and support by the Arizona Tourism Alliance [ATA] and the Arizona Hotel & Lodging Association for budget improvements AOT has realized in the past few years. The additional funding on top of budgets approved by the Legislature comes from Prop. 302, a sports and tourism ballot measure approved by voters in 2000 and Prop. 202 in 2002, the Indian gaming measure. Prop. 302 increased the tax on rental cars and added 1 per cent to the hotel room tax to raise funds for the Arizona Cardinals stadium, expand the Cactus League and support youth recreation. Prop. 202 expanded gaming and required 1 per cent to 8 per cent payments to the state depending on tribal winnings. How do the two tourism organizations complement each other and AOT? “I’m a consensus builder,“ says Ms. Emmerman. “When I first became director of AOT, I looked to see how the entities in the industry should work together. ATA and Lodging have a natural working relationship.”

Originally ATA helped sponsor the Governor’s Tourism Conference, but for the past two years the Lodging Association has become one of the partners as well, joining the Arizona Restaurant Association, Ms. Emmerman says.

Funding Tourism

Karen Churchard, executive director at Arizona Tourism Alliance, says of the state’s tourism post Sept. 11: “It’s slowly recovering in Arizona and at the national level. We’re showing positive growth. For us, our biggest challenge or opportunity was getting the Arizona Office of Tourism on full formula funding.”

The funding formula, which was approved during Governor Hull’s administration, is based on a percentage of revenues generated by the lodging, restaurant and amusement industries. But huge state budget shortfalls prompted lawmakers to suspend the formula and appropriate a flat amount of $9 million for fiscal 2004, which ended last June 30. Fiscal 2005 is the first year that the formula is being used, giving AOT an appropriation of $11.9 million.

Aside from pressing for AOT funding, Ms. Churchard says, the Alliance has had a busy and productive couple of years. “One of our main focuses was the possibility of not even having a Tourism Office,” she says, recalling that there was talk of merging AOT with the Arizona Department of Commerce.

Tourism advocates have opposed the mere mention of a merger, fearing that tourism funds would be co-mingled with Commerce and that tourism would be the loser.

Other Issues

Other issues the Alliance tackled involved getting the Maricopa County transportation tax on the November ballot, opposing guns in drinking establishments and supporting the 2 a.m. closing time for places that serve alcoholic beverages, an hour later than was allowed previously.

“We believe the 2 a.m. closing benefits tourism, including conventions,” Ms. Churchard says. “It’s one more favorable thing on the list to match up to our competitors.”

On allowing weapons, concealed or otherwise, in bars, Ms. Churchard says the concept seemed simple enough. “Just put up some signs against carrying guns, but for hotels that have dozens of entry points, that could get expensive. Besides, the safety factor was the major reason we felt it was not appropriate.”

Debbie Johnson, executive director of the Arizona Hotel & Lodging Association, says of the gun issue: “Guns and alcohol in any combination don’t mix. The NRA [National Rifle Association] is very powerful, but we were able to defeat that bill. That was our best defeat of the year, with help from the Arizona Restaurant Association. It got much closer to passage than we would like to see, but common sense prevailed.”

Although Ms. Churchard feels a little relief after reviewing some of the recent successes, the Alliance is moving forward with an AOT strategic plan that was developed before Sept. 11. The three main elements are marketing, product development and advocacy.

Marketing Arizona’s Heritage

She explains product development. “How do we as an industry develop product?” Ms. Churchard says. “We are blessed with natural resources, but we need man-made products to highlight our cultural heritage. Our major competition comes from California, Las Vegas and New Mexico, which is kind of ahead of us. New Mexico had a Native American cultural center added to a Hispanic cultural center, giving it a national brand.

“Williams is working on trying to get a product like a Western heritage cultural center. The Grand Canyon Railway is in preliminary stages of planning a museum in Williams. Flagstaff is looking to add a conference center so it could host larger conventions.”

As one of the co-sponsors of the Governor’s Tourism Conference, along with the Arizona Hotel & Lodging Association and the Restaurant Association, Ms. Churchard says, “We’d love to hold it in Flagstaff.” The most recent Governor’s Tourism Conference held in Tucson a couple of months ago attracted 472 attendees. Flagstaff, she says, can’t accommodate a meeting of that size.

And there are product opportunities in the Phoenix area as well, perhaps focusing on Native American culture, she says. Tucson is considering how to capitalize on the De Anza Trail, which runs from Mexico along the southern Arizona border into California eventually ending in the San Francisco area, Ms. Churchard says.

She mentions Sierra Vista, Graham County and Cochise County with tourist attractions such as birding opportunities and visiting Kartchner Caverns just south of Benson. “Yuma has the only National Heritage designation in the state — the east and west wetlands,” she says. “Obviously some of our attractions are natural and that’s good.”

Advocating For Tourism

The advocacy element of the strategic plan, which was launched in May, involves educating tourism employees and others in non-tourism industries about how the Arizona Office of Tourism is marketing the state. So far the audiences in communities around the state include economic developers, business executives, elected officials, staff representatives of public entities and chamber of commerce officials.

“They give us some dialogue, and the educational advocacy tells them how we can all work together,” Ms. Churchard says. Thus far, no presentations have been made to legislators, she says, adding that most of their contact with lawmakers in the past few years involved lobbying for or against bills. Rural legislators seem to have a better understanding of the economic impact that tourism has. “They can see the dollars coming in and how it helps their communities,” Ms. Churchard says. “Urban legislators understand it, too, but some of our biggest advocates tend to be from rural areas.”

She cites Rep. Michele Reagan, R-8, as an example of an urban legislator who strongly supports tourism. Ms. Reagan led the drive for 2 a.m. closing time for liquor sales.

Ms. Churchard explains how the Arizona Tourism Alliance, which was formed in 1997, differs from the Arizona Hotel & Lodging Association: “We take a broader look at the entire tourism industry. They’re more focused on hotels and resorts.”

Ms Emmerman agrees. “A lot of other people in the industry needed a place to come together to have a common voice. Without ATA you might have people in the hospitality industry not having unity of thought.”

Among the accomplishments cited by the Alliance are: protected the continuation of an independent Arizona Office of Tourism; sustained the existing level of dedicated funding for tourism marketing; lobbied to expand the Phoenix Civic Plaza Convention Center and to secure funding; lobbied; actively supported legislation to assist a second NASCAR race at Phoenix International Raceway; worked aggressively in support of continuing the half-cent sales tax for freeway and road construction and expansion of light rail in Maricopa County.

As a champion of AOT, the Alliance says that for every $1 spent on the state agency’s advertising campaign, Arizona receives $6.36 in state taxes and more than $10 in state, county and municipal taxes. “Tourism generates more than $1 billion in tax revenues to Arizona’s General Fund each year and maintains 450,000 jobs,” the Alliance states.

State Revenues

Ms. Emmerman of AOT breaks down the three aspects of the $1 billion benefit tourism is to state tax revenues — direct, indirect and induced. Direct revenue involves what visitors spend, indirect relates to such things as the electricity used by hotels and linen service, and induced revenue is generated by people employed in the industry and the goods and services they purchase, she says.

Regarding the 450,000 tourism-related jobs, Ms. Emmerman responds to critics who say most are low paying. “Our industry has a whole host of job levels, some entry level and some general managers. Our industry supports bankers and many other high-paying jobs. We do have a lot of entry-level jobs. Some individuals work while they’re going to school, and there is a lot of upward mobility.”

Ms. Johnson of the Hotel & Lodging Association, says the organization considers itself “a legislative watchdog” for its members and for the protection of the AOT budget. “You never know what’s going to happen there,” she says of the Legislature.

“The industry is getting stronger, but it has been somewhat of a mixed message,” Ms. Johnson says. “We’re not quite back to the way it was before 9/11. Occupancy levels are getting stronger, but the problem is with REVPAR — revenue per available room. Rates have been lowered substantially to get people back. Our market has rebounded faster than others, and increased funding for tourism has had a lot to do with it. We’re seeing some rebound in the rural situation as well.”

She notes that Arizona is a seasonal destination. “It depends on the time of the year,” Ms. Johnson says. “Our seasons are different in Flagstaff than in Maricopa County.” This year’s Cactus League Spring Training baseball was a successful lure, and a second major race at Phoenix International Raceway next April will bring in even more visitors, she says.

“I’m hearing a slight increase in Tucson, but things could always be better,” Ms. Johnson says. “What I’m hearing in Phoenix, Tucson and throughout Arizona is that the fall season is not as strong as we had hoped.”

ASU Report: ‘Industry Ready For Improvement’

The Arizona Tourism Barometer, a measurement of industry health produced by the Bank One Economic Outlook Center at Arizona State University’s W. P. Carey School of Business, rose by 5.4 points to reach 97.0 in May, compared to a revised 93.5 the previous month. This is a 19 per cent improvement over the 2003 reading and a 5.8 per cent increase over April’s reading, the Center said. The strongest positive contribution in May was hotel and motel retail sales, according to Dawn McLaren, an economist with the Center. “In March and April this component had slipped downward, but healthy recovery occurred in May. Air traffic landings were also a positive influence on the barometer.”

Still showing some trouble is overseas visitation. National park visitation was also down, but only slightly. Gasoline prices were a worry in May, and may have played a role in the slower national park visitation, according to Ms. McLaren. “Those prices have since eased slightly, and with the current upward trend of the barometer, the tourism industry appears ready for continued improvement,” she said in a May report.

Lodging Guide

One of the popular publications produced by the Hotel & Lodging Association is the annual Lodging Guide, which is used to market member properties. More than 20,000 copies are sent to at least 300 travel agents and visitor centers in such places as Illinois, California and Colorado. “We try to reach people when they’re making their cold-weather plans,” Ms. Johnson says. “We also do a lot of in-state marketing. In-state travel is a tremendous market.”

Ms. Johnson applauds Governor Napolitano for her efforts on behalf of tourism funding. “When legislators look at a billion dollars in tax revenue returned it’s a little easier to justify funding for tourism,” she says.

Looking ahead to next year, Ms. Johnson says her organization will not be advocating to increase AOT funding. “All we will be asking is to maintain the formula, which is based on a percentage of taxes collected by hotels, restaurants and attractions, including museums, ski areas and visitor attractions.”

Referring to partners of the Hotel & Lodging Association, Ms. Johnson says, “We have a united industry like never before. We work together.”

The Association, formed in 1938, represents 450 members statewide with more than 37,000 rooms in hotels, resorts and bread-and-breakfasts.

The Association touts its primary benefits as protecting the lodging industry against unfair taxation, securing the AOT budget, and advocating for the industry at the Legislature and with state agencies.

Ms. Emmerman says the Office of Tourism doesn’t have a major legislative agenda for the Legislature next year except to make sure the agency continues to receive adequate funding. “We’re not an agency with a lot of issues,” she says.

With the funding formula based on how well the industry does, Ms. Emmerman says, “It’s an incentive for all of us to work together. I have a great relationship with the hospitality industry. This is an industry where we meet frequently with the heads of the organizations helping to fund this agency. We have a common dialogue.”

What’s next? AOT plans to expand its target markets and enhance its Web site to get its visitors guide in a pdf format.

“We go to cold weather places when we have warm weather,” Ms. Emmerman says, mentioning Chicago, Denver and Minnesota. “Our key strategic markets are places with weather conditions that are undesirable when we are desirable.”