|
|
Oil + Tourism = Do Not Mix
While much has been written about the impact of the Gulf of Mexico oil spill on fisherman, local businesses, and the oil industry itself, there is only now beginning to be a clear concern on the part of public policy makers as to the impact on the tourism sector of the Gulf Coast. We believe that the tourism sector (hotels, airlines, casinos, food & beverage, conference facilities, and leisure facilities) will be highly impacted by the oil spill for at least the next 3 months, but probably longer.
Let's be clear by what we mean about the Gulf Coast in the context of the Gulf oil spill. We essentially classify that area as the coastal areas of Louisiana, Mississippi, Alabama, and Florida (western side). This area, particularly this Florida region, is highly reliant on tourism sector activity, and its associated economic multiplier effects. In fact, tourism sector related employment in the beach and resort areas of the Gulf Coast is enormous and many families in the region rely on a healthy tourism sector to pay their medical bills, pay their rent, and feed their families.
|
The $10 Billion Dollar Problem
We project that the total negative economic impact on the Gulf Coasts tourism sector will likely be at least $10 billion dollars (including economic multiplier effects). The figure is based upon approximations of the number of hotels long the coast, the reduction in hotel rates, and the resulting job losses associated with the oil spill. The economic impact to the tourism sector will be greater than the impact now being experienced by oil rigging crews that are subject to a government imposed 6-month drilling moratorium.
Public policy makers are just beginning to recognize that the tourism sector might be, in the long-run, the most highly impacted economic sector that is falling victim to the oil spill. Because much of the tourism activity that belies the Gulf Coast is ecosystem related, i.e. beaches, swimming, natural sightseeing, the tourism sector falls a close second to the environment in terms of total damage done, although a dollar figure can never be put on environmental destruction.
|
|
40% Reduction in Gulf Coast Hotel Rates
While it's hard to project the total impact of the oil spill on Gulf Coast hotel room rates, we are projecting that a minimum of a 40% reduction in both Revenue Per Available Room (RevPar) and a similar reduction in Average Daily Room Rate (ADR) will be experienced amongst most hotels in the impacted coastal areas. We have already observed many hotels along the Gulf Coast region dropping their rates by as much as 50% already, in anticipation of a further downturn over the next several months.
The tourism industry in the region is responding to this issue slowly, but we believe they should move faster. In fact, we highly advocate that every CEO of every major hotel, casino, and airline company that operates in the Gulf Coast region physically locate themselves in the region over the next month to coordinate a consolidated tourism industry response. We applaud companies like Orbitz that have taken a proactive approach by establishing their 'Open Beach Guarantee' program which basically provides a hedge for consumers that take the risk of vacationing at a beach hotel/resort that might be impacted by the oil spill.
|
|
Our Take on BP Tourism Sector Liability
It is very clear that, but for the actions of BP, the tourism sector in the Gulf Coast would not be negatively impacted the way that it is, and the way it is is going to be over the coming months. One of the clear distinctions between this oil spill and that of the infamous Exxon Valdez is that the Gulf Coast region has enormous tourism infrastructure, and that is in contrast to the limited tourism infrastructure that existed on the Alaskan coast near the Valdez impacted areas.
While we are not legal experts, we certainly believe that one of the largest legal and financial claimants against BP, as a group, will eventually be tourism sector related companies and individuals. In fact, we believe that ultimately airlines, hotels, taxi cab companies, resorts, and even casinos that reside on the Gulf Coast will ultimately be able to make legitimate economic claims against BP in the billions. We believe that the impact of these potential claims against BP is currently being substantially underestimated, or not even recognized by the press, market pundits, or industry executives.
|
|
|
Quick Points:
$10b Negative Tourism Economic Impact on Gulf Coast Areas
40% Lower Project RevPar and ADR Rates for Gulf Coast Hotels
Thousands of Expected Tourism Related Job Losses
Tourism Industry Response Just Starting, But Too Late
Government Response to Impact on Tourism Economy Lagging
BP Response to Oil Spill Impact on Tourism Economy Lagging |
|
