Mark Green: How much of a hit did the state’s $11.8 billion tourism industry take from the pandemic?
Mike Mangeot: Our industry was really one of the first—if not the first—that really showed the impact of the pandemic: the shutdown of the events and meetings and conferences. We took a pretty good hit early on from an employment standpoint as well. Overall, we had about a 26% hit to our economic impact in 2020. We were on pace for another record year until that last quarter of our fiscal year. But we actually did better than some of our competitor states when you look at our neighboring states. I give a lot of credit to the way the administration responded to the pandemic. One of the things people were really looking for was safety and places to get out without big crowds in Kentucky. Make no mistake, it made an impact but we are bouncing back very well.
MG: There has been discussion of pent-up demand in the tourism sector for at least a year. What are current expectations for this 2022 travel and tourism season?
MM: We’re very optimistic about 2022. Throughout the pandemic, the level of pent-up demand really didn’t wane much. People are wired to travel; we don’t like being told we can’t. We work with a company called Longwoods International that has been doing weekly surveys throughout the pandemic on traveler sentiment. The most recent I saw showed 90% of American travelers have plans to travel in the next six months, which is a significant increase. It had been hovering around 70-75%. And about 34% of travelers say the pandemic no longer has any impact on their decision to travel. That’s a significant change from a year or two ago.
MG: What is the current status of employment levels in the Kentucky tourism hospitality sector?
MM: I don’t have the exact numbers. We were hit pretty hard early on, but a lot of those folks were able to come back after the beginning of the pandemic. We’re no different than most industries out there. We’ve lost workers and whether that’s people wanting to work from home because of the pandemic, wanting a career change, whatever it may be, it’s a challenge for us. What we’re looking at now is how we can engage with the postsecondary schools and in other ways to entice people into the hospitality industry as a career path. There are a lot of success stories in this industry, where people who started out working “back of the house” at a hotel have gone on to be general manager of the hotel. We have to do a good job of recruiting. The hospitality industry isn’t any different from any industry around the country. This is not something isolated to Kentucky; we’re seeing it all over the country.
MG: Did Paycheck Protection Program loans preserve very many jobs? Was there a significant impact on hospitality?
MM: Yes, a number of our attractions, museums and destination marketing organizations (DMO) were able to access those loans. It allowed them to keep staff on board, which otherwise they might have had to lay off. It was very effective in keeping our employment levels more sustainable.
MG: The Kentucky Bourbon Trail has been realizing success and driven hundreds of millions of dollars in hotel construction for a decade. How far into what the Bourbon Trail will eventually become do you think we are now?
MM: I think we’re still in the very early phases. For those of us who’ve been around for a while and see all the development at this point, you think, ‘How can this be in only the early stages?’
I know the bourbon industry likes to use Napa Valley (California’s wine country) as an example. If you look at that, the first (hospitality) businesses that started going out to Napa Valley were for the wine connoisseurs, and then eventually it expanded. You saw major spas and the culinary aspect of it take off, and that’s what I’m starting to see here in Kentucky.
You mention investment in hotels, but you can’t underestimate the investment in the culinary aspect of it, the historical heritage side of it. Look at the number of tour companies that have popped up offering guided tours. Look at the number of bourbon-themed hotels. Probably the most telling thing to me is that the distilleries themselves are investing millions of dollars into their visitor products, from new visitor experiences to hotels on the property to restaurants.
Look at what Jim Beam has done; they’ve added their family kitchen restaurant. Look at what Heaven Hill just did in Bardstown with a $20 million investment just in its visitor experience. When I see multinational and international companies like that investing that much in the visitor experience, that tells me they see a long horizon on this.
MG: Maybe an important example is what Horse Soldier Bourbon is doing, making a $200 million investment in a wide-ranging campus. Do you see others following their example?
MM: I do. The COVID pandemic really was a health crisis and wasn’t as much an economic crisis. Throughout the majority of it, we saw a lot of continued investment in our Kentucky Tourism Development Act program and that’s why I’m very bullish on it. The thing to keep in mind for the bourbon industry is, there’s still growth. They’ve made a lot domestically, but there’s huge growth potential internationally. When you talk to the rank-and-file person, most people think bourbon has to come from Kentucky. That’s a tourism advantage for us, but it’s also an opportunity for us to tell the story of bourbon to new markets internationally, get them to visit and hopefully become consumers of the product.
MG: Reports are that Scotch still has 95% of the international whiskey market. Does that suggest a lot of potential upside for bourbon remains?
MM: Yes. What I hear—and I’m not the whiskey statistics person—is that India is the largest per capita whiskey-consuming country in the world. I know what opportunities are in India for distilleries. And look at Australia, Japan, Germany, the United Kingdom, France—(there is opportunity) from a product standpoint to grow that share of the market. Once you have that (market share) and have a visitor experience around it, you’re bringing travelers in who want that experience, who are spending money in Kentucky. We’re looking for opportunities to leverage that domestically and internationally.
MG: Which Kentucky tourism areas or venues are excelling and how so?
MM: What we saw through the pandemic was people were getting out from the more densely populated areas and discovering new parts of the state. Our outdoor segment really thrived. Our lakes, our mountains and our state parks were very busy, and had very good occupancy throughout the pandemic. Some of those more rural areas are looking at this as an opportunity. We’ve got a couple of spots around the state that don’t have a large group of DMOs or organizations promoting them, and more of those are deciding they need a more formalized approach to tourism.
But there are many I would call our superstars in this industry. We’ve talked about bourbon and visitor centers. Look what the Kentucky Derby Museum has been doing with its Unfiltered Truth collection. Look at the development of Visit Horse Country in Lexington. Another one is Bardstown. Bardstown has grown in such a smart way, and the investment is coming in there. There are so many areas around the state you can look at and everybody has their own story and their own version of tourism locally. There’s not a one-size-fits-all approach to this.
MG: What are the needs in the tourism industry currently to improve this performance?
MM: A key need is workforce, building that pipeline into the industry as a career path. The biggest challenge we have in the state really is awareness. When visitors come to Kentucky for the first time, they’re surprised by what they find. They say, ‘I didn’t know I could have that type of experience. I didn’t know you had this here, how beautiful it is.’ And that is consistent over time. They become advocates for us, and they become return visitors.
So, our biggest challenge comes down to that awareness level and part of that is resources. But I think we punch above our weight; I think we do a good job. We’re very targeted in what we do as far as marketing but we’re never going to have the budget of a Florida or California; we realize that.
The other challenge we have right now besides resources is local product development: How can we help the local communities develop a tourism product that is strong, that is authentic? We’re working on that. Our urban areas don’t have as much of an issue with that. So, it’s how do we continue to help and support those areas but also help the more rural areas of product development?
MG: What is Kentucky’s public budget for tourism marketing compared to neighboring states that are our direct competition?
MM: The last time there was a formalized survey, I believe we were in the mid-30s, maybe the upper 30s compared to all 50 states.
It’s a little murkier now simply because some states have gotten ARPA (American Rescue Plan Act) funding already; some states have gotten CARES (Coronavirus Aid, Relief, and Economic Security) Act funds.
Our budget as it now stands: Out of my office we will spend $14.5 million in marketing. Not all of that is paid advertising, such as trade shows. That’s basically our operating budget.
I don’t have exact numbers; COVID has thrown off all those surveys. When you look at the 12 Southern states that we worked with in a group called Travel South, we’re probably middle of the pack.
MG: I hear people say Gatlinburg and a couple of these venues are killing us because they can market better. But I have not heard of an overall ranking that compares Kentucky to everybody else.
MM: The U.S. Travel Association normally pulls that together. I just finished the survey a week or two ago, but it’s not published yet. Your point about the Gatlinburgs of the world is a good one. In a normal year, the Louisville Bureau has a larger budget than we do and it’s not unusual for large markets to have a larger marketing budget than the state does.
When you look at a state like Tennessee—you mentioned Gatlinburg—keep in mind they have the state’s dollars and large DMOs like Gatlinburg/Pigeon Forge, Nashville and Memphis, which have significant budgets. The larger budgets (for Kentucky) are Louisville and Lexington and I would throw in the Northern Kentucky CVB (convention and visitors bureau) that covers Boone, Kenton, and Campbell counties. Those three help push us. When you’ve got a large city or multiple urban areas and they’re promoting tourism, that elevates that voice beyond just what the state does.
MG: Is the traveler/tourist different now than a few years ago? You mentioned an increased concern for safety. Are there other trends?
MM: The biggest concern since the onset of the pandemic has been, ‘How safe can I be?’ They’ve used a lot of road trips: ‘I can control who’s in this car; I can control what we do and when.’
You saw a lot of the airline trips declining. As the vaccines have come out, as people have learned how to travel during the pandemic and travel safely, you’re starting to see them revert to their typical approaches.
I do think road trips are going to stay popular for a while. People have rediscovered the road trip. For a while people were not going to the big cities. They wanted to get out into the outdoors. I think that will maintain to a certain level, but you’re starting to see trends where folks are coming back into the big cities.
The meeting and convention market is critical for us; we need to get back to where we were and beyond the 2019 levels. That is such a big factor in the Louisville economy and Louisville is what helps drive the tourism industry in Kentucky. They’re our largest city, our largest destination and account for about 28% of the overall economic impact. And a big part of that is meetings and conventions. We’ve got to get that back on track. It has come back well but not to the levels of 2019. When are companies going to start letting folks travel again for business like they used to? With Zoom and virtual options, that may take a little longer to get back. But people are learning to travel again.
What we saw last year during the pandemic was that the average age of our traveler dropped and is actually younger now than the national average. That tells me we’re getting a younger audience who hasn’t been here before. They are discovering the Red River Gorge and Lake Cumberland and Kentucky Lake and some of our other areas. Once we get them here, they usually come back. That’s an opportunity that we need to continue to expand on.
MG: How much of Kentucky’s tourism business is in-state versus out-of-state?
MM: We do a visitor profile every year and we track it two ways. We track it with day trips, which is folks just traveling in-state or to the state for a day trip, and with overnight visits. In 2020, our overnight visits were 73% out-of-state, 27% in-state. Our day trips were 46% in-state, 54% out-of-state.
MG: How significant is marketing? Do we see a direct correlation between marketing and numbers, in-state and out-of-state?
MM: Absolutely. We track all of our advertising and our ‘call to action’ is to drive people to our website. And there is a direct correlation. You can see almost to the hour that our advertising starts, the numbers on our website go up. That’s important because it is about awareness and exposure and information dispersal, getting that information out about the state.
There are case studies of places that pulled their advertising. Colorado is probably our industry’s worst-case scenario. Many years ago, they were the No. 1 ski destination in the country and someone decided they didn’t (need to advertise) and eliminated their department of tourism. Within three years they weren’t even in the top 30.
There’s correlation beyond just direct tourism spending and driving that awareness that you have to look at as well. The company I mentioned earlier, Longwoods International, has been in the industry a long time and just studied what they now call “the halo effect.” What that showed with tourism advertising is that destinations that consistently market for tourism certainly attract visitors and their money, but it also creates a really positive lift in that destination’s image for economic development, as a place where people want to live or work, retire, start a business, etc. If people come visit and see it, it creates a similar lift on those attributes. That’s hard to measure, but it certainly has a positive impact on the brand and image of a state on many levels, not just from a tourism standpoint.
MG: What is the decision process for a composite tourist in deciding when to go?
MM: A lot of times it’s just what you’re comfortable with. I hate to say COVID was an opportunity, but a lot of folks wanted something new and Kentucky was it. It was close by to a lot of folks who came and visited.
Our industry market is incredibly competitive, not just the 50 states, not just the cities included in that, not just other countries. It’s really all entertainment. People decide: ‘Do I really want to spend money on that trip and stay overnight or would I rather just go into town and have a nice dinner?’ We’re really fighting for any kind of entertainment dollars that are out there. It’s very competitive. Our job is to generate that interest in people so they say, ‘I really want to go see that; I want that experience.’
It’s creating an experience that people don’t want to miss out on. A couple of years ago everybody was talking about FOMO, the fear of missing out. And that’s what you’re trying to create from a tourism standpoint. That excitement, something so authentic and intriguing that I want to go do that and I can see myself doing that.
There’s really an art to how you do your ads and marketing. You want people to envision themselves visiting a horse farm and getting up close to the horses, or touring a distillery and filling a bottle, or having that culinary experience, or that experience in the arts. Then it’s providing them with the information and avenues to book the trip.
You boil it down to Marketing 101. It comes down to your unique selling proposition, whether you’re a small destination or large destination or a state. What sets you apart, what’s going to make people want to come and see you? And sometimes it’s not all about the destination or the attractions; it’s things like hospitality, people. Sometimes it’s just the culture, the vibe, and getting that across. Advertising and marketing—it’s not easy but that’s what we want to do. That’s our mission; that’s our job.
MG: What is Kentucky’s brand out there in the industry? What do people think of now when they think of Kentucky?
MM: Every state does a printed visitors guide, and I’ve always said if you took everybody’s name off the cover and laid them all on the table, what would set Kentucky apart? If you put a horse on there, most people are going to look at that and their first default is going to be, ‘That’s Kentucky.’ Our brand, as you put it, has been with horses for a long time.
Bourbon is now right there with that. And our outdoor recreational opportunities. Those are our big three. And what we do is use those to get into our other pillars: our music and our musical heritage, culinary, history and culture, arts. We try to weave those stories through the big three. There are a lot of ties between the horse industry and the bourbon industry and the outdoors, so it gives us a lot of different avenues to go down.
MG: How is our tourism infrastructure? When people get here, do they say, ‘This feels good. It’s up to date. It’s what I want.’ or do we need to upgrade?
MM: Generally, it’s very good. In some of our more rural areas there are major initiatives on getting Wi-Fi out there. Somebody once told me we can get visitors out to certain parts of the state, but once they get there it’s hard to help them move around because everybody is using their devices now for GPS and everything else. But with the broadband initiatives that are going on, that’s being addressed. We want to be able to help with that and show those concerns (are being addressed) if given the opportunity. But overall, our infrastructure is strong.
We’ve got a great road system. I’ve had folks from California on site visits and they raved about our roads. It’s a matter of perspective on where you’re coming from. My take on it is our infrastructure is good.
Signage is always an issue at the local level, but there are systems in place to help with that. It goes back to what I was saying earlier about local product development: What can our office do to better assist with that? We’re in the process of a strategic plan and working on things like that. We want to be a good resource for our local partners and attractions in building that tourism infrastructure.
MG: One of the ways some do infrastructure is through the Kentucky Tourism Development Incentive Program. How many projects does the state have? Is it a very difficult application process?
MM: Kentucky was the first state in the country to have an incentive specifically for tourism development projects. It was established in 1996 under the Paul Patton administration. The lead sponsor on that was (senior advisor to the governor) Rocky Adkins, when he was in the House.
It’s been very successful. We’ve had over 70 projects approved since 1996, over $1.5 billion of investment. One of the very first was the Newport Aquarium. Many of our distilleries have participated, Fourth Street Live in Louisville, etc.
There were a number of states that picked up our legislation, just changed the state name and dropped it in. I don’t believe they’ve been as successful as Kentucky. We’re very proud of that.
And as I said earlier, COVID really wasn’t an economic crisis. To show that, since January 2020 we’ve had 11 projects come through the program. Those are hotels, those are distillery projects and other things, so we’re very proud of that. It’s been a very effective program.
MG: Does Kentucky have an organized system of collaboration and connectivity between the attractions, the destinations and the lodging providers and restaurants to feed business back and forth?
MM: We do and a lot of that is centered at the local level with our DMOs, destination marketing organizations. That’s your local tourism commission or convention and visitors bureaus. A lot of that connectivity is done there.
Many of the local tourism commissions by statute have to have a representative of a restaurant association or hotel association. I can tell you it’s vital. You need those partnerships. When you’re bringing a motorcoach group of 40 or 50 people, you have to feed them, you have to get them on the tours.
That connectivity is there also at the state level. The Kentucky Travel Industry Association—which merged a couple of years ago with the Kentucky Hotel and Lodging Association—together with the Kentucky Restaurant Association has worked on some advocacy efforts. My office has had primary contact with the DMOs and one of the things that we’ve talked about is expanding our relationships more and more.
(There are) good relationships with the attractions, probably not as close with the restaurants, and we’ve been good friends with the lodging partners as well.
Another one I would mention is airports. Not just our large commercial airports but the regional airports where there’s opportunity for some fly-in tourism. Private airplane owners do what they call “The $100 Cheeseburger”: Fly from Chicago to Eastern Kentucky or Kentucky Dam Village, have a cheeseburger and fly home. What opportunities are there? You’re always looking for that edge, that angle, and that’s one that we’ve had some conversations about. Those airports, I think, are underutilized from a tourism perspective. We’ve never had a whole lot of conversations directly with them and actually next week (in early March) when I go to Covington, part of the trip up there will be talking to CVG (Cincinnati/Northern Kentucky International Airport).
MG: As the sector looks towards the future, what should Kentucky be doing or planning for? Are there trends or opportunities to aim for?
MM: Traditionally we have pulled most of our visitors from the upper Midwest—Ohio, Illinois, Michigan. We pull a little more than 50% from the North and the rest from the South. What new markets are there for us to be looking into?
Our visitor profiles are changing a little, skewing younger. A big part of that is the bourbon industry. The product has grown, so you’ve got folks who want to come visit. With what they have invested at the distilleries, you’re getting a little different demographic profile coming in that we can maybe expand into some other markets.
Another issue I would look at is new and emerging markets, like the LGBTQ-plus market—which we’ve never focused on— and the Black traveler, Hispanic travelers. These are all areas we invested in due to a $5 million CARES Act allocation that Gov. Beshear gave us last year. They are areas that we have been wanting to get into but due to resources we couldn’t. We’re investing in that now. We’ve seen some positive response and it’s something we’re going to continue.
MG: There are new branding efforts. We see Kentucky Wildlands and the proposed large resort development on the edge of Red River Gorge is discussing making itself the front door to Appalachia.
MM: There are opportunities to brand Appalachian culture or rebrand it in a more positive manner. Kentucky Wildlands is certainly doing that. It’s a 40-plus-county cooperative effort to market, and they have a lot of federal grants to do that. They’re doing a fantastic job. We’ve worked with them, giving them access to some of our database and photos to get them started and will continue doing that.
Kentucky—as well as a lot of places—has to fight stereotypes from a tourism and image brand standpoint. But a lot of what we do is we highlight those Appalachian roots and how it is ingrained into almost everything that we push from a tourism standpoint, whether it’s the bluegrass music that was brought over with the settlers from Europe—Scotland and England and Ireland—all the way into our distilling with bourbon and even our horse training. So many of our traditions and customs feed into Appalachian history.
Part of it, too, is growing information. Even some people in-state think the roads aren’t good, that it’s hard to get there. That’s not true anymore.
During COVID what we were saying was, travel in-state; go see it. You can’t go to Florida so go somewhere you’ve never been in Kentucky. We saw some success with that. Eastern Kentucky benefited from that.
One of the challenges in Eastern Kentucky has been getting private investment for tourism development. We’re starting to see more of that occur, and we want to encourage that. I’ve said for years, you’re not going to tell me there’s any place more beautiful in the country than Kentucky—especially when you’re driving through Eastern Kentucky.
The job is getting people there. Once you get them in there for the first time, they’re going to come back. What surprises visitors to Kentucky when they get here is how pretty it is. I remember watching a focus group in Chicago a couple of years ago, and the facilitator asked, ‘What’s the first thing you think of when you think of Kentucky?’ One of the folks said, ‘As soon as you cross the river, everything turns green.’
I thought about (what it’s like) if you live in a major urban market. No offense to our friends in the upper Midwest, but it’s pretty flat. Then people come down here and see the hills and the grass and the horse farms, a lot of things that we take for granted. We’re selling quality of life.
I’ve lived most of my life in Frankfort and I drive by the state Capitol. I don’t even look at it, it’s just background on the way to work every day. But if you bring a visitor in who’s never seen it before and look with new set of eyes, then you step back and realize what a beautiful campus that is. I think it’s the most beautiful state capital in the country.
My point is, we take for granted a lot of things that people see with a new fresh perspective: the beauty of the state, the hospitality of our people that comes through time and time and time again in our research.
And then there are the actual authentic experiences that they have. We hear so often, ‘I didn’t know I could have that experience.’ When you walk into a distillery, the process of making bourbon does not differ from distillery to distillery—it’s the history, the stories and the personalities of each distillery that make it authentic and unique. It’s going into our small towns and walking through the locally owned stores and being able to sit down with the owners and talk to them, hear their stories and buy their products. It’s the authentic culinary. But it’s getting them here first and ensuring that they have that great, authentic experience.
MG: Do you have a closing comment or is there something you’d like to mention?
MM: I just want to say how proud I am of our industry. Being hit as hard as we were during the pandemic, they didn’t pack up their tents. They buckled down. Our DMOs became sources of updated information and support for local businesses and restaurants and hospitality workers. They went from being primarily a marketing group to almost a destination management group, and I think that’s the next evolution of DMOs around the country.
I’m very proud of them. I’m very proud to be in the position that I’m in, and to help lead this industry. I’ve had a number of other state travel directors say to me over the years that they envy how well our partners all get along and work collaboratively. I do not take that for granted and I thank them for that.
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