The COVID-19 pandemic brought economic disruption to almost all sectors of the U.S. economy in 2020, but few industries were as hard hit as travel. The combination of economic instability, and health and safety measures in the United States led to a large reduction in the demand for such services.
According to a report released by Visit California, travel activity in California last year continued the recovery expansion started in mid-late 2020.
The California travel economy reached new highs across most categories in 2022, and continued demand for overnight accommodations and increased price inflation led to large gains in visitor spending.
This increased spending and a tight labor market contributed to an increase in employee earnings, with both having a cumulative effect on increased tax revenue.
Travel Spending
In 2022, travel spending grew to $134.4 billion, a 31.7% increase from the prior year.
Visitor air travel on domestic flights to California destinations increased by 66% in 2022, from 21.4 million to 35.5 million arrivals. The number of visitors who stayed in a hotel, motel, or short-term vacation rental (STVR) also increased. These visitors spent a combined $67.6 billion in 2022, an increase of 25.7% compared to 2021.
Residents of California accounted for 45% of all travel spending in the state, while U.S. residents of states other than California accounted for approximately 41%. International visitors accounted for 14% of travel spending.
While international spending is up 88% relative to 2021, the report found that most regions are still lagging compared to 2019 levels of travel activity. Travel from Asia and Pacific was especially limited in 2022, as travel restrictions related to COVID-19 remained in effect for much of the year. The increased cost of airline travel associated with inflation of oil prices also had a major impact on international travel.
Tax Revenue
Travel-generated state and local tax revenue increased to $11.9 billion in 2022, an increase of 21.6% from the prior year. Compared to 2019, travel-generated tax revenue has fallen by 3%.
According to the report, approximately 65.3% of the tax revenue generated by travel-related spending is attributable to sales taxes paid by visitors. An additional 14.2% of tax revenue is raised through sales taxes on the consumption of goods and services by employees within the travel industry. Income taxes contribute 4.6% of total tax revenue. Property taxes applied to businesses involved in the travel industry generated approximately $1.6 billion (14.7% of total). The remainder of taxes generated directly by travel is categorized as “Other” and includes passenger facility charges for visitors who travel to California airports.
Employment
Travel-related spending in 2022 supported 1.09 million jobs statewide, a 16.8% increase from the prior year.
Compared to pre-pandemic levels, travel industry employment has recovered to 93% of peak employment reached in 2019.
Employment in the Accommodations and Food Services sector totaled 627,200 in 2022, a gain of 88,100 jobs (16.3%) from 2021. Arts, Entertainment, and Recreation grew at the highest rate, gaining 57,400 jobs (27.7%).
Impact Report
To read the full “The Economic Impact of Travel” report, click here.
