One-on-One: As $14.5B Tourism Sector Grows, Kentuckians Are Main Beneficiaries

Visitors seeking ‘authentic’ experiences create jobs and pay taxes, says Travel Industry Association CEO Hank Phillips

By Mark Green

Hank Phillips is president and CEO of the Kentucky Travel Industry Association
Hank Phillips is president and CEO of the Kentucky Travel Industry Association

Mark Green: Tourism contributed $14.5 billion to Kentucky’s economy in 2016 and supports 192,697 jobs. Can you provide a brief description of some of the impacts and jobs that non-insiders might not realize are part of tourism?

Hank Phillips: The story of Kentucky tourism is that it is a premier economic driver for Kentucky and Kentucky communities. The $14.5 billion is what visitors spend when they come to this state and then that money turns over and is infused into our economy. That impact makes tourism the third-largest industry from an economic impact standpoint, trailing only health care and the automotive industry.

You mentioned the jobs. That is where the impact of tourism is perhaps most visible, but another aspect of that impact is that tourism also generates over $1.5 billion in local and state tax revenue. When you turn that around, it means tourism saves Kentucky households over $1,100 a year by virtue of the local and state tax revenue generated by the industry. So clearly, definitely, it is an economic driver.

In terms of jobs, tourism is an enormous jobs generator for the state, including high-quality jobs. To look a little deeper, we’ve identified over 50 categories of businesses – and that’s as much a sampling as it is a complete list – that are part of the tourism industry. On a literal A to Z basis, they go from airports and artisan centers to zoos and zip line operations. Within those various businesses there is a wonderful array and quantity of jobs. 

As an example, consider just one hotel. Within that one business, there are all the back-of-the-house people, the wait staff and housekeeping. There are the front-line people. But then there are also the people like event professionals, executive chefs, accountants, salespeople, managers and senior executives. Then multiply that times every hotel, times every other kind of tourism business in the state and you can see the enormous jobs power of tourism.

MG: When the Great Recession hit, everybody pulled back but it seemed like tourism helped pull the state out of the hole and was generating revenue at a time when few other areas were. Hotel construction was one of the first signs of recovery that we saw.

HP: Right. Travelers are resilient, and there are a lot of them. The industry certainly took a hit, like every other business; it was not immune from that. But one of the things about travelers is that so many of them travel for special interests. We see that in Kentucky with certain segments of the industry: horses, bourbon, outdoor recreation. Those are some of the most resilient travelers. They travel for a purpose, for a specific reason, a specific affinity. And, yes, that tends to weather some economic storms. That was the case during the Great Recession.

MG: How does Kentucky’s tourism industry compare to that of other states? Where do we tend to fall in the rankings nationally or regionally?

HP: It’s somewhat at a mid-range. There are different ways of looking at the industry. In terms of pure visitation, there are states that are in the uppermost echelon of destinations: Florida and California are obvious examples. Other states are in the general upper tier, Tennessee being one; Michigan has come on strong in recent years. Colorado would be another. And then there are a number of other states that are in the middle to upper range; Kentucky is one of those. We are ahead of a lot of states.

Another way of looking at that is competitiveness and funding. The funding of Kentucky’s state tourism efforts, carried out by the Kentucky Department of Tourism, is in the lower third of states. Due to the great work of the Department of Tourism and of Commissioner Kristen Branscum, along with the local destination marketing organizations, we are playing well above our funding level in a competitive sense. The state and local teams deserve a great deal of credit for that.

MG: What are the Kentucky Travel Industry Association’s primary activities for the industry and its members? What is your budget and staff?

HP: The Kentucky Travel Industry Association is the organization that represents the full spectrum of Kentucky’s travel and tourism industry. We work from a simple proposition that an industry that delivers so much value to its state deserves an association that also delivers enormous value.  That motivates us as an association.

Our services flow from four cornerstone areas: advocacy, education, information and business development. They’re all important, but advocacy – our members would say –  is the first among equals of our services. The foundation of our advocacy is to work very hard to get ingrained in the thinking of legislators, local officials and the business community that tourism is a vital contributor to Kentucky’s economy. When that understanding is reached, then when issues come along – policy issues or legislation that can either enhance or hurt the industry – a legislator that really “gets” tourism is much less likely to vote for something that could be harmful and is much more likely to support something that can enhance the industry.

The rest of our services are:

• Education: various conferences and working hard to keep our members abreast of trends and best practices.

• Information: We disseminate a large quantity of information. Just one example is a monthly online journal.

• Business development: involves enhancing our members’ businesses through more visibility and putting more resources at their disposal.

As far as the association operationally is concerned, over the last three years our revenues have increased approximately 50 percent and our membership has increased 26 percent. Just as the industry has been doing well, the association has been doing as well. One thing I’m proud of is that we have a very small staff: a team of two full-time people, including myself, and two part-time people. What that really means, besides the extraordinary work they do, is that we have a highly engaged membership, a tremendously supportive board, and partners like the Kentucky Department of Tourism, all of whom help bring about all the success that the association is enjoying.

MG: What are the major trends the tourism/travel industry is seeing?

HP: One trend has been underway for a while but continues to build and become more predominant: Travelers no longer want to simply do what I refer to as ‘stop, stand and stare.’ They are more active. They want experiential opportunities. They want hands-on, sensory experiences. And they want authenticity. And everything I’ve just said is exactly what Kentucky delivers through the diverse assets and experiences the state offers to visitors. That whole set of influencers is very much an ongoing trend.

Here are some examples of how this trend plays out to make Kentucky so appealing: Certainly bourbon is an example, as are our horse and equine experiences. But I’ll give you one that is more specific, and that is food. This is a specific trend within that broader set of trends. People have always enjoyed food as a part of their travel, but now food has become a reason to travel. And picking up on that trend, the Department of Tourism has declared 2018 the Year of Kentucky Food and is mounting a very aggressive and creative effort to demonstrate to prospective visitors that one of the many special things about Kentucky is Kentucky food.

MG: What sectors of tourism are growing and which are contracting?

HP: If we look at the latest data available, every region of Kentucky has grown in the economic impact of tourism, and that’s how we tend to measure the industry’s productivity. There has been no contraction of that productivity in any region. But one instance where there’s been specific growth – regionally and in terms of destinations – is the Ark Encounter (in Grant County near Williamstown), which has had a huge impact on the number of visitors coming to that region. The Northern Kentucky region has experienced heavy growth and visitation and hotel occupancy is way up, driven by the Ark Encounter.

Last year, certainly, as a one-time phenomenon, the solar eclipse had a big impact in west Kentucky.

But then more generally, bourbon is still an extraordinary draw, and increasingly on a statewide basis. I’ve mentioned horses and equine. Another thing about Kentucky is the whole outdoor adventure and recreation aspect. And our urban areas are doing extremely well: Northern Kentucky again, Louisville, Lexington. But people are also branching out into the authenticity that our small towns and rural areas offer. There’s really not a downward trend in any aspect of Kentucky tourism right now.

The wonderful treasure chest of all of those varied and different experiences is combining to result in Kentucky being a hot destination right now. The South generally is hot, no pun intended, but within that there is something really special going on with Kentucky

An important strength we have as a travel destination is our people, and this is supported by research. When visitors experience Kentuckians, they see us as being different – positively different. Our authenticity, our humor, our sort of brashness – all of that, combined with warmth and friendliness and hospitality, makes Kentuckians unique. That translates into memories visitors take home and talk about, and it contributes to a sort of “cool” zone that Kentucky finds itself in as a “hot” destination.

MG: We hear a lot about zip lines these days, but when people are going into the tourism industry, what kind of businesses are they opening?

HP: There’s not one specific trend. Tourism lends itself to a variety of small businesses and also to entrepreneurial pursuits, and we see that in the growth of craft breweries and distilleries. When we talk about outdoor adventure, certainly ziplining is one of those, but we can also point to wildlife viewing, particularly in Eastern Kentucky with its huge elk herd – the largest elk herd east of the Mississippi – bald eagles and other wildlife where that experience is being converted into business opportunities: guides and wildlife viewing services. With the growth of bourbon experiences, there are companies now capitalizing on that in terms of tour companies and others that deliver those experiences.

In Central Kentucky, borrowing from distillers, horse farms have become more and more receptive to visitors, opening their gates to people to experience our horse culture.  That has led to some business opportunities.

On a larger scale, it is a growth period for Kentucky hotels, which are hugely important linchpins of tourism, obviously. That growth provides people with different forms of lodging and accommodation options. That has been a major positive.

MG: Who are Kentucky tourism’s primary customers or visitors? What are the top age, socioeconomic and place-of-origin profiles?

HP: Increasingly, what we’re seeing, and what the Department of Tourism, whose job it is to market Kentucky, is seeing are younger travelers and there’s a strong emphasis now on attracting more millennial visitors. International visitation is on the uptick, too. Seasoned international travelers want to experience the real America, emphasis on “real.” And Kentucky absolutely offers that.

An opportunity that should and is being pursued is to reach out to a more diverse audience, particularly African-American visitors, which is a huge market. By way of example, the U.S. Civil Rights Trail, a multistate set of historical attractions, was recently launched and there are three sites in Kentucky.

The areas and states of origin of visitors to Kentucky still tend to be the nearby states, but increasingly Kentucky is on the radar of visitors from throughout the U.S., and as noted, international visitors

MG: Just as Kentucky’s location allows businesses to ship everywhere within a day, does its central location also encourage people to travel here?

HP: Absolutely. Proximity to prospective visitors is hugely important. The very same points that are touted by those who recruit businesses to the state are factors in recruiting visitors to the state. The “ship everywhere” part of your question is a reminder that tourism is actually an ‘export.’ That especially becomes apparent when you talk about international visitors to the state. If an export is a product or service created in one place and bought by people from another place, that’s what tourism is. That is a dimension of tourism people may not always see at first glance, but tourism is very much an export.

MG: How does the travel industry view the status of the development of “bourbonism” as Mayor Greg Fischer in Louisville calls it? How much room for further growth do you foresee?

HP: Bourbonism has nowhere near reached a plateau. I’m not sure there will be the exponential, explosive growth that we’ve seen in recent years, but there’s no reason to think it won’t continue on an upward trajectory. Part of that is because – and this is why the mayor refers to it as “bourbonism” – it’s not just the wonderful experience that somebody has at a distillery, coming to learn how bourbon is produced, but it’s a much more comprehensive experience that involves history and heritage and culture and cuisine. That’s why as an industry we are so thrilled with the impact that bourbon has had. That impact goes far beyond just things like the Kentucky Bourbon Trail and expands out into so many other aspects of visitor experiences. I always point to, as many people do, California’s wine country. That is a regional destination built around one product, but when you think about what else people experience there and the memories they come away with, it’s not just wine. That is the centerpiece, but there is so much more to experience in that region. Kentucky is every bit that and more in regard to bourbon and all there is beyond bourbon.

MG: Are there public policy steps Kentucky can take to improve and support its tourism industry?

HP: Certainly being in the bottom third of the states in investment in state-level tourism advertising and marketing is something we would like to improve. However, more immediately, one area that is extremely important is local tourism marketing and the funds that support it. More specifically, for the smaller communities in this state, the primary source of tourism marketing funds is their ability to enact a restaurant tax of up to 3 percent. The money generated goes to the local convention and visitors’ bureaus for tourism purposes. All communities can enact a local hotel-room tax, and that is the primary funding source for many cities. However, smaller cities typically don’t have many hotels to generate a sufficient amount of revenue for tourism. Therefore, the statute allows those smaller cities to enact a restaurant tax.

Increasingly, and as tax reform becomes more likely, some have mounted efforts to convert the restaurant tax to a general city government funding source rather than a dedicated funding source for tourism in the small communities. We are concerned about that. It comes back to legislators understanding the economic power of tourism and the jobs it creates and to do no harm to the funds that help generate that value, especially in our smaller communities. Consider some of those communities I’m talking about and the tourism implications: Bardstown, Harrodsburg, Berea, Shelbyville, Pikeville. Those are communities that have the restaurant tax and where tourism is a particularly prominent factor in their economy and contributor to their jobs. If the restaurant tax changes to be used for other things rather than generating the dividends that tourism pays, those communities’ economies will be hurt and Kentucky’s overall economy will be hurt. As tax reform approaches, we want to be very sure that no harm is done, especially in regard to the restaurant tax.

MG: Who are Kentucky’s main tourism competitors?

HP: Everybody! Back to talking about the internet and digital communication, the same person that can see information about Paris, France, can see information about Paris, Ky. In that broad sense, everyone is chasing the visitor dollar. And by the way, the food is even better in Paris, Ky., than it is in Paris, France.

In narrower terms, the closer states in proximity to us are key competitors. But it’s also important to understand that just as there’s heated competition, there’s also extensive collaboration in this industry. For example, the Northern Kentucky Convention and Visitors Bureau works very closely with Cincinnati and there are tour itineraries that include Kentucky and Tennessee.  Travelers don’t really care if they’re crossing a river or if they’re in one state versus another; they are looking for experiences. There is competition, and it’s heated competition, but there’s also a very intense and relevant collaborative factor when it comes to tourism marketing.

MG: Kentucky has been experiencing a hotel construction boom the past several years. How significant is this for the state’s tourism/travel industry?

HP: It’s been very important. The hotel business is critical to tourism generally and specifically as a funding source. It is somewhat a chicken-and-egg relationship: If there are more visitors coming to Kentucky and more room demand, that generates construction, the construction then opens up new and different accommodation opportunities and that generates more visitors. A byproduct is that the state’s marketing and advertising efforts are funded by a 1 percent statewide hotel-room tax; and local hotel taxes are the predominant funding source of local tourism marketing – in addition to the restaurant tax in the smallest communities – so an expanding hotel industry results in expanded tourism marketing.

MG: Will Kentucky residents notice this Year of Kentucky Food taking place this year? We like to eat too!

HP: Tourism in Kentucky is often used as a marketing strategy for Kentucky products, including Kentucky food. If you think about it, that’s what the Kentucky Bourbon Trail is. Distillers are using visitation and tourism to build their brand awareness and brand loyalty. For the same reason, the GM Corvette assembly plant and the Corvette Museum in Bowling Green have tours, as does Toyota in Georgetown. Ale-8-One Bottling in Winchester does tours. In Lebanon, the cooperage that produces bourbon barrels does tours. In Louisville, Louisville Slugger has tours and a museum.

In that same vein, as Kentucky foods are marketed as a visitor attraction, the effect will be Kentucky food momentum and expansion that Kentuckians will see – and taste! It is enormously important, as we talk about tourism as an economic driver and all of the other values and benefits that tourism brings, to keep in mind that the ultimate beneficiary of tourism efforts is not the visitor; it’s not even the businesses that are in the tourism industry – it’s the residents of Kentucky. That’s who, bottom line, benefits from tourism in terms of the jobs, in terms of the taxes generated and in terms of the quality of life that is enhanced when visitors are attracted to Kentucky.


Mark Green is executive editor of The Lane Report. He can be reached at [email protected]

Please wait...

Subscribe to the FASTER LANE business newsletter.

Subscribe and receive breaking Kentucky business news and updates daily.