Statement of Chamber Senior Vice President Rolf Lundberg on Travel and Tourism in America Today

Statement by U.S. Chamber Senior Vice President for Congressional and Public Affairs Rolf Lundberg before the House Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection on travel and tourism in America today

April 30, 2003

Overview

Good afternoon Chairman Stearns and Ranking Member Schakowsky, and members of the Subcommittee on Commerce, Trade, and Consumer Protection. My name is Rolf Th. Lundberg, Jr., and I am Senior Vice President for Congressional and Public Affairs at the U.S. Chamber of Commerce. The U.S. Chamber of Commerce would like to thank the subcommittee for holding this important hearing, and we are pleased to have the opportunity to testify on the current state of the U.S. travel and tourism industry.

The U.S. Chamber of Commerce is the world's largest business federation representing over three million businesses of every size, sector and region. Our member companies and their millions of employees have suffered the burden of a weakened economy. Since the events of September 11, that burden has been particularly felt in the travel, tourism, and hospitality sectors, many of which are small businesses.

The stakes are high and the challenge is clear. Few domestic industries generate jobs and economic growth like travel and tourism. One out of every seven people (or nearly 18 million people) in the U.S. private-sector workforce is employed directly or indirectly in travel and tourism related jobs. On April 9, 2003, the U.S. Chamber of Commerce co-hosted, with the Travel Business Roundtable, a major travel and tourism summit titled Re-Igniting Growth in Travel and Tourism. We used the summit to bring people together to help focus a very bright spotlight on one of the most urgent economic issues of our time: the revitalization and growth of travel and tourism in the U.S. and around the world. The summit – the largest of its kind in almost a decade — included participants from all sectors of the travel and tourism industry and brought together more than 200 CEO and senior level executives along with three Cabinet Secretaries, congressional leaders, mayors from cities across the country and senior Administration officials. Our summit helped all of us recognize and highlight the fact that drop offs in travel and tourism are affecting broader elements of our economy. State and local governments are losing tax revenue, small businesses are hurting, and our balance of trade is suffering.

The travel and tourism industry includes airlines, hotels, restaurants, resorts, theme parks and museums, rental car companies, travel agencies, and other industries and contributes nearly $100 billion in tax revenue to federal, state, and local governments. With states and localities suffering their worst budget deficits in half a century, travel and tourism-generated funds are critical for providing essential services such as health care, education, and transportation system improvements.

Additionally, the U.S. economy realized an annual balance of trade surplus from travel and tourism of $8.6 billion in 2001, however that surplus was a 70% decline from a $26 billion trade surplus in 1996. It is one of the few industries that consistently generate multi-billion dollar trade surpluses.

As the travel and tourism industry faces unprecedented challenges in the wake of the September 11 tragedy, economic uncertainty, the war in Iraq, and most recently the outbreak of the Severe Acute Respiratory Syndrome (SARS), the serious difficulties facing the airlines, hotels, cruise lines, and theme parks are obvious.

Another victim of a sluggish travel and tourism industry is the small business sector directly and indirectly affected from a lull in travel and tourism. Small businesses represent more than 96% of the U.S. Chamber's membership. In fact, 75% of these companies have fewer than 50 employees. Small businesses play a crucial part in the United States' economy, as there are roughly 22.4 million non-farm firms in the U.S. representing more than 99% of all employers. Additionally, they employ 51% of private-sector workers, and 38% of workers in high-tech jobs. Small businesses account for nearly all of the self-employed, produce sixty to eighty% of all the net new jobs and they account for 44.5% of total U.S. payroll. They are the fastest growing segment within this economy and women and minority entrepreneurs head many of these.

With the contributions of the small business sector to the economy, the Chamber would like to point out the dramatic impact the decline of travel and tourism in the United States has on small businesses that service and supply the travel and tourism industry. When travel slows, small businesses suffer the most because they often do not have the ability to weather a long decline in business. Small businesses such as independent hotel owners and operators, taxi cab drivers, and local restaurants are immediately impacted by a slowed travel and tourism economy. When small businesses directly impacted by the travel and tourism industry are in decline, the flow of downstream revenues to other small businesses in a community, such as dry-cleaners and local retailers, are negatively impacted as well.

The impact on communities is illustrated by the significance of small business to the communities that surround and serve our National Parks. At the Chamber's Travel and Tourism Summit, Secretary of the U.S. Department of the Interior Gale A. Norton, told the audience that in 2002, the National Park System attracted nearly 280 million visitors with 40 million of those visitors coming from foreign countries. Additionally, the Bureau of Land Management drew 54 million visitors while the National Wildlife Refuge System hosted more than 35 million visitors.

Those millions of visitors were responsible for significant economic support of the local communities surrounding those tourist destinations. A survey conducted in the mid-1990s by the Fish and Wildlife Service found that Americans spend more than $100 billion a year on wildlife-related recreation including hunting, fishing, and hiking. Such activities are supported by local small businesses that cater to those activities. Thus, when travel and tourism is slowed, so is business for numerous small businesses in local communities.

Recommendations

The Chamber believes that the first step to revitalizing our slowed travel and tourism industry is to restore confidence in American travel. We fully support the President's initiatives within the Department of Homeland Security to secure our nation's borders and protect our citizens. Simultaneously, we believe it imperative that our borders remain open to legitimate visitors.

Secondly, the Chamber supports an increase in the promotion of America in other countries. Currently, the United States does not do enough to promote itself as a travel destination for international visitors. As other countries are promoting their countries, the United States continues to lose market share to foreign competitors for international tourists. According to the World Tourism Organization, travel and tourism economic activity represented 11.7% of world GDP in 1999 with global tourism receipts reaching $463 billion in 2001. With such staggering figures, it is clear that competition for tourist dollars is on the rise and the United States must promote itself in order to compete.

The Chamber applauds President Bush, the Congress, and Senator Ted Stevens (R-AK) in particular, for the appropriation of $50 million to the United States Department of Commerce in fiscal year 2003 for a comprehensive international destination marketing campaign. These funds will allow the Secretary of Commerce, advised by the United States Travel and Tourism Promotion Advisory Board, to begin a campaign to promote the United States globally as a tourist destination.

While the appropriation to the Department of Commerce is an excellent first step in organizing a Travel and Tourism advisory board for the Administration, the U.S. Chamber also supports establishment of a separate Presidential Advisory Council on travel and tourism. The Council would be created by Executive Order as a federal advisory committee under the Federal Advisory Committee Act (FACA) and should be comprised of members from the private, public and non-profit sectors.

Over 130 countries have assigned cabinet-level tourism officials or created some form of government-sponsored tourism office. These nations have recognized the essential need for organization and promotion of their countries as travel destinations as they compete for the global tourist market. If we are to effectively compete, the creation of a Presidential Advisory Council is imperative to both cultivate policy development within the federal government as well as to measure tourism policy success.

Yet another factor that will assist the recovery of the travel and tourism industry is the strengthening of the American workforce. President Bush signed legislation reauthorizing the work opportunity tax credit (WOTC) through December 31, 2003 and in doing so continues to help employers provide work for unskilled and disadvantaged workers. As the WOTC gives employers a federal income tax credit of up to $2,400 for each WOTC-eligible employee they hire, approximately one-fourth of the restaurants in the United States are reaping the benefit of the tax credit while providing jobs for needy employees.

Another means of encouraging travel within the United States would be passage of legislation in the 108th Congress that would fully restore the business meal and entertainment tax deduction. In the Omnibus Budget Reconciliation Act of 1993, the allowable deduction for business meals and entertainment expenses was reduced to 50 percent. The reduction of this tax deduction has negatively affected the restaurant and entertainment industries and has been particularly punitive to the small business community. Research completed in 1998 by some members of the Travel Business Roundtable showed that one-fifth of business meal users were self-employed with more than two-thirds of business meal users having incomes of less than $60,000 and 37% having incomes below $40,000. As such, to assist small business owners as well as boost the travel and tourism economic industry, the Chamber supports an increase in the level of deductibility of business meals and entertainment expenses.

Conclusion

The U.S. Chamber of Commerce remains committed to working with all sectors of the travel and tourism industry in an effort to revitalize the industry as a whole. We will continue working with the industry, Congress and the administration until we are once again the number one global travel destination.

The U.S. Chamber of Commerce would like to thank the Subcommittee for focusing attention on the economic impact of the travel and tourism industry to the United States. We appreciate the Subcommittee's review of our recommendations for re-igniting travel and tourism in the U.S. We look forward to working with the Subcommittee as it continues to examine issues related to the growth of the industry and considers policy to stimulate the revival of travel and tourism.