'Squeezed & Confused'

Travel, tourism experts voice economic concerns over rising gasoline prices

Mark Brown

WASHINGTON -- The U.S. House Natural Resources Committee held an oversight hearing to examine the impact high gasoline prices have on job creation and economic growth in America's tourism and travel industry, which last year supported 14 million U.S. jobs.

"According to the Wall Street Journal, every dollar increase in gas prices means $2.6 billion a week must be diverted toward the gas pump and away from other spending. This decrease in consumer spending has significant impacts throughout our economy. With many families already running on tight budgets, the extra money spent on gasoline is more than enough to force families to forgo summer vacations, spring break trips or other travel plans," said Natural Resources Committee Chairman Doc Hastings.

Click here to view Hastings' full written testimony.

"Beach towns, mountain gateway communities and various other tourist destinations rely heavily on spring and summer travelers for the majority of their yearly income. High gasoline prices can have a crippling effect on the travel and tourism industry as business costs increase and revenue decreases from the lack of tourists and visitors that can afford to make the trip."

At the hearing, witnesses representing the travel industry recognized that as spring and summer travel season starts, many American families are already changing their travel plans and cutting back vacation and tourism.

Sam Gilliland, chairman and CEO of Sabre Holdings, who represents the world's largest travel marketplace that connects more than 350,000 travel professionals, provided the committee with insight on the direct economic impact to the travel industry.

"Overall, the U.S. travel and tourism industry generated $1.8 trillion in economic output last year…But make no mistake, the travel industry's significant contributions to the U.S. economy can only be fully realized if travel remains affordable and within the budgets of families and businesses of all sizes and backgrounds."

According to Gilliland, some Americans are already changing their travel plans, "For Americans who plan to travel by car this summer, 54% said that an increase in the price of gasoline would affect their travel plans."

Click here to view Gilliland's full written testimony.

AAA executive vice president of association and club services Mark Brown provided the committee with a consumer prospective on the impact of fuel prices on household budgets and travel plans. "Once again America's motorists are caught in a squeeze and confused as they try to understand what is happening at the gas pump," said Brown.

Since the beginning of 2012, the national average price of self-serve regular unleaded gasoline has jumped from $3.28 per gallon to $3.90 per gallon, an increase of 62 cents per gallon. At this price, a typical family owning two vehicles and using 1,200 gallons of gasoline per year spends about $4,680 annually, or about $390 per month.

Brown cited the findings of a recent AAA survey in which 84% of respondents said they have already changed their driving habits or lifestyle in some way because of increased gasoline prices. Combining trips and errands was the most commonly reported cost-cutting tactic, with 60% of respondents reporting having already made this adjustment; 45% of respondents are dining out less and 34% are delaying major purchases.

"The impact of rising fuel prices on consumer spending is significant," he said. "IHS Global Insight studies have shown that an increase of 24 cents per gallon ($10 per barrel of oil) over the course of a year will result in lowering real disposable income by 0.26%. This impact on disposable income will have an impact on consumer expectations and sentiment and can translate into a decreased willingness to travel. Gasoline currently makes up about 3.7% of consumer spending, and every additional 24-cents-per-gallon increase in prices results in roughly an additional $30 billion in consumer spending shifted to gasoline, assuming no change in volume purchased."

Although rising gasoline prices can cause concern for the travel industry, Brown indicated that current feedback from AAA travel counselors is encouraging. "A quick poll of some of our agents suggests that members are not cancelling their vacation driving plans, but may alter the distance and number of destinations."

Click here to read Brown's full written testimony. And click here for more details on the hearing, including a link to the archived hearing webcast.