Local Tourism Industry Faces Tough Sell During Hard Economic Times

But consultant Bruce Balin says it’s not all doom and gloom, and he predicts a modest recovery in 2010.

By Rob Kuznia, Noozhawk Staff Writer | Published on 12.03.2008

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After a summer of enjoying record windfalls from foreign travelers, the Santa Barbara tourism industry has taken a nosedive in the past two months as the economic malaise gripping the United States has spread to the rest of the world.

But it’s not all doom and gloom, Bruce Balin, vice president of PKF Consulting, said in a presentation for local hoteliers Wednesday called the Santa Barbara County 2009 Tourism Forecast.

Speaking to a packed house in the conference room of the Cabrillo Arts Center, Balin said 2009 will be a tough year, but he is expecting a modest recovery in 2010.

“It’s not going to be a 10-year buildup,” he said. “It’s going to be a one-year buildup.”

Tourism is a big deal for the local tax base. In Santa Barbara, bed taxes generate nearly $15 million, which is about 15 percent of the city’s general fund budget. A significant dip in tourism could spell trouble for city services and departments such as police, fire, street maintenance and parks.

Balin said the tourism industry across the state has been hit hardest by the slowdown in business travel, meaning things could be worse for the South Coast, which caters more to families on vacation.

“People do take vacations,” he said. “Leisure travel is not something that is a luxury to people at this point in time; it is an absolute necessity. In tough economic times, and tough psychological times, it’s more of a necessity.”

He added that although people still take vacations during recessions, they may scale back on the way they do it. Santa Barbara, he said, stands to benefit from this phenomenon because many thrifty Southern Californians may opt to drive up the coast — and through Santa Barbara — rather than fly somewhere farther away.

Despite his optimism, Balin acknowledged that the local industry took a beating in September and October. “We are seeing double-digit decreases right now,” he said.

Balin said he believes that the free-fall will begin to level off in January.

“What’s happening is the business markets have shut down,” he said, referring to corporate travelers. “There’s so much uncertainty in the market that there’s frankly a feeling almost of impending catastrophe. It’s as much psychological at this point as it is in reaction to actual economic activity.”

Countywide for 2008, Balin is projecting that, largely because of the drop-off in tourism that began in the fourth quarter, occupancy rates will be about 2 percent below what they were the year before. He also projects that they will decrease an additional 1 percent in 2009.

On the South Coast, Balin said 2008 occupancy rates at beachside resorts are projected to be down nearly 1 percent from the year before. He expects it to drop another 1 percent in 2009. Worse hit have been the hotels, such as those on upper State Street, that tend to draw more corporate customers. Occupancy there is projected to drop 3 percent from the year by the end of 2008, and then by an additional 2 percent in 2009, he said.

“These are all numbers that are manageable in terms of your business context,” he said.

Speaking more broadly, Balin also insisted that the U.S. recession is nothing to panic over. “If we didn’t have this downturn, we’d have some other downturn,” he said. “We all know that this is cyclical. … So what we’re seeing today is, to some extent, just kind of a correction.”

Balin also addressed the fact that Goleta is adding two new hotels to the mix, a fact that has stirred no small amount of anxiety in the local industry.

Again, Balin was optimistic, saying the market is in a position to absorb the properties. “It’s just a question of how long will it take,” he said. “Will it take two years, three years, four years?” 

At least one local hotelier, Jeanette Webber, owner of the Best Western Peppertree Inn on upper State Street and other properties, seemed skeptical of Balin’s optimism.

“Our business during wintertime is 70 percent corporate,” she said during the question-and-answer session. “I’m questioning your prediction.”

Balin conceded that her property, like many on upper State Street, will suffer more from the decline in business travel than beachside hotels, but he said he believes that business travel will pick up again in 2010.

Kathy Janega-Dykes, president and CEO of the Santa Barbara Conference & Visitors Bureau, said the past few months have been difficult.

“The summer attracted an unprecedented number of international visitors, which compensated for the soft domestic market. But we began to see declines in September of this year and they have continued since,” she said in a statement. “Because 2009 will be a difficult year for our industry, it will be important to aggressively innovate and differentiate ourselves from the competition.”

Write to rkuznia@noozhawk.com.

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» steve on 12.04.08 @ 06:36 AM

That guy is full of crap.


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