California travel industry needs boost to fully recover, restore workforce

California’s tourism economy has made significant strides toward recovery amid devastating disruption and huge job losses over the past two years.

The Legislature and Gov. Gavin Newsom last year wisely agreed to spend $95 million for tourism marketing programs to jump-start the economy. It was the first time since the aftermath of 9/11 two decades ago that state taxpayer funds supplemented the tourism industry’s contribution to marketing the state as a tourism destination.

That investment has been key to survival during an unprecedented period. But the travel and hospitality industry still faces daunting challenges – particularly in San Francisco, Los Angeles, Orange County and San Diego – and the industry needs another lifeline to continue the recovery and make our tourism economy whole. Legislators should approve the $45 million Newsom’s budget proposes to maintain domestic marketing programs that have proved successful.

Tourism marketing works. Last year, it inspired leisure travelers from California and throughout the United States who felt safe to travel responsibly in the Golden State. 

A preliminary report Dean Runyan Associates prepared for Visit California shows visitor spending reached $97.4 billion in 2021, up 50% from 2020.  Employment and visitor-generated tax revenue also rose last year. 

Still, what visitors spent in 2021 amounted to just two-thirds of the record $144.9 billion reported in 2019, before the COVID-19 pandemic set in. Similarly, 2021 employment levels in the California tourism industry remained only about three-fourths of the 1.2 million workers recorded in 2019. 

Recovery in urban centers, where the largest percentage of tourism jobs exist, still lags. Cities disproportionately depend on large meetings and events to generate tourism spending and drive employment. California’s meeting market was unable to operate for most of 2020 and into 2021 and has been slow to return.

In February, Visit California held its annual travel conference at the Hilton San Francisco Union Square. It marked the first time in nearly two years that dozens of food and beverage staff at the hotel had been asked to work.

Hotel data from STR Inc. further illustrate the divide: Room revenue in California’s rural and outdoor recreation areas exceeded that of 2019’s record year. The four gateway cities, however, fell significantly short. In San Francisco, room revenue reached just 45% of 2019 levels.

Other American travel destinations are gaining ground on California and making investments to inspire travel at the expense of California’s economy. 

• Because of stimulus funds, California’s share of the domestic travel market regained its advantage over its closest rival, Florida. But California’s market share remains far below 2019 levels, and Florida also gained significant market share in 2021.

• In New York, Gov. Kathy Hochul committed $450 million in state funds, including $50 million for tourism marketing, to help the tourism industry and its workforce recover. 

All of the $45 million Newsom has proposed would be spent on domestic media buys for tourism marketing. It is projected to return $13.9 billion of additional revenue for California businesses and $1.2 billion of additional state and local tax revenue.

Most importantly, extending stimulus will help bring thousands back to work. California travel and hospitality businesses suffered by far the biggest job losses in 2020 and 2021, with more than half of tourism employees out of work after lockdown. The unemployment rate of our industry during the pandemic was twice the rate of the Great Depression.

The travel and hospitality sector remains a huge component of California’s economy. It is critical that the momentum for recovery created by the state’s smart investment in 2021 continue into 2023.