Potential Impact of the

Gulf Oil Spill on Tourism

A report prepared for the

U.S. Travel Association
Contents

1 Introduction....................................................................................... 2
1.1 Summary of Findings ............................................................................... 2
1.2 Overview .................................................................................................. 3

2 What Is At Stake? ............................................................................. 4

3 Understanding the Impacts So Far ................................................. 6

3.1 Decline in Gulf shore interest ................................................................... 6
3.2 Declining Traveler Intentions: TNS Survey ............................................... 7
3.3 Declining Traveler Intentions: Louisiana
Survey ............................................................................................................... 8

4 What is the Outlook for Recovery?................................................. 9

4.1 Has the flow of new oil been permanently
halted?............................................................................................................... 9
4.2 Where will the oil flow? ............................................................................. 9
4.3 How long will cleanup take? ................................................................... 10
4.4 How will travelers react?......................................................................... 10

5 Case Studies and Potential Impacts ............................................. 11

5.1 Duration of tourism impacts.................................................................... 11
5.2 Duration and Scale of Impacts ............................................................... 14
5.3 Description of Key Case Studies ............................................................ 15
5.3.1 Ixtoc Oil Spill................................................................................... 15
5.3.2 Other oil spills / HABs..................................................................... 15
5.3.3 Hurricane Katrina ........................................................................... 15
5.3.4 Other hurricanes............................................................................. 16
5.3.5 Exxon Valdez ................................................................................. 16
5.3.6 SARS / H1N1 ................................................................................. 17
5.3.7 Asian Tsunami................................................................................ 20
5.3.8 Terrorism........................................................................................ 20

6 Estimates of Impact........................................................................ 21
6.1 Summary of Impacts .............................................................................. 21
6.2 Methodology........................................................................................... 22

7 Mitigating Losses ........................................................................... 24

 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

1 Introduction

1.1 Summary of Findings

„ Tourism is one of the top economic drivers of the Gulf region.

Visitors to Congressional Districts along the Gulf coast spent in
excess of $34 billion in 2008, sustaining 400,000 jobs.

„ Current indicators show double-digit declines in plans to travel

to the region.

„ The potential impact of the Deepwater Horizon oil spill could

cost the U.S. coastal economies $22.7 billion over a period of
three years.

„ A review of disasters affecting tourism destinations reveals that

the impact endures beyond the resolution of the crisis itself due
to brand damage and ongoing traveler misperceptions.

„ The potential economic impacts of the crisis could be cut by

one-third ($7.5 billion) with the establishment of a $500 million
emergency marketing fund to counter misperceptions and
encourage travel to the affected regions.

Oil Spill Impacts on Tourism Revenue Oil Spill Impacts on Tourism Revenue
US$, mns
% business as usual
16,000
2010 2011 2012 2013
15,000 0%

14,000 Low Impact

-5%
13,000

12,000 -10%
High Impact
11,000
-15%
10,000
Low impact scenario
9,000 -20% High impact scenario
8,000
2010 2011 2012 2013 -25%
Source: Tourism Economics
Source: Tourism Economics

2
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

1.2 Overview

The Deepwater Horizon oil spill in the Gulf of Mexico is the largest offshore spill
in U.S. history. Hundreds of millions of gallons have spilled since the explosion
of the rig on April 20, 2010. The resulting oil slick covers at least 2,500 square
miles. Large underwater plumes of oil not visible at the surface have also been
reported. Estimates of the total spill range from 100 million to 184 million gallons
of oil.

The spill has already had a massive impact on the Comparative Oil Spills
environment and is severely affecting the Million Gallons
economies of the region.
Exxon Valdez,
This study seeks to understand the current and March 1989,
potential damage to the tourism industry in the Alaska

region over a likely prolonged period of impact.

To do this, we look at a range of indicators of how Ixtoc, January
the disaster is already affecting traveler behavior. 1979, Mexico
To assess the potential longer term impacts, we
Low Estimate High Estimate
assessed the duration and magnitude of impacts Deepwater
of a broad range of historic crises around the Horizon, April-
July 2010, Gulf
world as inputs into a risk-weighted scenario of Mexico
model.
- 50 100 150 200

3
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

2 What Is At Stake?
„ Tourism is one of the top economic drivers of Visitor Spending in Gulf
Aggregate of Gulf Congressional Districts, $ millions
the Gulf region. Visitors to the Gulf Coast
Congressional Districts spent more than $34
billion in 2008. The largest share of this
Texas, 7,192
spending is received by Florida with more than
$20 billion in visitor spending, followed by
Texas with $7.2 billion and Louisiana with $3.6 Alabama,
1,362
billion.
Mississippi, Florida,
„ This spending sustains nearly 400,000 jobs 1,988 Louisiana,
20,013
3,567
within the Gulf Coast Congressional Districts.

Source: U.S. Travel Association

Leisure and Hospitality Employment

„ As a generator of employment, tourism is Share (%) of all private employment
25
more important to the Gulf economies than to
the rest of the country. Leisure and hospitality
22
employment represent 15 percent of total
20
private employment for the counties along the
Gulf shore compared with 12 percent for the
entire country. In Mississippi, 22 percent of 15
private employment on the coast is in the 15
14
15 15
13
leisure and hospitality sector. 12
10
US Gulf AL TX LA FL MS
Total County
Counties on Gulf Shore
Total
Source: BLS

Gulf Shore Tourism Employment

Share of State Tourism Employment
„ The 18 congressional districts touching the 40%
Gulf Coast represent a significant share of
each state’s total tourism economy. In
30%
Louisiana, nearly 40 percent of the state’s
tourism employment exists along the Gulf
Coast. A full 25 percent of tourism 20%

employment in the five affected states is on

the Gulf. 10%

0%
Texas Alabama Florida Mississippi Louisiana

Source: U.S. Travel Association

4
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

„ The visitor economy is a diverse

composite of sectors. When destinations Visitor Spending
are affected by a disaster, the impacts $ million
25,000 Mississippi
are felt by a broad spectrum of
Louisiana
hospitality, transport, recreation, and 20,000 Florida
retail sectors. Alabama
15,000

10,000

5,000

Personal
Transport

Retail
Lodging

Foodservice

Recreation
services

auto
Source: U.S. Travel Association

Homes for Seasonal or Recreational Use

„ In addition, the real estate sector and Gulf Coast Congresional Districts
rental income are highly tied to the 350,000

tourism industry. More than 459,000 300,000

homes along the Gulf are for seasonal or
250,000
recreational use, representing 7 percent
of all homes in the congressional districts 200,000

along the shore. 150,000

„ The current crisis puts into jeopardy not 100,000

only rental income and the ancillary
50,000
spending of guests, but also real estate
values. -
Mississippi Louisiana Alabama Texas Florida

Source: U.S. Census

5
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

3 Understanding the Impacts So Far

The high profile of the oil spill has led to incredibly widespread economic
impacts. Although the losses have been concentrated where oil has come
ashore, tourists have shifted away from the entire region in significant numbers.
Though hard figures are not yet available, several surveys and indicators help
provide a range of the impacts which are being, or will be, experienced.

The available research tells us a few things about the crisis for the tourism
sector in these early days. First, travel intentions are down significantly for the
Gulf. Second, misperceptions abound regarding which areas are affected. And
third, travelers believe the impacts of the disaster will be felt for a long time.

3.1 Decline in Gulf shore interest

With nearly 47 million monthly visitors, TripAdvisor® is the world’s largest travel
website featuring consumer reviews for destinations, hotels, B&Bs, inns and
restaurants, offering tools to search everything from flights to vacation rental
properties. The company has provided two revealing snapshots of the decline in
searches for Gulf shore destinations.

The chart below shows the percentage drop in the share of TripAdvisor U.S.
page views for various destinations for the 20 days leading up to May 20 and to
July 18 compared to the same 20-day period one year earlier. The effect of the
oil spill on interest in the region is striking and in most cases has only increased
over time.

This decline in searches represents a leading indicator of booking as fewer

travelers are planning trips to the region. Consumers searched 52 percent less
for Pensacola, Fla. in July, 65 percent less for Gulf Shores, Ala., and 48 percent
less for Destin, Fla.

Share of TripAdvisor U.S. Page Views

% change on same 20-day period one year ago

Gulf Shores
Pensacola
Destin
Panama City Beach
Fort Myers Beach
Clearwater
Key Largo
Biloxi
Fort Lauderdale
20 days until…
Outer Banks
Myrtle Beach 18-Jul
Miami
20-May
Hilton Head
Daytona Beach
West Palm Beach

-65% -55% -45% -35% -25% -15% -5% 5% 15%

Source: TripAdvisor

6
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

TripAdvisor Page Views

% Change in Share of U.S.
Twenty days until… 20-May 20-Jun 18-Jul
West Palm Beach 14% 17% 9%
Daytona Beach 1% -4% 3%
Hilton Head -4% 0% 1%
Miami 16% 1% -2%
Myrtle Beach 1% 3% -2%
Outer Banks -11% -8% -4%
Fort Lauderdale 5% -1% -5%
Biloxi -24% -16% -14%
Key Largo -24% -28% -14%
Clearwater -20% -26% -17%
Fort Myers Beach -20% -31% -29%
Panama City Beach -18% -31% -30%
Destin -9% -25% -48%
Pensacola -41% -52% -52%
Gulf Shores -19% -47% -65%
Source: TripAdvisor

A more detailed look at the data in the above table shows that the impact may
already be extending beyond where oil has come to shore. For example, the
Outer Banks has been consistently negative since the crisis began, as has much
of the Florida Gulf coast, even though oil has only been spotted in the state’s
panhandle region. Also, it is noteworthy that the east coast of Florida has
experienced increases in interest, possibly as an alternate destination.

3.2 Declining Traveler Intentions: TNS Survey

TNS is a leading provider of market research and conducted a representative

survey of U.S. households regarding their travel intentions and how they have
changed. The survey was conducted in June and found that 10 percent of those
already intending to travel to the Gulf region had changed their plans due to the
oil spill. Another 22 percent had decided not to go for unspecified reasons,
leaving only 68 percent of would-be travelers to the region holding onto their
plans.

This figure is substantial in two regards. First, it represents the average for the
entire Gulf shore region though large parts have been untouched by oil. Clearly
some regions are bearing the greater brunt of these cancellations. Second,
these are changed plans only and therefore do not include any losses of trips
that would have been planned and booked on short notice apart from the oil
spill.

The TNS survey also asked which destinations were chosen as substitutes
when Gulf trip plans were changed. Remarkably, North Carolina, Massachusetts
and Maine were among the top alternative destinations indicating a high
aversion even to proximity to the Gulf region.

7
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

3.3 Declining Traveler Intentions: Louisiana Tourism Survey

The Louisiana Office of Tourism commissioned two successive surveys which

were fielded by MDRG. The first was a national survey conducted from May 19-
21. The second was a regional survey of key visitor source markets conducted
June 18-21.

The May survey found that 26 percent of those who had plans to visit the state
of Louisiana had postponed or canceled their trip. The June survey, which
focused on relatively nearby visitor markets in Texas, Mississippi and Florida,
found that 17 percent had postponed or canceled their planned vacation to
Louisiana.

Equally serious is the perception that this disaster will affect Louisiana for years
to come. Nearly 80 percent of national respondents believed the disaster would
impact the state for at least two years with nearly 40 percent stating that the
impact will extend five years or longer. Regional respondents had an even
bleaker view of the future with 88 percent indicating an impact of at least two
years and nearly 50 percent expecting an impact lasting at least five years.

Perception of Effect on Louisiana

Share of respondents

50%
National 41%
39%
40% Regional
31%
30%
21%
20% 17% 18%
11% 10%
10% 8%
4%

0%
1-2 years

2-5 years

years

years
than 1

5-10
Less

10+
year

Source: Louisiana Office of Tourism

Significant misperceptions were also identified by these surveys. For example,

only 14 percent of national respondents realized that Louisiana oyster beds have
not been contaminated with oil and only 45 percent of respondents believed that
seafood at Louisiana restaurants is safe.

8
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

4 What is the Outlook for Recovery?

Estimating the eventual impact of the spill on the tourism economies of the Gulf
faces several uncertainties. In order to begin to assess the duration and extent of
the impact, ranges must be established for these variables. We note four critical
uncertainties below as well as the most likely outcome for each.

4.1 Has the flow of new oil been permanently halted?

At the time of writing, a cap has successfully stopped the flow of oil for three
days. This is clearly encouraging, but the risk of additional oil flowing into the
Gulf remains.

4.2 Where will the oil flow?

Somewhere between 100 million and 184 million gallons of crude has spilled.
Projections indicate it could show up as far west as Corpus Christi, Texas, or as
far north as North Carolina's Outer Banks. The most widely accepted forecasts
are being conducted by The National Oceanic and Atmospheric Administration
(NOAA) which has used computer models to estimate the likelihood of various
oil flow scenarios:

„ The coastlines from the Mississippi River Delta to the western

panhandle of Florida: 81-100 percent oil probability

„ Texas: low probability (less than 1 percent in the south to 40

percent near the Louisiana border)

9
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

„ Florida Keys, Miami and Fort Lauderdale: 61-80 percent due to

the potential influence of the Loop Current

„ East coast of Florida and other Eastern Seaboard: 20 percent or

less with impacts less likely north of North Carolina as the Gulf
Stream moves away from the mainland

4.3 How long will cleanup take?

Here, estimates vary widely. The U.S. Coast Guard has talked about a multi-
year process. The existence of oil plumes that have been found deep in the
water column add uncertainty to any estimates of the time required for recovery.
The comparably sized Ixtoc Oil Spill (140 million gallons) off Mexico’s coast in
1979 suggests that affected beaches could return to pre-spill conditions within
about three years.

However, tar balls and patties could wash ashore for longer. Some of the
mangrove swamps in the Yucatan Peninsula, an ecosystem similar to the one
found off the Louisiana Gulf coast, are currently 80 percent recovered from that
spill, and tar can still be found in some areas.

4.4 How will travelers react?

This is the true wild card. Leisure travelers have ultimate discretion in their
choice of destination and may avoid regions which have only slight
contamination or perhaps even the risk of oil. This can affect a destination for
much longer than the disaster itself and may be the most significant factor in
determining the eventual impact on the affected tourism economies. The next
section of this report addresses this issue in more detail.

10
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

5 Case Studies and Potential Impacts

In order to understand the potential role of traveler behavior, we have assessed
a range of disaster case studies to determine the range and duration of impacts.
From these, we can then draw conclusions on the possible outcomes for the
current oil spill.

5.1 Duration of tourism impacts

A number of comparable crises have been considered to determine a range of

possible direct impacts on tourism in the affected areas. The duration and scale
of the previous crises have been considered at a national or state level since
data and case studies are more readily available. The impacts will clearly be
higher for specific coastal areas.

Duration is calculated as the combined length of time that there was physical
disruption to tourism services in addition to the time period for which perceptions
were affected. This is measured as the time between the start of each event and
the time that visits and spending return to business as usual estimates.

The scale of the current oil spill as well as the potential tourism disruption has no
exact precedent. While earlier oil spills have been environmental disasters, the
immense scale of the current oil slick implies that the potential damage is larger.
And the proximity to unique fishing activity and tourism hotspots also places the
event apart from previous events.

A variety of events have been examined in terms of duration and scale to

determine the expected range of impacts on tourism activity:

• Previous oil spills

• Harmful Algal Blooms (HABs)

• Hurricanes

• SARS / H1N1

• Asian Tsunami

• Terrorist attacks

All of these events share some common characteristics in that they are either
natural disasters or unpredictable events and that they have influenced
perceptions of destinations even after the initial physical disruption is over. The
following charts document the tourism impact duration of a wide range of events
in terms of the months required to attain prior visitor spending peaks. The
average ranges are based on a single standard deviation of the recorded
durations.

11
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

Duration of Oil Spill Tourism Impacts

Months after initial disruption for visitor spending to return to baseline

Exxon Valdez

Ixtoc

Amoco Cadiz

Erika

Prestige Average Range

12-28 months

Average (range)

0 10 20 30 40 50
Source : Tourism Economics

Duration of Hurricanes Tourism Impacts

Months after initial disruption for visitor spending to return to baseline

Katrina

Keith

Ivan (Cayman)

Ivan (Grenada)

Iwa

Luis
Average Range
Hugo 10-27 months

Average (range)

0 10 20 30 40 50
Source : Tourism Economics

Duration of Pandemic Tourism Impacts

Months after initial disruption for visitor spending to return to baseline

Hong Kong
(SARS)

Singapore (SARS)

Canada (SARS)

Mexico (H1N1)
Average Range
9-12 months
Average (range)

0 10 20 30 40 50
Source : Tourism Economics

12
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

Duration of Asian Tsunami Tourism Impacts

Months after initial disruption for visitor spending to return to baseline

Thailand

Indonesia

Sri Lanka

Maldives
Average Range
11-12 months
Average (range)

0 10 20 30 40 50
Source : Tourism Economics

Duration of Terrorism Tourism Impacts

Months after initial disruption for visitor spending to return to baseline

Bali 2003

Bali 2005

London

New York

Madrid

Sharm El Sheikh Average Range

10-22 months
Average (range)

0 10 20 30 40 50
Source : Tourism Economics

Tourism Disruption after Crises

Months after initial disruption for visitor spending to return to baseline
(typical range and average duration by type of event)
The far left and far
Oil Spills right markers
Hurricanes represent the range
of impact duration.
Pandemics
The middle marker
Asian Tsunami represents the
Terrorism average of all
Combined
observed timeframes.
Average

0 5 10 15 20 25 30 35
Source : Tourism Economics

13
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

5.2 Duration and Scale of Impacts

The following chart illustrates that there is a clear relationship between the
length of the disruption and the overall scale of the tourism impact. In addition,
we see that some relatively short-lived events can also have very large effects
on tourism for that period. This is used as an input into calculating the range of
possible impacts.

The analysis shows a broad range of impacts which provides a context for the
current disaster. Some hurricanes have reported only a single-season impact
while Katrina stands out in terms of its duration and scale of impact.

Event Duration & Scale The left axis shows

the peak percentage
80% loss in tourism
Tsunami
SARS Katrina spending. The bottom
70% Hurricanes
Peak impact (% year before event)

Oil Spills / HABs

axis shows the
60% Terrorism duration for spending
Gulf Oil Spill - RANGE to return to pre-
50% disaster levels.
40%
The dotted box
30% represents the
potential range of
20% impacts, both in
magnitude and
10%
duration, of the
0% current crisis.
0 10 20 30 40 50
Duration (months)
The dotted-line box represents the estimated range of impacts in terms of
duration and scale for the current oil spill. This is based on current estimates of
the length of time of cleanup as well as traveler uncertainty created by
misperceptions. On this basis, the Deepwater Horizon oil spill impact could
reasonably extend to three years beyond the initial spill.

14
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

5.3 Description of Key Case Studies

5.3.1 Ixtoc Oil Spill

„ In 1979, an oil rig exploded off the coast of the Yucatan in

Mexico. The Ixtoc well poured 140 million gallons of oil into the
Gulf of Mexico. Massive slicks reached the northern Mexican
Gulf coast and Texas, where it would eventually coat almost 170
miles of U.S. beaches. The beaches were largely clear within
three years. However, it was five years before all tar mats on
Texas beaches disappeared.

„ The Deepwater Horizon spill is closer to and, therefore, affecting

Louisiana marshlands that are more sensitive than the sparsely
populated Texan and Mexican coastlines that Ixtoc reached.
While beaches are relatively easy to clean, getting the oil out of
the delta's fragile marshlands is much more difficult, according
to scientists.

5.3.2 Other oil spills / Harmful Algal Blooms

„ Previous oil spills have involved huge cleanup operations and

disruption to ocean activities such as fishing with some clear
implications for tourism. However the potential disruption to
numerous tourism destinations and activities is a unique feature
of the current spill. It is likely that tourism disruption will be
higher than suggested by previous spills.

„ Harmful Algal Blooms (HABs) also present similar disruptions to

coastal tourism activity. Previous effects have affected fishing
activities more than broader coastal tourism activities.

5.3.3 Hurricane Katrina

„ On August 29, 2005, Katrina's storm surge caused 53 different

levee breaches in greater New Orleans, submerging 80 percent
of the city. The storm surge also devastated the coasts of
Mississippi and Alabama, making Katrina the most destructive
and costliest natural disaster in the history of the United States
with total damage of more than $100 billion.

„ In 2004, New Orleans received 10.1 million visitors. The city

hosted 7.6 million in 2008, the last year of available figures, and
remains roughly 25 percent below its pre-Katrina peak. Visitor
spending in New Orleans finally recovered fully in 2008 with
$5.1 billion compared to $4.9 billion in 2004, marking a three-
year process to reach prior peak spending levels.

15
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

„ The impact on the meetings sector endures to this day. After

Katrina, 4.6 million cumulative room nights were canceled,
extending out to 2025.

New Orleans Tourism Recovery Katrina Impact on New Orleans Meetings

Room nights cancelled by scheduled date of meeting
12 Number of Visitors (left side) $6

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015
Spending (right side)
10 $5 0
Million Visitors

Billion Spend
-200,000
8 $4
-400,000
6 $3
Total Cancelled Room
-600,000 Nights = 4.6 million
4 $2
-800,000
2 $1
-1,000,000

0 $0
-1,200,000
2002 2003 2004 2005 2006 2007 2008
Source: UniversitySource
of New:Orleans Source: New Orleans CVB

5.3.4 Other hurricanes

„ Hurricanes have been considered that have significantly

disrupted tourism infrastructure across Central America and the
Caribbean measured at the country level. These tend to be
short-lived events, with disruption of less than a full year but with
very high short-term impacts.

„ Hurricanes are expected annually to some degree, although the

affected locations are unknown and short-term impact is
comparable. However, the legacy of the impact does not tend to
persist beyond the physical rebuilding.

„ An obvious exception to general analysis here is Hurricane

Katrina and its impact on Mississippi and Louisiana.

5.3.5 Exxon Valdez

„ In 1989, the Exxon Valdez spill dumped nearly 11 million gallons

of oil into Prince William Sound, and it spread down the Alaska
coast, ultimately oiling 1,200 miles of shoreline.

„ Recreation and tourism in the spill area dramatically declined in

1989 in Prince William Sound, Cook Inlet and the Kenai
Peninsula. Injuries to natural resources led resource managers
to limit access to hunting and fishing areas, and users such as
kayakers were prevented from enjoying those beaches that
harbored visible oil. Recreation was also affected by changes in
human use in response to the spill, because areas that were

16
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

unaffected become more heavily used as activity was displaced

from the oiled areas.

„ More than 40 percent of businesses in the affected region

reported significant or complete losses and visitor center
inquiries fell 55 percent in the year after the spill. $19 million in
visitor spending was lost in one season.

„ Of particular note, 27 percent of businesses in parts of Alaska

with no oil reported moderate or significant losses

„ A 2001 National Oceanic and Atmospheric Administration

(NOAA) study surveyed 96 sites along 8,000 miles of coastline.
The survey indicates a total area of approximately 20 acres of
shoreline in Prince William Sound is still contaminated with oil.
Oil was found at 58 percent of the 91 sites assessed.

5.3.6 SARS / H1N1

„ The experience of SARS in 2003, followed by the Asia-wide

avian flu outbreak, reminded the world of the active threat of
serious global pandemics. None of the outbreaks to date
(including swine flu in 2009) have caused global devastation on
a level with true historic pandemics but there have been some
significant impacts on local economies, not least from sharp falls
in tourism arrivals to areas with a high perceived risk. In most
observed cases these sharp falls have been short-lived, but it
has taken on average a full year for activity to return to business
as usual levels.

„ Recorded SARS cases in 2003 were predominantly located in

East Asia with adverse affects to travel across the region as
confidence was hit. The important travel hubs of Singapore and
Hong Kong were significantly affected. Travel spending in Hong
Kong fell by 60 percent on a year-over-year basis in mid-2003,
but a return to more normal travel patterns was evident within a
year.

„ The number of reported cases in Singapore was much lower

than other countries, but its position as a regional travel hub
meant that it was hit by low confidence in travel. Inbound
revenues fell by 40 percent year-over-year in mid-2003 and it
took more than a year for a return to baseline trends.

„ Outside of Asia, a large number of reported cases in Toronto

affected travel to Canada. Total inbound travel spending fell by
more than 15 percent compared with the previous year. This
can also be explained by a general blow to travel confidence
from key Asian origin markets and highlights the importance of
destination perceptions in travel decisions.

17
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

„ The swine flu (H1N1) outbreak in 2009 was not as virulent as

was feared and did not significantly disrupt global activity.
However, the high number of initial cases in Mexico adversely
affected tourism perceptions of the country. Tourism arrivals and
revenue fell sharply in mid-2009 and remain low in early 2010,
but almost back to levels experienced before the outbreak.

„ The following charts show the losses in tourism spending by

country on account of SARS and H1N1 (for Mexico). The upper
line represents the pre-pandemic forecast. The lower boundary
shows actual revenues.

18
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

Hong Kong Inbound Tourism Revenue Singapore Inbound Tourism Revenue

HK$, mns S$, mns
75,000 9,500

70,000 9,000

65,000 8,500

60,000 8,000

12 month sum 12 month sum

55,000 7,500

50,000 7,000

45,000 6,500

40,000 6,000
2001 2002 2003 2004 2001 2002 2003 2004
Source : Tourism Economics / IMF BofP Source : Tourism Economics / IMF BofP

Indonesia Inbound Tourism Revenue Mexico Inbound Tourism Revenue

Rupiah, bns US$ mn
60,000 14,000

13,500
55,000
13,000
50,000
12,500

45,000 12,000
12 month sum
11,500
40,000
12 month sum 11,000
35,000
10,500

30,000 10,000
2004 2005 2006 2007 2008 2008 - Q1 2009 - Q1 2010 - Q1
Source : Tourism Economics / IMF BofP Source : Tourism Economics / IMF BofP

Canada Inbound Tourism Revenue Thailand Inbound Tourism Revenue

C$, mns Baht, mns
17,500 600,000

17,000 550,000

16,500 500,000

16,000 450,000

15,500 400,000
12 month sum
15,000 350,000
12 month sum
14,500 300,000

14,000 250,000

13,500 200,000
2001 2002 2003 2004 2004 2005 2006 2007
Source : Tourism Economics / IMF BofP Source : Tourism Economics / IMF BofP

19
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

5.3.7 Asian Tsunami

„ The Asian Tsunami of 2004 devastated coastal communities

and resorts across Asia and rebuilding is ongoing in some
cases, even though the actual event was brief. It still took at
least a year in most cases to rebuild visitor confidence in
destinations to return to business as usual.

5.3.8 Terrorism

„ The duration and scale of terrorism on tourism is largely

dependent on the scale and unexpectedness of the incident. If
there are already question marks regarding the safety of a
destination then the effect will be lower than if a destination has
previously been considered safe.

„ For example, the 2005 Bali bombing caused less disruption than
the 2003 incident, although comparison is complicated by the
effect of the Tsunami in 2004 on Bali and Indonesia in general.

„ Overall tourism event studies provides good examples of how

the impact of an event can persist for many months and even
years by altering tourists’ perceptions of destinations.

Indonesia Inbound Tourism Revenue Spain Inbound Tourism Revenue

Rupiah, bns Euro, mns
60,000 39,000

55,000 38,000

37,000
50,000
36,000
45,000
35,000
40,000
12 month sum 34,000
35,000
33,000 12 month sum
30,000
32,000

25,000 31,000

20,000 30,000
2001 2002 2003 2004 2005 2001 2002 2003 2004 2005
Source : Tourism Economics / IMF BofP Source : Tourism Economics / IMF BofP

20
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

6 Estimates of Impact

6.1 Summary of Impacts

Case studies provide historic benchmarks for both the duration and scale of the
impact. The below table lays out the results of a model of potential impacts
under two scenarios. The low impact scenario is based on the lower range of
NOAA oil flow probabilities for each potentially affected region, observable
impacts to date and lower boundaries of historic disaster impacts.

The model behind the high impact scenario is based on the high range of NOAA
oil flow probabilities for each potentially affected region, observable impacts to
date and upper boundaries of historic disaster impacts. Due to the scale of the
current oil spill it is more likely that the disruption to tourism in the region will be
towards the upper end of the historic range of impacts as reviewed in the
previous section.

The disruption to visitor patterns is expected to last a minimum of 15 months.

This implies a minimum impact scenario that tourism flows to the region return to
“normal” levels by late 2011 and would entail an aggregate cost of $7.6 billion in
lost tourism revenues.

Total Impact on Gulf Region

Low Impact High Impact
Months 15 36
Impact on Tourism Revenues
% 1 year % 3 year % 1 year % 3 year
US$ Bn US$ Bn
outlook* outlook** outlook* outlook**
Total Region $7.6 12% 4% $22.7 25% 8%

Florida $6.3 13% 5% $18.6 27% 14%

Lousiana $0.7 17% 6% $2.0 37% 18%
Missisippi $0.4 19% 7% $1.2 41% 20%
Alabama $0.3 19% 7% $0.8 41% 20%
Texas $0.0 0% 0% $0.1 1% 0%
* potential lost revenues in the first 12 months relative to business as usual for coast economies
** potential lost revenues over the next 36 months relative to business as usual for coast economies

However, there is a clear risk that impacts may be greater than this and that the
crisis will adversely impact tourism arrivals for up to 36 months. In this high
impact outlook, tourism flows to the region would not return to “normal” until
early 2013, involving lost revenues of almost $22.7 billion.

The expected losses fall heavily on Florida due to the larger area at risk on both
the Gulf and Atlantic coasts. However, the coastal areas of Louisiana,
Mississippi and Alabama are more directly exposed to the disaster and the

21
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

proportional effects are expected to be larger. The impacts for Texas are
minimal in both scenarios due to the likely direction of oil flows.

In comparing these two scenarios, not only would tourism be affected for a
longer period in the high impact scenario, but the initial impacts are also
expected to be larger. This fits the usual profile of tourism impacts seen in
previous extended crises. A large initial response is observed, driven by both the
supply and demand side. This tends to be followed by a partial recovery as
supply is restored but perceptions and demand still take time to return to normal
levels.

For example, visits to New Orleans fell sharply in the year following Katrina with
a large drop in the number of available hotels and rooms. A little more than a
year later, more than 80 percent of capacity had been restored but room
demand lagged.

In the case of the Gulf Oil Spill, comparable impacts for 2010 are expected to be
roughly twice as large under the high impact scenario as under the low impact
scenario.

Oil Spill Impacts on Tourism Revenue Oil Spill Impacts on Tourism Revenue
US$, mns
% business as usual
16,000
2010 2011 2012 2013
15,000 0%

14,000 Low Impact

-5%
13,000

12,000 -10%
High Impact
11,000
-15%
10,000
Low impact scenario
9,000 -20% High impact scenario
8,000
2010 2011 2012 2013 -25%
Source: Tourism Economics
Source: Tourism Economics

6.2 Methodology

Potential high and low tourism losses were identified from case studies and have
been applied to Gulf Coast tourism revenues. Since these estimated impacts are
derived from comparable case studies they are net impacts and include any
offset from relief workers, government officials and media. It should be noted
that the spending and activity patterns of these visitors are much more limited
than leisure travelers.

A range of impacts for the Gulf Coast as a whole has been estimated according
to the range of impacts in case studies. The expected duration of the crisis was
estimated within the range of 15 to 36 months. However, the range of overall
impacts is not purely due to different durations. Case studies also indicate a

22
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

range of proportional responses in tourism revenues, relative to pre-crisis levels.

This informs the range of estimates of the peak one-year response to the crisis.

Specific ranges of impacts can be determined by adjusting the overall potential

loss by the relative risk of oil reaching shores using the probabilities derived from
NOAA ocean current and wind probabilities. Accordingly, the coastline between
the Mississippi River Delta and the western panhandle of Florida are expected to
experience the greatest proportional losses in tourism revenues in both low and
high scenarios.

Potential losses are applied to tourism revenues for Gulf Coast congressional
districts grouped by state, as described in Section 2. The exception is Florida
since the full extent of its coastline is at risk to a relatively high degree.

This methodology has the important implication that Texas is expected to be

largely unaffected despite having a large Gulf coastline. NOAA sees a minimal
risk to the bulk of Texas shore. Less than 2 percent of its Gulf revenues are at
risk in the worst case scenario.

23
 Potential Impact of the Gulf Oil Spill on Tourism
Prepared for the U.S. Travel Association

7 Mitigating Losses
The difference between the low and high boundaries of the impact over a three
year period is $15 billion. This poses the question, “What can be done to move
the impact toward the lower boundary?”

The range of potential impacts depends largely on the uncertainties described in

Section 4. Namely:

„ Has the flow of new oil been permanently halted?

„ Where will the oil flow?

„ How long will cleanup take?

„ How will travelers react?

Of the four major uncertainties, the last one is the easiest to influence. As noted
in many of the case studies and even in the current crisis, perceptions are
critical to the recovery. In many instances, the impact of misperceptions on
travel and tourism is greater than the effects of reactions to the real disaster.
Current data from surveys and TripAdvisor show that this is happening already
with vacationers avoiding the entire region, partly for lack of information.

Therefore, a critical part of the recovery strategy should include a robust

communications and marketing plan for the entire region to both inform and
motivate travel to the broadly affected region.

This is the key lever available to the travel and tourism industry to move the total
impact toward the lower boundary of total impact over the next three years.

Separate research by Oxford has determined a range of tourism marketing ROI

for various destination campaigns over the past decade. This analysis showed
that some of the most effective campaigns were conducted after a crisis. This
was observed in campaigns both for Canada after SARS and for Alaska after the
Exxon Valdez spill. After eliminating outliers on both the low and high end, we
found tourism marketing campaigns to yield a return of $5 to $64 in visitor
spending for every dollar spent on marketing.

The industry has called for a dedicated emergency marketing

fund of $500 million as a means of reducing the medium and
Expected Event Impacts
$ Million, Three‐Year Cumulative
longer term impacts of the oil spill. If we assume an average
ROI of 15:1 (which is conservative in light of a documented Tourism Industry Loss
Low Impact $ 7,621
ROI of 20:1 for post-SARS campaigns in 2004), the $500 High Impact $ 22,737
million in marketing would generate $7.5 billion in tourism Difference $ 15,115
spending in the regions affected by the oil spill.
Suggested Marketing $ 500
Another way to describe this scenario is that $500 million in Assumed ROI (Visitor spend
marketing spending could relieve half of the $15 billion per dollar marketing) 15:1
uncertainty between the lower and upper boundaries of Visitor Spend Benefit $ 7,500
potential impact. This would effectively cut the total impact on % of High-Low Difference 50%
the travel and tourism economy by a third in comparison to % of High Impact Scenario 33%
the high impact scenario.

24
 OXFORD
Abbey House, 121 St Aldates
Oxford, OX1 1HB, UK
Tel: +44 1865 268900

LONDON
Broadwall House, 21 Broadwall
London, SE1 9PL, UK
Tel: +44 207 803 1400

BELFAST
Lagan House, Sackville Street
Lisburn, BT27 4AB, UK
Tel: +44 28 9266 0669

NEW YORK
817 Broadway, 10th Floor
New York, NY 10003, USA
Tel: +1 646 786 1863

PHILADELPHIA
303 Lancaster Avenue, Suite 1b
Wayne PA 19087, USA
Tel: +1 610 995 9600

SINGAPORE
No.1 North Bridge Road
High Street Centre #22-07
Singapore 179094
Tel: +65 6338 1235

PARIS
9 rue Huysmans
75006 Paris, France
Tel: + 33 6 79 900 846

email: info@tourismeconomics.com

www.oxfordeconomics.com
www.tourismeconomics.com

25