Arizona at a tourism crossroads-Savvy neighboring states present heavy competition

The only images that used to matter were 100 percent natural: the sun setting behind a saguaro, visitors sitting poolside in February, the awe-inspiring beauty of the Grand Canyon.

A cold snap in the Midwest was sure to spark a stampede to the desert.

Hal Mattern
The Arizona Republic

Domestic visitor profiles (2001)

• Average age: 43.6.

• Average household income: $67,500.

• Average party size: 2.57 people.

• Average spending per person: $106.53 a day.

• Activities: Sightseeing, visiting parks and historic sites.

It’s not that simple for the Arizona tourism industry these days. The weak economy, aggressive marketing by other states and a tendency to rest on the status quo spell potential trouble.

Neighboring states are going after Arizona’s vacationers and business travelers, its tourism promotion budget is in jeopardy, and projects such as the Phoenix Civic Plaza expansion appear off track, at least for now.

Industry experts say that Arizona’s efforts to capitalize on tourism lag behind such areas as Las Vegas and Southern California, which have long histories as tourist destinations and are more organized and effective in marketing their attractions.

"Arizona has been sophisticated in looking at tourism for a lot less time," said Randy Virden, chairman of the Recreation Management and Tourism department at Arizona State University. "The industry is fragmented, and it is hard to get everyone together to work as one."

Debate rages on about funding for the Arizona Office of Tourism, but there is little discussion of the larger issues:

• Is Arizona in danger of losing market share to other cities and regions in the West, notably Las Vegas, San Diego or Los Angeles?

• Does the state tourism industry, which is loosely organized and prone to regional rivalries, have a vision to bring it out of this slump?

High stakes

The stakes have never been higher for Arizona, where the tourism industry supports 450,000 jobs and attracts nearly $15 billion a year in direct spending by domestic and foreign visitors.

The number of visitors and their spending levels has remained flat or fallen slightly because of the poor economy and the travel slowdown before and after the 2001 terrorist attacks.

Before then, growth was hot.

From 1997 to 2000, visitor spending rose by 25 percent, to $15.8 billion, but then fell to $14.8 billion in 2001, according to the state Office of Tourism. Early indications are that spending rose slightly in 2002.

But there is concern that increased competition and reductions in promotional funding could further erode Arizona’s share of the tourist and business travel market.

Las Vegas, for example, has stepped up its competition with Phoenix and Scottsdale for golfers and resort guests. And people in growing numbers are hopping on planes in Las Vegas to tour the Grand Canyon without setting foot, or spending dollars, in the Grand Canyon State.

At the same time, the Legislature is contemplating eliminating or severely reducing Arizona’s $9 million annual tourism promotion budget.

The historically fragmented industry has become more unified in recent months in efforts to save the tourism office’s budget, and it has been working on a strategic plan since 2001 to guide future tourism development in the state. It hopes to implement the plan this year. Officials are hoping that the industry unity continues.

"I think we have made great strides in recent years, but we have spent so much energy and political capital just trying to hold the line (on state funding) that we haven’t been able to think about getting to the next level," said Barry Aarons, executive director of the Arizona Tourism Alliance, an industry lobbying group.

In an effort to maintain and ultimately increase market share, the state and the tourism industry have to take immediate and long-term steps, officials say. They include:

• Maintaining funding for the tourism office, which promotes the state domestically and internationally and is especially critical for rural communities that lack the resources and expertise to conduct sophisticated marketing campaigns.

• Expanding Phoenix Civic Plaza, which is too small to handle the largest convention groups. The Legislature has balked at funding half of the $600 million project.

• Developing new attractions and improving and expanding current offerings to remain competitive over the long term. Some tourism officials say the state should be capitalizing on its Native American culture, which is especially intriguing to international tourists.

"Back in the 1960s, people came here for the weather," said Tom Silverman, whose family has been in the Valley hotel business since the 1950s. "In those days, we didn’t have competition. Now San Diego, Las Vegas and Florida, all sun destinations, are competing with us big time.

"The days of sitting back and waiting for people to come are over."

An escalating battle

There is no question that Arizona’s weather, natural beauty and world-class resorts will continue to attract millions of tourists. Investors and resort operators placed large bets last year on the industry’s future when they opened three giant resorts in the Valley. One, the Sheraton Wild Horse Pass Resort and Spa, is the first attempt in the state to wed Indian casino gaming with a full-fledged resort concept. Until now, gambling has not been part of the marketing pitch to out-of-state tourists and conventioneers.

But the lure of Las Vegas casinos and the beaches and theme parks of California is stronger than ever, meaning Arizona tourism officials will have to be creative in an attraction-driven and promotion-driven world.

While Arizona is facing tourism budget cuts, neighboring states, including Nevada and Colorado, are holding the line or beefing up their tourism promotion budgets. Colorado recently approved a $10 million increase to its $7 million budget, while Nevada added $1 million last year and plans to remain at its current $10 million this year.

California, which is facing a $34 billion budget deficit, is proposing cuts to its tourism funding for next year.

Even before the terrorist attacks rocked the tourism industry, the slowing economy was beginning to affect travel around the country. Most states, including California and Nevada, saw their visitor spending levels drop between 2000 and 2001. California ranked first in the nation for domestic tourist spending in 2001 with $55 billion, down $1 billion from the previous year, while Nevada was fourth with $24 billion, down from $27 billion.

Domestic visitor spending fell to $11.6 billion from $12 billion in Arizona in 2001, when the state ranked 12th in the nation.

But while other states reacted by boosting their tourism spending, the Arizona Legislature cut $1 million out of the tourism office’s budget. Lawmakers also took away half of the $4 million the office was supposed to receive this year from a new Maricopa County hotel room tax.

Arizona now ranks 29th in the nation for state tourism funding, while California and Nevada are 16th and 18th.

"It is totally foolhardy to cut the tourism budget when states around us are increasing theirs," said Sen. Carolyn Allen, R-Scottsdale.

Splintered interests

Achieving cohesive goals to attract more visitors will be difficult in a state with a tourism industry that hasn’t historically promoted its attractions with a unified voice. Different regions of the state sell their own attractions, from the Old West theme of Tombstone to the London Bridge in Lake Havasu City.

There also are several different groups working individually to attract tourist dollars. They include hotel and restaurant industry associations, city convention and visitors bureaus and the privately funded Arizona Tourism Alliance. Although they share the same ultimate goal, they sometimes clash over their priorities.

The state tourism office acts as a central clearinghouse for the industry, but its function mainly involves promoting the state. Its small staff and limited funding restrict its ability to develop and implement a universal plan for the future of the industry.

"Given the resources they have, I think they do a pretty good job," ASU’s Virden said. "But they could do a lot better if they threw more resources at it. We also need the tourism office to take the lead in getting everybody working together."

Theme-park dilemma

Arizona is at a further competitive disadvantage because it lacks any major private, for-profit tourist attractions, which can offer a windfall of free advertising. In California, for example, Disneyland spends millions on advertising, which directly benefits the state. Nevada’s casinos also help attract visitors with extensive marketing campaigns.

Arizona’s biggest tourist attraction, the Grand Canyon, is a national park and lacks the resources to advertise. It’s the same with such public attractions as the Petrified Forest, Painted Desert and Kartchner Caverns.

The biggest for-profit marketing boost the state receives is through resorts, whose well-known operators, such as Starwood, Marriott and Hyatt, promote the hotels worldwide in various media.

There has been talk over the years about the need for a major theme park in the Valley, but a variety of proposals have come and gone with no action. Concern lingers that a theme park would be a bust because Phoenix is too hot in the summer, when most families vacation. And not everyone believes a theme park would be a panacea.

"It would be nice, because it would be another source of dollars, but if you’ve seen one roller coaster, you’ve seen them all," said Pam Hait, a former deputy director of the state tourism office who now does marketing and public relations for tourism-related businesses.

"I tend to feel that the natural wonders we have are more important. We’ve got some incredible stuff that no one else has. There is only one Grand Canyon in the world, and we have it. Disney can create things, but we have the real thing. We’ve just got to do a better job of promoting what we’ve got."

Reach the reporter at [email protected] or (602) 444-8652.

http://www.azcentral.com/arizonarepublic/business/articles/0316tourism_future-CP.html