M. Ray Perryman
Texas Border Business
Texas is struggling to strike the appropriate balance in the tragic choice between effective public health measures and restoring vitality to the economy. Moving ahead with reopening before recommended safety milestones were met has led to reversals and setbacks on the path to progress. Physical health and economic health are both essential. Nowhere is this tension more intensely evident than in the tourism industry.
People traveling to new areas inherently involves enormous public health implications as cases of COVID-19 escalate. On the other hand, tourism is a major driver of the economy in urban and rural areas alike. Estimates by my firm indicate that travel spending added $155.3 billion in total gross product to Texas in 2019 and supported over 1.5 million jobs.
To put it mildly, tourism and related services have experienced a turbulent few months in what is usually a bustling season. In April, the first full month of shutdowns, 518,000 jobs were lost in the Texas leisure and hospitality industry, a decrease of 38.1%. In May, the economy started to rebound and the leisure and hospitality industry gained back 193,400 jobs, but is still down 24.5% from January.
Performance in the hotel industry has followed a similar pattern. In April, hotel gross operating profits fell by 116.9% and into negative across the US, led by Houston which reported a decline of 135.3%, according to data produced by STR. Hotel occupancy hit a low of 22.0%, and individual cities recorded even lower rates (such as Austin, with 3.4% occupancy the first week of April). Airline performance followed a similar pattern.
Once restrictions began to ease in early May, many Texas cities saw the beginnings of a rebound in hotel occupancy. The first weekend of May saw increases of 31 and 24 percentage points in the beach communities of Galveston and Corpus Christi, respectively. As of the week ending June 20th, hotel occupancy across the US was 43.9%, up from historic lows in April but still down 41.8% from the previous year. With an uptick in COVID-19 cases and renewed restrictions, tourism-related businesses may be further impacted, though some activity will continue.
Moving forward, the near-term solutions likely will require distancing, facial coverings, increased sanitation procedures, and other measures to help people feel (and be) secure for traveling. Over a longer horizon, vaccines, treatments, tracing, and innovations will allow us to move forward. As I have often noted, this is an economic crisis that was spawned by a health crisis. You can only fully overcome the former by dealing with the latter. People love to travel and Texas is an iconic destination. Tourism will resume and prosper, though it may look a bit different. Be safe!!