Study: True tourism spending down

When state Office of Tourism officials announced last week that visitor spending in South Dakota increased by 2.8 percent in 2008, they weren't telling the whole story.

When state Office of Tourism officials announced last week that visitor spending in South Dakota increased by 2.8 percent in 2008, they weren't telling the whole story.

The study upon which the announcement was based contained other information that was not as positive and was not mentioned in the announcement. For example: When adjusted for inflation, visitor spending actually decreased by 2.5 percent; the number of tourism-related jobs in the state fell by 901; and the amount of state sales-tax collections arising from vacation travelers fell by $500,000.

None of that was mentioned in state Office of Tourism's announcement, which was sent to media outlets in the form of a press release titled "2008 Tourism Revenue Sets Record at $967 Million."

The press release said the growth in visitor spending came "in spite of $4 gas prices, a year-long recession and a third-quarter report showing an overall drop in U.S. tourism spending of 8.1 percent." The release also said that "Much of the success of the visitor industry in South Dakota can be credited to the partnerships forged with cooperative programs, such as the Governor's Million Dollar Challenge."

The press release was issued Thursday, with a note near the bottom stating that the "Economic and Fiscal Impact Study" upon which the release was based would not be made public until Friday.


Media outlets across the state reported information from the press release Thursday night, before the Economic and Fiscal Impact Study was available for viewing. A Thursday evening story by The Associated Press was published by many media outlets with headlines such as "South Dakota tourism grew by 2.8 percent last year." The AP story found its way into online publications as far afield as, MSN Money and Yahoo! Finance.

The sub-headline on the Yahoo! story said "South Dakota's tourism spending rose 2.8 percent despite higher gas prices, recession."

However, the study's author, identified as Dr. Michael K. Madden, wrote that "much of the increased overall spending by visitors in 2008 is traced to increased fuel costs."

Madden also wrote that, "in 2008, the rate of inflation jumped to 5.3 percent, the highest level in recent history." An estimate of "real" growth can be obtained, he added, by subtracting the 5.3 percent inflation rate from the 2.8 percent "nominal" growth rate.

"In 2008," Madden wrote, "the real rate of growth in travel spending amounted to -2.5 percent for the state as a whole."

The drop in real growth led to a corresponding decrease in visitor-industry jobs, according to Madden, who said the number of those jobs in the state fell by 901 as compared to 2007.

Madden estimated that $586.6 million worth of visitor spending was subject to the 4 percent state sales tax in 2008, producing sales-tax collections of about $23.464 million. That was a decrease in collections of about $500,000 as compared to 2007, he wrote.

The Daily Republic attempted to contact Wanda Goodman, who was listed as the contact person on the state Office of Tourism's press release, to comment on the report. Goodman did not return a phone message.


The findings of the study were not all bad. As noted in the state's press release, the nominal increase in spending was 2.8 percent and was the seventh-straight year of nominal growth. The total estimated visitor spending in 2008 was $967 million, which was a record. The spending created a total estimated economic impact of $2.418 billion, according to Madden, who used a multiplier of 2.5 that he said he developed in a 1986 study.

Madden also noted that since 2002, the South Dakota tourism industry has been on "a much more stable and consistent growth path than has been the case in earlier years."

"This is perhaps related to year to year congruence in advertising and promotional activities," Madden wrote, "as well as a stabilization of the industry over time."

What To Read Next
Get Local