2011 CERTEC, INC. Tourism Economic Impact Analysis

A detailed examination of the expenditure, employment, and tax impacts generated by the Hendricks County tourism and travel industry, as well as the industry structure, has been conducted for the Hendricks County Convention & Visitors Bureau. The major findings of the 2011 study follow:

•The tourism and travel industry contributed $219.3 million to Hendricks County’s economy in 2011 compared to $192.3 million in 2009. Direct expenditures by tourists accounted for $155.7 million of this total—an annual real growth of 3.7 percent.

•The tourism industry generated over $51.6 million in tax revenues to government - $19.0 million to the state, $10.2 million locally, and $22.4 million to the federal government. Total taxes in 2009 were $45.9 million.

•Residents of Hendricks County spent an additional $37.4 million with the local tourism industry. This direct spending created 541 jobs.

•A total of 2,879 jobs in Hendricks County resulted from the industry in 2011 compared to 2,679 in 2009. Direct expenditures created 2,254 of these jobs.

•Over one-third of the jobs created were in high wage occupations.

•The tourism-generated jobs provided nearly $46.8 million in wages to Hendricks County workers compared to $41.1 million in 2009.

•Destination travelers to the county totaled nearly 2.1 million persons. Over 453,700 pass-through travelers also stopped briefly. These visitors generated nearly 3.1 million participant days when length of stay is taken into account.

•Expenditures by category showed that food and beverage, attraction, and shopping purchases accounted for over seven of every ten dollars spent.

•Expenditures by industry sector reflected the importance of the attractions and lodging sectors to the local tourism industry. Over three-fifths of all direct spending was from these two sectors.

INTRODUCTION

The purpose of this study is to quantify the magnitude of the economic impact of the Hendricks County tourism and travel industry in 2011 and show any changes since 2009. Economic benefits begin when a traveler to Hendricks County, either an out-of-county Indiana resident or an out-of-state visitor, spends money in the county. The typical purchases of visitors include goods and services such as lodging, food and beverages, gasoline, souvenirs, admission fees, entertainment, or other retail goods. This initial round of spending is referred to as the direct expenditures.

These direct expenditures create a ripple-like effect through the economy. The businesses receiving these dollars use them to pay wages and salaries, to purchases goods and services for the businesses, and to pay taxes. The individuals and businesses receiving these monies, in turn, spend them on goods, services, and taxes. This process is repeated through several rounds of spending until the impact becomes insignificantly small. The combined impact of these several rounds of spending is referred to as the multiplier effect.

The total economic impact of Hendricks County tourism is the combination of the direct expenditures and the multiplier effect expressed in terms of spending, jobs, wages, and taxes. It is important to note that tourism impacts all sectors of the local economy.

Tourism is a large, growing business in Hendricks County. The research findings presented in this report show the importance of tourism to the local economy in 2009 and 2011. This is accomplished through the use of the Certec Model© designed for estimating tourism impacts at the state and local levels, in conjunction with an input-output model designed for estimating the indirect and induced effects of tourist spending. The procedures used are explained in detail in Appendix A.

Table 1

Chart 1

Where does this money go once it is in the Hendricks County economy? Many hold the idea that it all goes to the service and retail sectors to support only low wage jobs. In reality, the economic benefits to the Hendricks area are far more widespread. It helps support dozens of local businesses that do not directly serve the county's tourists. It impacts banking, insurance, and real estate; transportation and public utilities; construction; agriculture, and manufacturing.

Expenditures by Sector

The contribution of the individual tourism sectors to the visitor expenditures varies widely. The countywide distribution of these expenditures is provided in Chart 2. Attraction visitors accounted for 32 percent of these $155.7 million in purchases. Lodging guests accounted for the next largest share of this spending (over 31 percent)—up from 29 percent in 2009. Those visiting friends and relatives in the county followed with nearly 24 percent of the total spending. Individuals passing through the county contributed nine percent. Campers provided four percent.

The importance of the lodging and the attractions sectors to tourism spending in Hendricks are substantial. They are the cornerstones of the area’s tourism industry. The lodging sector, in particular, grew the most between 2009 and 2011 while attractions increased slightly.

Their growth is the key to a healthy tourism industry in Hendricks County. The volume of traffic passing through the area on Interstates 70 and 74 also makes an important contribution with food and beverage, gasoline, and other retail store purchases.

Employment

In 2011, a total of 2,879 jobs (in FTEs [full time equivalents]) in Hendricks County were due to the expenditures made in the tourism and travel industry (Table 1)—an increase of 200 jobs. These represent four percent of all jobs in the county in 2011. The 2011 direct expenditures of travelers accounted for 2,254 of these jobs.

The employment opportunities were distributed throughout the county. A number of the jobs in the community are supported, in part, by tourism. Since tourism jobs are dispersed throughout the local economy, they are more difficult to identify than factory jobs. This contributes to the misunderstanding of the size and importance of tourism to the local economy.

The individual sectors of the industry had different impacts on the creation of employment. The travelers in the attractions sector lead the industry in job creation. The expenditures of the visitors within this sector generated 944 jobs—an increase of 41 jobs. It was followed, in turn, by the lodging sector (916 jobs)—an increase of 122 jobs, the VFR [visits to friends and relatives] sector (666 jobs)—an increase of 31 jobs, and the pass-through sector (254 jobs)—an increase of five jobs. The campground sector provided 99 jobs.

The jobs created by tourism can be found throughout the occupational structure, not just in the service sector (Table 2). Over one-third of the jobs resulting from tourism spending (34.3 percent) were found in the high-wage occupations of professional and technical, managerial, sales, construction, craftsman, and operatives. Tourism produces a wide range of jobs in addition to the front line personnel such as desk clerks, waiters, and ticket takers travelers most often observe.

Table 2

TOURISM GENERATED EMPLOYMENT BY OCCUPATION

Tourism stimulates non-tourism industries such as agriculture, fishing, meatpacking, food processing, brewing and distilling, bottling, floriculture, construction and appliance, furniture, and linen manufacture. For example, demand for hotel rooms can create demand for the services of contractors, which generates secondary demand for steel, bricks, lumber, tile, marble, glass, plumbing and air conditioning systems, elevator cars, carpets and a variety of other goods. Similarly, tourist demand for restaurant meals creates business not only for restaurants, but for producers and packagers of fresh and frozen foods, butchers, dairies, and ultimately, for manufacturers of farm implements and fertilizers. Consequently, a healthy tourism industry means additional business for industries throughout the economy.

Wages

The expenditures of travelers are the business receipts of the establishments patronized. A portion of these revenues is used by the businesses to pay their employees. In 2011 every 8 dollar spent by travelers in Hendricks County produced an average of 21.3 cents in wage and salary income.

The total wage and salary income generated by tourism and paid by local businesses was nearly $46.8 million in 2011 (Table 1)—an increase of $5.7 million over 2009. The direct purchases of travelers accounted for over $33.2 million of this total.

Taxes

Tourism generates state and local as well as federal tax revenues. Hendricks County tourism expenditures resulted in the collection of over $51.6 million in tax revenues in 2011 (Table 1) compared to $45.9 million in 2009. Over two-fifths ($22.4 million) went directly to the federal government through taxes including personal and corporate income, social security, gasoline, and airline taxes.

The Indiana state treasury benefited from the addition of nearly $19.0 million in tax revenues generated by tourism activity within the county compared to $16.6 million in 2009. A major portion of these revenues were obtained through sales and excise taxes, and taxes on individual and corporate income.

Local government operations in Hendricks County such as the cities and towns, county government, and the Convention & Visitors Bureau also benefited from tourism in the county. County and municipal governments received over $10.2 million in tax revenues as a result of the tourism industry compared to $9.0 million in 2009. Property tax, business taxes, and the innkeeper’s tax contributed to these local tax revenues.

APPENDIX A

DATA AND METHODS

In simplest terms the economic impact of tourism is a function of the number of visitors to the county and how much they spend while there. The research challenge is to accurately measure these quantities. A number of factors contribute to the complexity of this type of economic analysis. Among these factors are:

•the distribution of tourism attractions and industry infrastructure in the county;

•the type of lodging facilities visitors use since this choice greatly impacts level of spending;

•the length of time the tourist spends in the county;

•the size of the travel party, and

•the reason for visiting the county.

These are a few of the critical factors affecting the spending patterns of visitors. Only the spending of non-Hendricks County residents is included in this research. Locals contributed an additional $37.4 million in direct spending to the local tourism industry and generated 541 jobs (see page 14—Direct Effects).

Bottom-up vs. Top-down Measurement

The Certec approach to this research challenge is based on information collected directly from tourists and tourism businesses (bottom-up measurement) as opposed to a procedure that relies on the extraction of information from business data that was initially collected for a purpose other than the analysis of the tourism industry (top-down measurement).

It is the Certec position that tourism economic impact begins with the purchase of goods and services by tourists. Therefore, to most accurately measure the sum of these economic transactions requires data collected from both tourists and tourism businesses that answer questions directly related to the research task at hand.

The Certec Model© was developed in the 1970s, and updated annually, to measure the direct tourism economic impacts at the state and local levels. The data required as inputs include the spending pattern of visitors, in great detail, and business data such as rooms sold at lodging facilities and the number of visitors to attractions.

Expenditure Data

The information on the spending pattern of travelers to Hendricks County is currently available for 2009 and 2011 through the research of Certec Inc. This research provides very detailed information on the spending of visitors in the area. For this project the 2012 data were adjusted to 2011 by correcting for inflation. For each sector, the expenditure figure includes purchases for lodging (excluding attractions, VFR, and pass through), food & beverage, transportation, souvenirs, attractions, and shopping/retail.

The expenditures per person per day were calculated. They are, by sector:

Hendricks County is divided into tourism sectors. Certec identified tourism and travel businesses operating in 2011 from a review of local tourism publications. This information was used to update the 2009 database developed for the previous year’s study.

Certec designed surveys to collect business data from a stratified random sample of these businesses. The questionnaires are available in Appendix D. The information was collected through the Hendricks County Convention & Visitors Bureau with the assistance of Jaime Bohler Smith, Associate Director. Mail interviews were received from the owner and/or manager of each of those establishments during the period March through May 2012. The interview had as its primary focus the number of units sold (lodging rooms or campsites) or visitors to the facility. Complete interviews were obtained from 53.3 percent of the businesses in the sample.

Once the processing of these data sets was complete, participant days by type of business were determined. The results of this analysis are presented in Chart 3. Total participant days to Hendricks County in 2011 approached 3.1 million. Attractions, after adjusting for multiple visits, accounted for nearly 42 percent of all visitor days followed by VFR travelers (22 percent). The lodging and pass-through sectors also provided a substantial number of participant days—18 percent (up from 16%) and 14 percent, respectively.

Destination travelers to Hendricks County totaled nearly 2.1 million persons (2,076,088) compared to 1.9 million (1,963,492) in 2009—an annual growth of 2.9%. In addition, over 453 thousand pass-through travelers (453,750) visited the county compared to 449 thousand (449,257) in 2009.

Chart 3

Total Participant Days -- 2011

The information on participant days in Chart 3 in combination with the expenditure data in Chart 2 shows the importance of lodging guests and their much higher spending per person per day. Even though they account for just over two-fifths as many visitors to the county than does the attractions sector, the spending impact of lodging guests on the local economy is only slightly less than that of attraction visitors.

Direct Effects

Once the basic inputs to the Model were calculated, several statistical analyses were conducted using the equations of the Certec Model©. Note that the Model was modified for use in this project to reflect the Hendricks County tourism industry. This Model was designed to provide expenditure estimates at the sub-state (county) level for each of the industry sectors. These sub-state estimates by sector were combined to provide expenditure levels for the entire industry within the county.

The data collected from the business questionnaires also allowed for the calculation of the direct effects of the local residents. The business survey asked for the proportion of visitors/patrons from outside Hendricks County. The remainder would be local residents who used local tourism facilities. These data were used in the Model with the expenditure data to calculate spending which could then be translated into jobs created by the spending.

Multiplier Effects

The indirect and induced expenditures resulting from the initial infusion of money into the Hendricks County economy were calculated using the RIMS II input-output (I-O) model developed by the U.S. Department of Commerce, Bureau of Economic Analysis. The output from the Certec Model© served as data input for the I-O model. The latter model provided indirect expenditures resulting from the tourism industry.

The tax revenues resulting from this industry were also estimated. State and local tax revenues as well as federal tax revenues were obtained by using sector output generated by the Certec Model©with expenditure/tax relationships derived from I-O analysis.

Estimates of tourism and travel industry employment were generated in a similar fashion. Sector output from the Certec Model© was applied to expenditure/job relationships obtained from the I-O analysis. Employment generated by direct and indirect expenditures was obtained. The I-O model relationships also allocated the total employment generated to the occupation providing the service or product.

The addition of the multiplier effects, as determined from the I-O model, to the direct effects, as determined from the Certec Model©, provided the complete picture of the economic impact of the Hendricks County tourism and travel industry presented in this report.

Appendix B 

Definition of Terms

Demographics

The typical visitor to the Hendricks area is most likely to be a college graduate (62.5 percent) and working in a professional/technical job (43.1 percent). Another one out of seven visitors is retired (14.0%).

DEMOGRAPHICS OF VISITORS TO HENDRICKS COUNTY

Trip Characteristics

The destination tourism business Hendricks County enjoys is derived primarily from visitors on either a short trip (47.0%) of one to three nights in length or a day trip (40.0%). Nearly one in ten was on a vacation of four or more nights in length (9.0%). Over nine in ten (93.2%) of those who spent the night on this trip, i.e. excluding day visitors, stayed in motels. Nationally, pleasure travel accounted for over 80 percent of the one billion plus trips in 2010. The remainder results from business travel.

Four in ten of these travelers to the county (40.0%) are on their first visit to the county. This ranges from one out of ten for attraction visitors to three out of five for motel guests. Overall, visitors have taken an average of 4.4 trips to the area in the past two years—a high level of repeat visitation. The typical travel party has an average of 3.1 people. The average length of stay is 2.2 days.

The information sources mentioned by the respondents as most likely to be used when making travel plans include (in rank order): the Internet (73 percent), friends and relatives (41 percent), ), a local visitors bureau (15 percent), an auto club (10 percent), newspapers (8 percent), magazines (5 percent), a state tourism office (4 percent), and a travel agent (2 percent).

Travelers visited a number of attractions in the Hendricks County area. On average a travel party visited 1.3 attractions. The most visited attractions by those interviewed were:

•Lucas Oil Raceway

•Chateau Thomas Winery

•Indianapolis Motor Speedway

•Metropolis

•Indianapolis Zoo

•Sodalis Nature Park

•Art Museum

•Shopping (general)

•Local Parks

HENDRICKS COUNTY TOURISM AND TRAVEL INDUSTRY ECONOMIC IMPACT – 2007 AND 2009

HENDRICKS COUNTY TOURISM AND

TRAVEL INDUSTRY ECONOMIC IMPACT – 2003 AND 2007