Tourism Vital to Florida’s Economy

By Erick Winterkamp

Florida is known around the world for its white sandy beaches, diverse wildlife and theme parks. These environmental and manmade attractions make it a hotspot for domestic and international tourism. State and local taxes and spending have impacted the tourism industry, but Florida would likely be a tourism destination with or without these policies.

In 2015, Florida welcomed a record breaking 105 million tourists, an increase of 6.6% over the previous year. The first three months of 2016 saw a new quarterly record, with 29.8 million visitors. According to Visit Florida, the state’s advertising agency, spending by tourists in 2015 totaled $89.1 billion, or 11.3% of Gross State Product. However, these figures are likely biased upward, since they include spending (at restaurants, night clubs, retail shops and hotels, as well as for rentals of tangible property) that comes from locals too. Other estimates put total tourism spending in Florida around $51 billion.

Where do tourists come from? Eighty-six percent are domestic tourists, according to Visit Florida, with the largest numbers from Georgia (9.6%), New York (9.3%), and Texas (6.9%). Of international travelers, 33.4% hail from Canada, followed by those from the United Kingdom and Brazil with 14.8% and 12.9%, respectively.

Tourism in Florida has a longstanding history, along with other staples like agriculture (especially citrus), cattle, and real estate. As far back as the late 1800’s, Henry Flagler invested in railroads and hotels so that wealthy northerners could escape the cold winters and enjoy some Florida sun. Permanent communities such as Winter Park and Tarpon Springs developed around popular vacation spots for snowbirds. As more people arrived, airports, interstate highways and other infrastructure were constructed to accommodate them. In 1971 Orlando became home to Disney World, the largest single-site employer in the nation; and many more amusement parks and tourist attractions have since opened in Florida. Aerospace, aviation, and international shipping make up an increasing share of the state’s economy, but tourism remains dominant.

Florida’s tourism industry employed 1,194,500 people in 2015 and provided  12.3% of the state’s employment opportunities. Many of these jobs are in the customer service sector and  have a median wage below $10 per hour. This concentration of low wage jobs may be why, among the nation’s top 50 employment centers, the Orlando-Kissimmee-Sanford metropolitan area has the lowest median annual income, at $30,534 (assuming 40 hours of work per week). While not conclusive, some economic research suggests tourism can lower overall income for an area, even as the economy grows.

Natural environment and private investment have been primary, but public policies also impacted Florida’s tourism industry. Florida’s tourist development tax (TDT) is levied on hotel rooms, a common purchase for tourists. Among other purposes, TDT revenues must be spent on sports stadiums, convention centers, and other large scale capital projects meant to augment the tourism economy. These public policies impact the tourism industry in countervailing ways, since the spending may induce tourism while the tax would discourage it. However, most academic research finds little positive effect on employment or tax revenue from these kinds of projects, even finding negative effects in some cases. This policy of taxing the tourism industry in order to subsidize it implicitly assumes that the private sector is less able to allocate resources than public officials, despite the state’s history of private sector leadership in the industry. Visit Florida, a public-private partnership that acts as the state’s advertising agency, as well as other similar organizations for local tourism promotion, also receive TDT revenues. This spending produces a much higher return on investment. Between 2010 and 2013 Visit Florida spent $129 million.

With or without these taxes and public subsidies, tourism would likely make up a large share of Florida’s economy. Natural features and private investment have made the state a sought after destination for domestic snowbirds and international travelers alike.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
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