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Home > Research & Data > Research Publications > Business Review > 1996 > The Travel Market in the United States and the Third District

Business Review: September-October 1996

The Travel Market in the United States and the
Third District

Timothy Schiller*

The following article refers to tables and figures that are not available on this Internet version. To obtain a copy of the printed document, contact Sally Burke.

U.S. residents took more than 1 billion trips in 1994, and, that same year, almost 46 million people traveled to the United States from other countries. What motivates these trips? Where do travelers come from, and what are their destinations? How much economic activity does travel generate? How does travel-related spending compare to overall spending, and how many jobs are created because people take trips? Finally, how do the Third District states (Pennsylvania, New Jersey, and Delaware) stack up in terms of travel-related spending?

THE WHERE AND WHY OF TRAVEL

Travel is important not just for travelers but also for the residents of the areas they visit. State and local governments recognize the economic impact of both leisure and business travel, and they devote substantial resources to attracting out-of-area travelers--and their money. Successful public- and private-sector marketing plans are developed on the basis of information that identifies where travelers come from, the kind of travel experiences they are seeking, and the amount of money they are likely to spend on their trips.

The success of any marketing plan is measured by how much additional income is generated for each dollar spent on marketing. State and local governments and private-sector tourist enterprises use surveys to measure awareness of their advertising and to gauge visitors' use of promotional arrangements, such as special pricing for group and package tours. Private-sector tourist firms, hotels, and theme parks compare the added profit they make to the costs of their advertising and promotional programs. They adjust their marketing to concentrate on the people most likely to visit their facilities, and they develop new features to attract additional visitors.

State and local governments compare their travel marketing expenses to revenues obtained from travelers directly through taxes on lodging and transportation services and indirectly through sales taxes collected from retailers and through wage taxes collected from additional employees in tourist areas. Like private-sector firms, state and local governments evaluate their marketing programs with the objective of obtaining the most revenue for every promotion dollar spent.

Who's Going Where? Americans travel widely around the country, and nonresidents, who take about 4 percent of all trips within the country, make up an increasing share of travelers in the United States. Travel by U.S. residents increased about 11 percent from 1984 to 1994, but over the same period, the number of foreign visitors to the United States increased sixfold. Over half of the visitors from foreign countries are our neighbors from Canada and Mexico. Travelers from Japan account for about 9 percent of foreign visitors, those from the United Kingdom 7 percent, and those from Germany 4 percent.[1] The U.S. Travel and Tourism Administration forecasts that, in coming years, these five countries will continue to supply large numbers of travelers to the United States, but the number of visitors coming to our shores from Asian countries other than Japan and from South American countries will grow faster as the economies of these nations grow and their citizens' incomes increase.

Just as most foreign visitors to the United States come from neighboring countries, most visitors to the Third District come from nearby states. A compact geographic area in the middle of a densely populated part of the nation, the three-state region can attract a large number of visitors from neighboring states. In fact, surveys indicate that half or more of the people traveling to Delaware come from contiguous states and around one-third of the visitors to New Jersey come from states on its borders.[2] Although more distant states provide far fewer visitors, some states supply significant numbers: Virginia and California for Delaware, and Ohio and Florida for New Jersey.

Several reasons may explain the pattern of visitors. Travel from nearby locations is less expensive, and advertising by state tourism departments tends to be concentrated in nearby states. Furthermore, travel to Third District states from Florida (and some other southern states) could be the result of visits by family and friends who formerly lived in the area, since Census Bureau studies indicate that southern states are popular destinations for people moving out of the Northeast.

For all types of travel within the country (for business and pleasure, by U.S. residents and nonresidents), the average distance is 870 miles and includes four overnight stays. Most trips are taken by car. For many years, travel by auto has accounted for around 75 percent of all trips, airlines for 20 percent, and Amtrak, bus lines, and cruise ships for the rest.

Why Do People Travel? Most trips can be categorized as either recreational/vacation or business trips. Just over one-third of the trips Americans take each year are to visit friends and relatives, one-third are for entertainment and recreation, and one-fourth are for business (including conventions and other meetings). Personal and other reasons account for the rest (Figure 1). This breakdown has remained fairly constant over the years.

Most recreational and vacation trips are made by family groups, and the most popular destinations are sites affording recreational and cultural opportunities. Many families include several types of locations in their vacation itineraries (Figure 2).

Ocean beach resorts have been the most popular destinations for some time. Each year, about half of all family summer vacations are spent at ocean beach resorts. Beaches top the list of most frequently visited places in New Jersey and Delaware. Over half of the people who visit southern Delaware do so primarily to stay at one of the beach resorts from Cape Henlopen to Fenwick Island, and half of the people who make overnight visits to New Jersey seek out the state's shore resorts.

Atlantic City's casinos are an important factor in the large percentage of visitors who head for the South Jersey shore. More than 30 million people visit Atlantic City each year; however, only 15 percent of these people stay for one or more nights. In fact, going to the Atlantic City casinos is the second most frequently cited reason for trips to New Jersey by out-of-state residents. (Visiting friends and relatives is the first.)

And although Atlantic City casino earnings have been on the rise and additional gaming facilities are planned, competition for gambling dollars has been increasing. Until New Jersey legalized casino gambling for Atlantic City in 1976, casinos were legal only in Nevada. Since then, eight more states have legalized gambling. Industry analysts believe that individual gaming companies and the localities where they operate will have to exert more marketing efforts just to retain their existing business. It appears, however, that the expansion of legalized gambling is slowing; no states have legalized casino gambling since 1993.[3]

The popularity of ocean beach resorts as vacation destinations shows no signs of fading. This should bolster the economies of resorts in Delaware and New Jersey. However, the tradition of seasonal or long-term family rentals at resorts of this type appears to be waning, and tourist officials and others in the industry doubt if long-term rentals will ever again be as common as they once were. Also, there appears to be a growing trend that favors weekend trips and "mini-vacations" within one-day's driving distance of vacationers' homes. The Delaware and New Jersey beaches are located advantageously near large population centers for such trips. This type of vacation trip is likely to change the types of services in demand at beach resorts, however. Shorter stays, for example, may mean a shift from purchasing groceries to having meals in restaurants.

While ocean beach resorts are the most popular vacation spots for families, approximately 29 percent stay at lake resorts for at least a part of their vacations. Among the three states in the District, Pennsylvania has the most lake resorts, located across the state from the Pocono Mountains in the east, which also offer popular ski resorts, to the Allegheny Mountains and other areas in the west. While not as plentiful in New Jersey, lakes in the northern part of the state provide recreational opportunities that attract visitors from the heavily populated northern New Jersey-New York City area. Also in the northern part of the state, where the Delaware River forms the boundary with Pennsylvania, the Delaware Water Gap National Recreation Area provides boating and hiking opportunities enjoyed by millions of people each year.

Historic sites are growing in popularity as destinations for pleasure trips: 40 percent of families traveling in the summertime stop at historic sites. Several factors account for this increased interest. First, such trips tend to be less expensive than other types of vacations or pleasure travel. Second, family travel has increased, and, often, historic sites offer something of interest to all family members. Third, vacationers, especially family groups, are more concerned about adding educational opportunities to their vacation plans.

Pennsylvania, New Jersey, and Delaware are rich in historic sites. Pennsylvania has many significant sites from all periods of American history. The most famous is Independence National Historical Park in Philadelphia, often called the most historic square mile in America. Many visitors go to Lancaster County to observe elements of Amish culture. In addition, America's military history is preserved at Valley Forge and at Presque Isle State Park, Commodore Perry's naval base in the War of 1812 and Pennsylvania's most visited state park. And the only major engagement of the Civil War to take place north of the Mason-Dixon Line occurred at Gettysburg, Pennsylvania.

New Jersey abounds in historic sites of the Revolutionary War; battlefields at Princeton, Monmouth, and Trenton, and the Continental Army encampment site at Morristown are among the most famous. Other historic sites also attract substantial numbers of visitors, including Thomas Edison's laboratory in Menlo Park and the town of Cape May, a Registered National Historic Landmark, with its many Victorian homes.

American industrial history is prominenetly represented in Delaware, primarily at the sites of the Du Pont enterprises, the earliest of which is preserved at Eleutherian Mills in the northern part of the state. In addition, colonial history attracts many people to New Castle.

The historic sites that distinguish Pennsylvania, New Jersey, and Delaware should continue to attract visitors, according to local tourism officials. They expect the more famous sites to remain prominent among leisure-travel destinations, especially for travelers from outside the immediate region. Visiting historic sites as part of a family vacation is becoming a common practice, and analysts believe that historic sites, in combination with other cultural attractions such as art museums, are becoming increasingly important as focal points of vacation and short-term leisure travel.

Theme parks, a relatively recent addition to the list of favorite vacation places, are now destinations for nearly one-third of summertime family vacations. Although not in the same league with preeminent parks such as Disney World, theme parks in the three-state area figure prominently in the region's travel market. Six Flags/Great Adventure in central New Jersey was one of the earliest theme parks to open during the most recent wave of park development, and it remains popular. A recent survey indicates that, except for the beaches, it is the second most-visited site in the state. In Pennsylvania, Hershey Park and related attractions in the town of Hershey have drawn visitors since the park opened in 1907.

The growth in attendance at theme and amusement parks is another trend that is expected to continue. Analysts in the tourist industry say that attractions such as Hershey Park, Great Adventure, and Sesame Place should be able to post further gains in attendance, especially if they continue to add new and expanded features. Like the region's historic sites, the major theme parks draw a significant portion of their visitors from outside the region, either as a main destination or a secondary stop.

Although recreation and vacation trips dominate travel in the United States, business trips make up a significant share. Combining business and pleasure on a single trip represents a growing trend. It is estimated that travelers use some vacation time on one-fourth of all business trips, and the frequency of combining business and vacation travel has doubled since the mid-1980s. Furthermore, on nearly half of all business trips, the business traveler is accompanied by another member of his or her household.

Cities are frequent travel destinations, though perhaps more often for business than for pleasure trips. In Pennsylvania, New Jersey, and Delaware, cities are often the destinations of out-of-state visitors for both single-day and overnight trips. According to surveys of travelers to Delaware, Wilmington and Dover, the state capital, are among the top five most-visited places in the state. Surveys in New Jersey indicate that cities in the northern part of the state are among the top 10 most frequent destinations, excluding the beach resorts. In Pennsylvania, cities at opposite ends of the state--Pittsburgh and Philadelphia--figure prominently among destinations for both business and pleasure trips.

The recent opening of the Pennsylvania Convention Center in Philadelphia has highlighted the city as a destination for business travelers. Indeed, nearly 800,000 people visited the Pennsylvania Convention Center in its first three years of operation, over 60,000 more than initially forecast. The center's economic impact is likely to be significant. A study by the Pennsylvania Economy League estimates that spending in Philadelphia by visitors to the center will grow to $275 million annually by the tenth year of the center's operation (fiscal year 2004). This spending is projected to sustain 4600 jobs and provide annual tax revenues of $30 million each to the city of Philadelphia and the state of Pennsylvania.

TRAVEL ADDS UP

Both the number of people traveling and the money they spend on their trips have drawn the notice of businesses and state and local governments. Private companies and travel development officials in the public sector are focused on gaining some of this business for their firms and regions. They know that personal and business outlays for travel expenses are a significant portion of total spending. For the nation as a whole, spending for travel and tourism amounted to approximately $400 billion in 1992, accounting for 9.2 percent of total consumption spending and 6.3 percent of gross domestic product.[4] Travel and tourism as an industry thus ranks above agriculture, mining, or construction as a component of GDP. The industry has been growing both absolutely and as a share of GDP. From 1987 to 1992, travel spending increased 44 percent in current dollars, while GDP increased only 32 percent.

The share that overnight travel spending contributes to gross state product (GSP) in the Third District falls below the national average, but the amount of such spending is still significant (Table). For Delaware, the share is 3.4 percent of GSP ($0.8 billion), for Pennsylvania, 3.6 percent ($9.6 billion), and for New Jersey, 4.7 percent ($10.5 billion). Travel and tourism as an industry ranks above agriculture and mining in all three states and also above construction in New Jersey. The states at the top of the list when ranked by travel spending as a percentage of GSP tend to be those where a large portion of visitors stay for several days and where the tourist season is year-round, such as Florida, Hawaii, and the southwestern states. Nevada's place in the rankings can be attributed to these factors as well as to its casinos.

While these data make the travel industry appear less important in the Third District states than in the nation, Pennsylvania and New Jersey rank high among all states in terms of absolute amounts of travel spending. The top three states in overnight travel spending--California, Florida, and Texas--account for more than 25 percent of the national market, doubtless because of their large size and year-round attractions. Nevertheless, New Jersey, ranking seventh in the nation for overnight travel revenue, and Pennsylvania, ranking eighth, play important roles in the nation's travel industry. Delaware's small size is reflected in its ranking--49th.

These state-to-state comparisons are based only on overnight trips. For the three Third District states, surveys indicate that a significant portion of travel into these states is for a single day. While spending for a single-day trip is less than that for an overnight trip, the number of day-trips to the District's states is so large that a substantial amount of travel spending is generated in this way. For example, a survey conducted for New Jersey suggests that day-trip and pass-through travelers add an amount equal to 67 percent of the spending by overnight visitors each year. Surveys conducted in Delaware indicate that day visitors may be responsible for up to 10 percent of all travel spending in the southern part of the state and about 40 percent in the northern part. This difference between south and north in Delaware may be attributed to the existence of large population centers (in Maryland, New Jersey, and Pennsylvania) close to the many cultural attractions of the Brandywine Valley in the north, while beach resorts in the southern part of the state attract proportionally more overnight visitors.

How Do Travelers Spend their Money? U.S. residents spent more than $300 billion on trips in 1992.[5] Nationwide, the largest category of expense within this total was food service (25 percent of travel-related spending). The next largest was public transportation (23 percent), followed by lodging (17 percent), auto transportation expense (17 percent), entertainment and recreation while on a trip (10 percent), and general retail purchases while traveling (8 percent). (See Figure 3).

The spending pattern among travelers to the Third District states differs somewhat from the national average, especially in New Jersey. Spending on public transportation is the top category of expenditure for travelers to Delaware and Pennsylvania. Such spending accounts for 29 percent and 27 percent, respectively, of total travel spending in these states. In New Jersey, entertainment and recreation spending is by far the largest category of travel expense (34 percent of the total). This category includes casino winnings, the amount of money earned by casinos from gamblers.[6]

Travel Spending Generates Jobs. Employment in the travel and tourism industry reflects the industry's share of output. Nationwide, employment in the industry is estimated to be 5.7 percent of total nonagricultural employment. From 1982 to 1992, travel-related jobs increased 56.3 percent, twice the rate at which total employment grew. According to the most recent estimates (1993), around 35 percent of these jobs are in food service, 20 percent in lodging, 16 percent in public transportation, and 15 percent in entertainment and recreation. The breakdown is similar for Pennsylvania and Delaware. In New Jersey, however, employment in the entertainment and recreation sector accounts for 46 percent of total travel-related employment. The presence of casinos in Atlantic City boosts the absolute and relative magnitude of entertainment spending in New Jersey and raises employment in this sector above the national average.

Travel employment in New Jersey and Pennsylvania in 1993 (the most recently available statistics) placed these states eighth and ninth in a listing of all states based on numbers of total jobs attributable to domestic overnight travel. But travel-related employment made up only 4.7 percent of total New Jersey employment, which matched the nationwide percentage of jobs attributable to travel by U.S. residents, 3.2 percent in Pennsylvania, and 3.4 percent in Delaware. Nonetheless, for some local areas in these states, travel-related employment accounts for a significant share of all jobs. For example, in the New Jersey shore counties of Atlantic, Cape May, Monmouth, and Ocean, travel-related employment constituted 25 percent of total employment in July 1993. In the Pennsylvania Pocono Mountain counties of Carbon, Monroe, Pike, and Wayne, travel-related employment was 16 percent of total employment in mid-1993.

WHERE TRAVEL IS HEADED

Industry analysts have identified some trends that they expect will shape the travel and tourism industry for the rest of this decade. These trends affect both business and pleasure travel, and they will bring changes in the amount of travel within the country as well as in the types of destinations travelers will favor. Some of these trends have positive implications for the states of our region.

The trend toward combining business and pleasure in a single trip should benefit the region as a whole. Its well-established business base and wealth of historical sites and cultural and recreational opportunities, all in a relatively compact area, make the three-state area a logical place for combined business and pleasure trips. In addition to attracting greater numbers of visitors, the region's variety of business and leisure attractions encourages longer stays per visit, magnifying the economic impact of the increased visitation.

Another emerging feature of travel in the United States is an increased desire for a variety of activities per vacation trip. However, people in the travel industry are keenly aware that coordinated regional planning and active marketing will be crucial to any particular region's ability to take advantage of this trend. For example, out-of-state visitors to the 1996 Philadelphia Flower Show took advantage of other tourist attractions in the region and extended their stays, many in response to a marketing effort that highlighted special accommodation and tourist packages for Flower Show attendees.

A travel trend that will have negative implications for the region, and for domestic travel destinations generally, is the growing popularity of ocean cruises. Americans have been spending more of their vacation time in this way in recent years, and an increasing percentage of cruise ship business is made up of family groups. The overall impact of this trend on other types of travel is likely to be minor, however, as cruise ship capacity remains small in relation to all other types of travel.

SUMMARY

In 1994, domestic passenger-miles topped 2 trillion for the first time as U.S. residents took 1 billion trips and nearly 50 million visitors arrived in this country from other lands. Spread among many types of businesses and made up predominantly of small firms, the travel and tourism industry is sometimes difficult to see as a whole, but it is clearly a big business. Visits to friends and relatives, vacations and other recreational travel, and business trips add up to a $400 billion industry that employs more than 5 percent of American workers, and those numbers are growing.

The three states of the Third District--Pennsylvania, New Jersey, and Delaware--do not spring to mind when glittering travel images are conjured up. But the beaches, casinos, historic sites, and sheer numbers of people passing through and around the region generate a travel and tourism industry that is significant within the regional economy and crucial in many localities. The travel industry even propels New Jersey and Pennsylvania to national prominence, placing them among the top 10 states in dollar value of travel spending.