SONOMA COUNTY ANNUAL TOURISM REPORT INDUSTRY REPORT 2022 2 EDB ECONOMIC DEVELOPMENT BOARD Ï Ï KATHRYN HECHT, CHAIR JORGE ALCAZAR SKIP BRAND BETZY CHÃVEZ LINDA KACHIU JORDAN KIVELSTADT WAYNE LEACH REGINA MAHIRI RICHARD MARZO MICHAEL NICHOLLS Ï Ï * 0 ! . % )Ï 4 ! 1 0 % 2 !Ï % . ! 0 + . Ï Ï FOUNDATION LEVEL PRESENTING LEVEL PREMIER LEVEL EXECUTIVE LEVEL ⢠COMCAST ⢠MORGAN STANLEY WEALTH MANAGEMENT ⢠NORTH BAY ASSOCIATION OF REALTORS ⢠PISENTI & BRINKER LLP ⢠SUMMIT STATE BANK SONOMA COUNTY BOARD OF SUPERVISORS 3 EDB CONTENTS 4. EXECUTIVE SUMMARY 6. MOODYâS ANALYTICS TOURISM ANALYSIS 12. TOURISM INDUSTRY INDICATORS 19. SONOMA COUNTY VISITOR PROFILE 23. GLOSSARY 24. ACKNOWLEDGMENTS & SOURCES 4 EDB Ï Ï Ï Ï Ï EXECUTIVE SUMMARY ! , 0 ! ) ! .Ï The Sonoma County Economic Development Board (EDB), in partnership with Sonoma County Tourism, is pleased to bring you the 2022 Annual Tourism Report. The report contains three sections integrating ï¬ndings on the local tourism industry. MOODYâS ANALYTICS INDUSTRY ANALYSIS Moodyâs is a leader in economic research and provides key quantitative and qualitative analysis on Sonoma Countyâs tourism industry. Key ï¬ndings include: ⢠Sonoma Countyâs tourism industry continues to recover from the worst of the pandemic in 2020. Contagion fears are decreasing and peopleâs willingness to travel continues to rise. Sonoma County will beneï¬t from its proximity to large population hubs as visitors are more willing to travel by car than by plane. ⢠Sonoma Countyâs reputation for high-end wine, craft beer, outdoor recreation and cuisine will continue to aid recovery from the COVID-19 pandemic. A release of pent-up demand will boost tourism to the area. Data already shows improving trends in tourism-based industries. ⢠Sonoma County should continue to appeal to younger generations. Millennials prefer high quality beverages and food, which they will ï¬nd in Sonoma County. Spending patterns of Generation Z show a premium for experiences that will compliment the demand of millennials as well. TOURISM IND USTRY INDICATORS Sonoma County Tourism, in partnership with Visit California and Dean Runyan Associates provided the latest available economic impact ï¬gures on the economic impact of travel and tourism in Sonoma County. Key ï¬ndings include: ⢠Direct visitor spending in Sonoma County in 2021 totaled $1.9 billion, a 59% increase from $1.1 billion in 2020 and 12% lower than 2019 ($2.2 billion). Sonoma County remained just behind Monterey ($2.5 billion) and ahead of Napa ($1.5 billion) and San Luis Obispo ($1.7 billion) Counties. ⢠Sonoma Countyâs Transient Occupancy Tax (TOT) totaled $60.6 million in 2021. This was a 103% increase from $29.9 million in 2020. $60.6 million is the greatest TOT revenue ever collected in Sonoma County. SONOMA COUNTY VISITOR PROFILE Sonoma County Tourism partners with Longwoods International to gain insights into its visitor base. Tapping into Longwoodâs proprietary 2021 Travel USA survey, which included approximately 1,180 travelers who had visited Sonoma County in the last 12 months, the following key ï¬ndings were: ⢠In 2021, Sonoma County welcomed 9.9 million visitors: 4.6 million overnight and 5.3 million day visitors. The average stay was 1.9 nights and the average per-person expenditure for overnight visitors was $185. ⢠The main reasons for travel to Sonoma County were visiting friends and relatives, touring trips, and outdoor exploration. The top activities and experiences enjoyed by guests were shopping, visiting wineries/breweries/distilleries, sightseeing, attending celebrations, and business conventions/ conferences. For additional information, questions, comments, or suggestions please contact us at (707) 565-7170 or visit www.sonomaedb.org. 5 EDB 6 EDB Ï Ï Ï Ï Ï MOODYâS ANALYTICS TOURISM ANALYSIS Recent Performance ⢠Sonoma Countyâs tourism industry is showing signs of life, and the county enjoyed a much more fruitful year in 2021 relative to the worst of the pandemic in 2020. Travel restrictions have eased throughout the country, and the return of domestic travel is nearing pre-COVID-19 levels. According to data compiled by Dean Runyan Associates, Sonoma Countyâs visitor spending jumped 58% year over year in 2021, just 10% below its 2019 level. With contagion fears signiï¬cantly lower since the vaccination rollout, hospitality operators through the ï¬rst half of this year are building o! the progress made in 2021. ⢠The COVID-19-induced economic recession dealt a body blow to tourism-centric economies nationwide, and leisure/ hospitality payrolls were the worst-faring industry in nearly every part of the country. Sonoma County was no di!erent. Leisure/ hospitality employment was cut in half at the onset of the pandemic, but the recovery surged ahead in 2021 and the early months of this year. Sonoma Countyâs tourism industry is also faring slightly better than the regional average. Employment is now just 4% below its pre-pandemic peak, compared with a 7% deï¬cit for the West. ⢠Lodging data paints a similarly upbeat picture, and one where the recovery is gaining momentum but still not quite fully back to normal. Hotel revenues, occupancy, and average daily rates are all on the upswing, and the busy summer months are poised for continued growth. Consumers feel more conï¬dent and more willing to vacation. Macro Drivers ⢠Hand-wringing over prospects for a U.S. recession beginning in the next year or two has become increasingly fevered. While a near-term recession is not the consensus view, a growing list of economists are calling for a downturn. We put the odds that the economy will su!er a downturn beginning in the next 12 months at one in three with uncomfortable near-even odds of a recession in the next 24 months. ⢠Painfully high inï¬ation and inï¬ation expectations are behind this elevated risk and have forced the Federal Reserve to go on high alert and quickly raise short-term interest rates and engage in quantitative tightening to nudge long-term rates higher. ⢠Even with rising interest rates and high inï¬ation, the U.S. consumer keeps spending. Retail sales continue to tick higher, and the details are solid. Importantly, the recovery in retail sales at restaurants continues, with sales rising 2% between March and April. This is consistent with the improvement in the weekly data from OpenTable. ⢠Although the rebound in consumer spending has been inconsistent, the trend will become MOODYâS ANALYTICS / May 2022 3 The University of Michigan consumer sentiment survey has dropped noticeably, fanning concerns about U.S. consumer spending and the prospect of a recession. However, consumers are still opening up their wallets and spending continues to tick higher. The fall in con – sumer conï¬dence is likely due to a sharp uptick in gas prices and an equity market correction. With household balance sheets still in pristine shape, consumer spend- ing will climb higher this year, which augurs well for tourism-centric areas like Sonoma County. Leisure/hospitality employment took the brunt of the labor market damage following the COVID-19-induced recession, and the subsequent recovery had been holding back the economic recovery. However, strong growth over the past six months has payrolls down just 4% from their pre-COVID-19 peak, in line with total payrolls for the ï¬rst time since the onset of the pan- demic. Moodyâs Analytics expects leisure/hospitality employment to recoup all its job losses by the middle of next year. As expected, visitor spending in Sonoma County cra- tered in 2020 as a result of the COVID-19 pandemic and only began to recover in 2021 as travel restrictions were lifted and the vaccine rollout progressed. Visi- tor spending recovered strongly in the second half of the year, but the slow start to the year ensured that it still lagged its precrisis levels by a signiï¬cant margin. Moodyâs Analytics expects a near-full recovery in 2022, though it will still likely trail its all-time high from 2019. Higher energy prices and lingering contagion fears will likely sap some demand for leisure travel. The share of Americans who are planning a vacation in the next six months is steadily rising. Americans have been postponing vacation plans for the better part of two years, but there is increasing evidence that the vac- cine rollout and the end of most travel restrictions are pushing more to travel this summer. Despite signiï¬cant risks in the economic outlook due to inï¬ationary con- cerns and geopolitical tensions, consumers are making good on vacation plans. TSA traveler volumes are ap- proaching 2019 volumes, further illustrating Americansâ comfort in traveling. TOURISM !! Sonoma County Moodyâs Analytics Presentation Title, Month 2022 Glum Consumers Still Spend -20 -15 -10 -5 0 5 10 -15 -10 -5 0 5 10 18 19 20 21 22 Real consumer spending, % change (L) Univ. of Michigan consumer confidence, difference (R) 1 Sources: BEA, Univ. of Michigan, Moodyâs Analytics Moodyâs Analytics Presentation Title, Month 2022 0 500 1,000 1,500 2,000 2,500 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Accommodations Food, retail and rec. Transportation Other Visitor spending, $ mil Visitor Spending Makes Strides, but Still Not Fully Recovered 3 Sources: Dean Runyan Associates, Moodyâs Analytics Moodyâs Analytics Presentation Title, Month 2022 4 % of Americans planning a vacation in the next 6 mo More Americans Planning to Travel 0102030405060708090100 Feb Apr Jun Aug Oct Dec 2017 2018 2019 2020 2021 2022 Sources: The Conference Board, Moodyâs Analytics Moodyâs Analytics Presentation Title, Month 2022 Leisure/hospitality employment, Sonoma County, ths Recovery Is Underway, but Still Some Room to Run 12 14 16 18 20 22 24 26 28 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 2 Sources: BLS, Moodyâs Analytics Chart: The share of Americans who are planning a vacation in the next six months is steadily rising. Americans have been postponing vacation plans for the better part of two years, but there is increasing evidence that the vaccine rollout and the end of most travel restrictions are pushing more to travel this summer. Despite signiï¬cant risks in the economic outlook due to inï¬ationary concerns and geopolitical tensions, consumers are making good on vacation plans. TSA traveler volumes are approaching 2019 volumes, further illustrating Americansâ comfort in traveling. 7 EDB Ï Ï Ï Ï Ï MOODYâS ANALYTICS TOURISM ANALYSIS modestly favorable after the drags from supply constraints gradually lessen. Real consumer spending is forecast to increase 2.8% this year and 2.7% next. This is weaker than the 5.7% growth in 2021. ⢠The compos ition of consumer spending will continue to shift away from goods and toward services, especially as income growth remains strong. There is pent-up demand for a number of consumer goods, as the pandemic and ï¬scal stimulus pulled forward some spending on goods. However, there is pent-up demand for consumer services such as travel and real consumer spending is still below its pre-pandemic trend. ⢠The rapid labor market recovery provides the fundamentals that will drive service spending, hence the recovery in Sonoma Countyâs tourism industry. The pandemic is weighing less heavily on hiring, and the Russian invasion of Ukraine has had little impact to date. The sustained pace of payroll gains brings employment within 1.2 million of its pre-pandemic level, a gap that is expected to close by the second half of 2022. Job gains will total about 4.5 million in 2022. Leisure/ hospitality and government account for most of the deï¬cit, and it will take several more years at least for these sectors to recover completely. ⢠Geopolitical conï¬icts and inï¬ation fears have caused an extended slide in equity prices, fanning concerns of diminished consumer spending via the wealth e!ect. The Standard & Poorâs 500 is down 14% since December but is still up 23% from its pre-pandemic high. Even with the current sello!, investors have enjoyed double-digit per annum returns over the past decade. While consumers have begun to draw down their excess savings from the pandemic, an estimated $2.5 trillion remains, equal to well over 10% of GDP. While the bulk of these savings will not be spent, there is plenty of extra cash to help consumers remain stalwart spenders. ⢠The unemployment rate will fall to only 3.3% by yearâs end, below its pre-pandemic low, and the labor market will reach full employment in early 2023. The tight labor market will maintain upward pressure on wages. ⢠Easing contagion fears will also determine the fortunes of Sonoma County vintners and spirit makers. While these businesses adapted well to pandemic closures, visitor spending at wineries and restaurants will bolster the business recovery. Industry Drivers ⢠Sonoma Countyâs allure as a global destination for high-end wines, craft beer, outdoor recreation and cutting-edge cuisine will pave the road to recovery from the COVID-19-induced recession. Tourism- centric metro areas fared the worst during the pandemic but will also see an outsize boost as pent-up demand for travel is unleashed. Data from Homebaseâwhich tracks hours worked, businesses open, and the number of employees across a number of small, primarily consumer, businessesâ reveal a broad improving trend. ⢠The outlook for Sonoma County will undoubtedly depend on the decreased contagion fears and consumersâ willingness to travel. According to the Conference Board, the share of Americans planning a vacation in the next sixth months rose to 37% in April, marking steady improvement over the last six months, though it is still far below historical levels. Rising gasoline prices and inï¬ationary pressures likely suppressed some of the growth that had been seen earlier this year, but Moodyâs Analytics expects this number to rise higher if the U.S. economy avoids a signiï¬cant downturn and inï¬ation fears begin to recede. ⢠The two components considered to be the closest proxies to measure changes in peopleâs openness for in-person activitiesâ passenger throughput at airports and seated diner volume at restaurantsâhave increased solidly this year. ⢠Transportation Security Administration 88 EDB Ï Ï Ï Ï Ï EDB MOODYâS ANALYTICS TOURISM ANALYSIS traveler volumes are improving and through the end of May are 86% of their 2019 ï¬gures, compared with just over 50% through the same period last year. ⢠Data from Op enTable, which charts seated diners at restaurants, show a similar improvement, with statewide ï¬gures in May roughly on par with their pre-pandemic levels. Consumers are growing more comfortable with traveling and dining, and this will improve throughout the summer as each subsequent wave of the pandemic causes less disruption. ⢠Consumersâ professed comfort in taking vacations has followed a similar trend. According to Morning Consult, the share of respondents who are willing to travel rose to 70% in the last week of May and is 14 percentage points higher than it was at the start of the year. Respondents are more comfortable traveling by car than through domestic air travel, and this will likely help Sonoma County recover more quickly than other tourism-centric areas given its proximity to large population hubs and more of a reliance on visitors from neighboring metro areas within driving distance. High gas prices through the rest of this year may dissuade some travelers, but these are expected to recede by yearâs end. ⢠Although the outlook for tourism is quickly improving, it will take some time to repair the damage inï¬icted from the pandemic. Sustain ed improvement in visitor spending will drive employment gains through the year, but it will take years to recover all pandemic- related losses. Pricing ⢠Hospitality operators are seeing a substantial improvement in pricing power, though there is still some room for improvement. Hotel lodging data broadly are improving, with occupancy rates climbing higher as postponed vacations and large conferences and events are returning. ⢠Higher visitor foot counts will likewise improve pricing power at tasting rooms, restaurants, breweries, and outdoor recreation ï¬rms. Data from OpenTable shows that seated diners at California restaurants are rapidly approaching pre-pandemic levels, down on average just 1% in May compared with the same period in 2019. County restaurantsâ pricing power will recover in tandem and could improve further if pent-up demand and excess savings are pushed toward more spending on services in the summer and latter half of the year. ⢠Longer term, supply constraints will add to hotelsâ pricing power. Despite rebuilding e!orts and the opening of several new establishments, the number of hotel rooms in the county will rise only modestly over the next few years. The extension of occupancy taxes to vacation rental websites such as Airbnb will narrow their price advantage over traditional hotels and will mean that most Chart: As expected, visitor spending in Sonoma County cratered in 2020 as a result of the COVID-19 pandemic and only began to recover in 2021 as travel restrictions were lifted and the vaccine rollout progressed. Visitor spending recovered strongly in the second half of the year, but the slow start to the year ensured that it still lagged its precrisis levels by a signiï¬cant margin. Moodyâs Analytics expects a near-full recovery in 2022, though it will still likely trail its all-time high from 2019. Higher energy prices and lingering contagion fears will likely sap some demand for leisure travel. MOODYâS ANALYTICS / May 2022 3 The University of Michigan consumer sentiment survey has dropped noticeably, fanning concerns about U.S. consumer spending and the prospect of a recession. However, consumers are still opening up their wallets and spending continues to tick higher. The fall in con – sumer conï¬dence is likely due to a sharp uptick in gas prices and an equity market correction. With household balance sheets still in pristine shape, consumer spend- ing will climb higher this year, which augurs well for tourism-centric areas like Sonoma County. Leisure/hospitality employment took the brunt of the labor market damage following the COVID-19-induced recession, and the subsequent recovery had been holding back the economic recovery. However, strong growth over the past six months has payrolls down just 4% from their pre-COVID-19 peak, in line with total payrolls for the ï¬rst time since the onset of the pan- demic. Moodyâs Analytics expects leisure/hospitality employment to recoup all its job losses by the middle of next year. As expected, visitor spending in Sonoma County cra- tered in 2020 as a result of the COVID-19 pandemic and only began to recover in 2021 as tra
