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Cross-Border
Economic Bulletin - November 2001
The Visitor
Services Industry in San Diego and Baja California
One of the primary
regional economic impacts of the September 11th terrorist attack is the
decline in tourism and business travel. The visitor services industry, which
supports tourism and business travel, is one of 16 industry clusters that
the San Diego Association
of Governments (SANDAG) has identified as “groups of complementary,
competing, and inter-dependent industries that drive wealth creation in
the region.... “ Hence, negative shocks to the industry hurt the entire
region.
This issue of the Cross Border Economic Bulletin uses regionally comparable
statistics to examine the size of the visitor services industry in San
Diego and Baja California. Its main findings are:
• Visitor services comprise about 7% of total employment and 5% of
output in both Baja California and San Diego;
• Approximately 75% of visitor services industry workers in San Diego
are employees in hotels, motels and other lodging facilities, or in restaurants,
bars, and night clubs; the figure for Baja California is over 80%;
• The impact of the terrorist attack is likely to be felt more intensely
in Baja California, and particularly in Ensenada and Rosarito;
• Some of the impact in San Diego could be offset by southern Californians
who substitute local vacations for distant ones;
• Negative impacts in San Diego will fall most heavily on local city
and county budgets that depend on the transient occupancy tax (TOT) and
on the working poor—some of whom may be forced back onto public assistance.
Definition and size of the sector
SANDAG identifies
two separate clusters of economic activity that support travel, tourism,
and conventions. These are the (i) Visitor Industry Services and (ii) Entertainment
and Amusement. Both industries are included in the analysis below. Collectively,
they are called the Visitor Services cluster.
In both San Diego and Baja California, the Visitor Services industry generates
wealth by using local labor and inputs to produce services that are sold
to people from outside the region. The industry provides employment to
large numbers of low skilled workers and is an important avenue for their
entry into the local labor force.
Table 1 illustrates the size of the sector in 1998, the most recent year
of comparable data. The relative size of the Visitor Services industry is
roughly the same in Baja California and San
Diego County, where it makes up about 5% of output and 7% of total employment
in both regions. (San Diego’s employment figures are from the Workforce
Partnership; they are significantly less than the numbers provided by
the San Diego Convention
and Visitor’s Bureau. The latter uses a jobs multiplier factor
to measure direct and indirect jobs—that is, jobs in the industry and
additional jobs outside the industry created by business and tourist spending.
(The data in Table 1 measure jobs in the industry only.)
Table
1
Visitor Services Industry Cluster, 1998 |
|
Employment
|
Average
wage
(US $)
|
Share
of regional product
|
| Baja California |
37,025
|
2,773
|
4.9%
|
| San Diego
County |
89,884
|
15,369
|
5.1%
|
| Source:
San Diego Workforce
Partnership; California EDD; Economic Census of Baja California;
INEGI; and author's calculations |
In 1998, the average annual wage in San Diego was $28,790 (87% higher
than in the Visitor Services cluster) and in Baja California was $4,061
(46% higher). The difference between the industry’s employment share
(7%) and its output share (5%) is explained by the low wages and relative
lack of skilled positions.
Industry subsectors
Within the San Diego segment of the Visitors Services cluster, approximately
75% of total employment is in two subsectors: (i) hotels, motels, and
other lodging, and (ii) eating and drinking places. In Baja California,
the figure is over 80%. This explains the relatively low wages paid as
well as the scarcity of high skilled positions. For example, in San Diego,
the single most important occupational category is waitress and waiters,
followed by food preparation workers, and cashiers. Occupational data
for Baja California is less certain, but there is no reason to believe
that it differs from this pattern.
Tables 2 and 3 show the number of workers in the two leading subsectors,
as well as the Amusement and Entertainment sector Note that the concentration
of employment in the tourism sector is much greater in Rosarito than in
any other political jurisdiction. Ensenada is a distant second, while San
Diego, Tijuana, and Mexicali are roughly comparable. The data in Table 2
show that Rosarito is particularly vulnerable to negative shocks to the
tourism sector.
Table
2
Subsectors of the visitors services industry, 1998 |
|
Hotels,
motels, other lodging
|
Restaurants,
bars, night clubs
|
|
Employment
|
Percent
of City
|
Employment
|
Percent
of City
|
| Ensenada |
1,330
|
2.2
|
3,490
|
5.9
|
| Mexicali |
1,669
|
1.2
|
6,616
|
5.0
|
| Rosarito |
919
|
12.5
|
979
|
13.3
|
| Tecate |
64
|
.3
|
533
|
3.2
|
| Tijuana |
2,715
|
.9
|
14,189
|
4.8
|
| San
Diego County |
25,399
|
2.0
|
43,379
|
3.4
|
| Source:
San Diego Workforce
Partnership; Economic Census of Baja California |
Table
3
Amusements and recreation subsector of the visitor services industry, 1998 |
|
Amusements
and recreation |
|
Employment
|
Percent
of Region
|
| Baja
California |
4,483
|
.9
|
| San
Diego County |
16,738
|
1.3
|
| Source:
San Diego Workforce
Partnership; Economic Census of Baja California |
Impacts of the terrorist attack
The September 11th terrorist attack had a harmful impact on the Visitor
Services industry. Airports were shutdown for several days and air travel
is not likely to return to its previous level for quite awhile. In addition,
border crossings became more difficult, and many Americans simply decided
to stay at home. As a consequence, several conventions were canceled,
hotels and motels have experienced big declines in occupancy rates, and
restaurants have fewer customers.
In San Diego, 27% of overnight visitors arrive by air. Their impact on
the local Visitor Services industry is relatively greater than their share
of the visitors, however, because 2/3 of all business and convention travelers
arrive via air, and these visitors spend more than twice as much per day
($132 per person versus $59, in 1999). In Baja California, only 9% of
the overnight visitors arrive by air, but a much larger share of visitors
are from outside Mexico and must cross an international border. As a result,
air travel is less critical than in San Diego, but impacts at the border
are more critical.
Table 4 shows the total number of visitors in 1999, along with the share
that is national in origin and the share that is foreign. The vast majority
(94%) of visitors to San Diego are from the U.S., and 45% are from Southern
California (33%) or Arizona (12%). One of the effects of the terrorist
attacks is that Americans are staying home more, but once travel begins
to pick up again, it is conceivable that San Diego could benefit from
a redirection of vacation plans by Southern Californians and Arizonans.
That is, if air travel does not resume its previous volumes, more people
will likely seek vacation opportunities nearby rather than at destinations
requiring air travel. In this sense, some of the decline in visitors could
be recouped from the large population base in Southern California.
Table
4
Visitor Services Industry, 1999 |
| visitors |
Overnight
visitors
|
National
origin visitors (%)
|
Foreign
origin (%)
|
| Ensenada |
892,100
|
53.0
|
47.0
|
| Rosarito |
844,200
|
25.3
|
74.7
|
| Tijuana |
1,300,500
|
76.1
|
23.9
|
| San
Diego County |
14,692,000
|
94.0
|
6.0
|
| Source:
San Diego Convention
and Visitor's Bureau; Secretaría de Turismo (SECTUR) |
Baja California’s status is more complex however, as large numbers
of visitors must cross the U.S.-Mexico border, and border waits have gotten
longer and more erratic. In particular, the very large share of Ensenada’s
and particularly Rosarito’s economies that are built around the Visitor
Services cluster, make them extremely vulnerable to a downturn in travel.
Ensenada is partially insulated from the border given that about 6% of
its visitors arrive via passenger ship. In 1998, this totaled 248 arrivals,
and 349,351 passengers. Not all of these passengers spend the night, however,
and overnight visitors sleep aboard ship, which reduces the demand for
hotels and motels.
Several other effects should be noted. First, the San
Diego County derived about $140 million dollars in revenue from the
transient occupancy tax (TOT) during fiscal year 2001. The Convention
and Visitor’s Bureau estimates that declining occupancy rates in
the region’s hotels and motels, together with discounts in room rates,
may reduce tax collections as much as $9 million in 4th quarter of 2001.
Second, a large but unknown share of Baja California’s commercial
sector depends on tourism. Not only the merchants along Tijuana’s
Revolution Ave., but pottery and furniture makers in Rosarito and Ensenada,
pharmacies, and taxis, all depend to one extent or another on the tourist
trade. Baja California has 12,454 employees (1998) in the passenger transportation
sector, and another 34,617 employed in specialized retail stores other
than food. Some but not all of these workers will feel the impact.
Third, as mentioned in last month’s Bulletin, about 35,000 residents
of Tijuana cross the border daily to get to work in San Diego. Longer
waits and greater uncertainty makes their lives more difficult and threatens
the income that they bring to Tijuana.
Finally, the low wage, low skill, characteristics of the Visitor Services
cluster makes it an important source of employment for people struggling
to get off public assistance. Given that the U.S. and San Diego economies
have been in one long expansion since the implementation of welfare reform,
economic events have never posed a significant challenge to the reforms
passed by Congress. Now, with the possibility of a national recession
and a downturn in Visitor Services, some of our assumptions about welfare
reform may be called into question.
The Cross-Border
Economic Bulletin is prepared monthly by Dr.
Jim Gerber, professor of economics at San
Diego State University. It is underwritten by 
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