The Business at Hand >> High gas prices can negatively affect tourism

Written by Ann Richardson Tuesday, 21 February 2012 10:34

There’s pain at the pump as the average price of gas – $3.56 per gallon – hit an all-time high for February. The price spiked eight cents since last week and about 18 cents since last month.

Business journalist Stuart Varney, host of Varney and Company on the Fox Business Network, said we can expect the price to spike higher: $4 or $4.25 is on the horizon.

Varney said it’s going to get much worse; the rising price of a barrel of oil, $105 – up $2 since Friday – is not yet reflected. It will take about 45 days until prices at the pump catch up.

A gallon of gas is already $4.03 on average in California. Prices were up 17 cents a gallon in Cincinnati in the past week, 20 cents in Los Angeles. Varney said that every time gas goes up $1, it takes $140 billion out of the pockets of American consumers.

This summer, the price of gas could hit $5 on the East Coast. We can crow all we want about what a busy holiday weekend we had with all the happy renters signing summer leases, $5 for a gallon of gas is going to hurt the Jersey Shore.

Diane Wieland, director of tourism for Cape May County, said red flags are waving.

“We are doing a survey, right now,” she said. “We just sent them out, and one of the questions we asked people, was whether gas prices going up would affect their vacation plans.

“Right away, people responded; it was about 50/50 for that question,” she said. “That’s a big concern. Right away, right off the bat, half the people were saying yes; that’s not good. More than any other year, we had an instantaneous reaction.”

Wieland said she is especially concerned because the escalation continues. Half the people were saying “yes” based on last week’s high; and $5 would be a huge psychological barrier to a vacation.

“There is a tipping point, and we’re there,” she said. “At some point, we’re really going to feel this. The people who have a week booked will come. It’s the last minute people that fill the hotel rooms, who book that vacation later, the day-trippers, the spur-of-the moment weekend.”

“Those who are staying longer can justify the cost, but those quick trips are going to be questioned,” she said. “They may stay closer to home, maybe they’ll come here versus driving to North Carolina, but they might stay in Philadelphia. The ‘staycation’ isn’t necessarily a good thing.”

There is no easy way to spin high gas prices. When it costs $100 to fill the tank, visitors won’t be spending freely.

“This is a really big concern for us, for many reasons,” she said. “Right now, they should be saving their money for their summer vacation. The gas spike is not just going to affect them in July or August, it’s affecting them right now! The money they are putting in their tank isn’t going into the ‘vacation fund.’

“They’re not saving, so when they get here, their discretionary spending has been affected,” she said. “So what gives? They can spend on retail or the restaurant, but not both. They’re going to be making tough choices.

“Somebody will take a hit; the price of gas affects everyone, at every income level,” she said. “This really hurts our businesses because they’re already taking a hit from delivery surcharges. The cost of doing business is already higher.

“Everybody is looking for ways to economize,” she said. “They’re starting out in the hole, and it’s supposed to get worse.

“We’re worried about our Canadian friends, who come for two weeks, but have to travel hundreds of miles to get here. At $5, the price of gas is about the same as they pay. When our gas is lower, we have an advantage. At $5, they may stay home.

“The fact that people responded so quickly to our survey concerns me,” she said. “Either we hit a lot of people at just the right moment, or we hit a nerve. They’re really impacted by gas prices. Families are really being squeezed.”

In 2008, the price of gas topped $4 a gallon for a short time, but Wieland said things were different.

“Right now, it’s been three years of worrying,” she said. “It impacts them getting to work, it impacts them at the grocery store; everywhere they go. Unemployment is high, things are not good, the cost of insurance is going up.

“We’re now at dangerous levels,” she said. “This has been nibbling away at them for three years or longer. The pie is smaller, inflation is hitting them.”

Americans spent 8.4 percent of their household income on gasoline last year; that’s double what was spent a decade ago, Wieland said.

“We have to sit tight, but we are doing radio and television ads, maintaining our markets,” she said. “We’ve been talking about value-added for the past few years, this year it couldn’t be more important for our businesses to offer value.”

Michele Gillian, executive director of the Ocean City Chamber of Commerce, said gas prices are a big concern. Offering over 200 free events throughout the year, she said Ocean City is all about value.

“People still want to create memories to last a lifetime with their children,” Gillian said. “They still want that family vacation and that’s what makes Ocean City attractive. People will come back to Ocean City because we offer something different. We will be rewarded, because people can’t find what we have somewhere else.”

Ocean City’s family market, she said, is a good niche.

“Ocean City provides a family with a great deal,” she said. “We have the beach, the boardwalk, the free events, a lot to do. You don’t have to spend a lot, so you still have room in the budget for popcorn, pizza, rides and fun.

“We’ve worked very hard at the free events, they make a very attractive vacation package,” she said.

The events, she said, are like a “pre-emptive strike,” to create the niche capable of withstanding an economic downturn. The family resort is not standing idly by as gas prices escalate, however.

“We are taking heed, high gas prices are a serious problem. We realize that,” Gillian said. “This is where our brand is so important, ‘America’s Greatest Family Resort.’ We have to keep reminding people, this is where you bring your family. Generations of families still want a place to have fun.

“Those without a brand are having a more difficult time right now,” she said. “We have had the same message for decades, for generations, people know who we are. We cater to the family. Our brand is important to our economic stability.”

For the 2012 marketing campaign, tourism officials dusted off the 2008 “less than a gas tank away” slogan to remind folks that Ocean City is within 300 miles of 30 million people.

“You can get here with less than a tank,” she said. “So, we’re hoping that means people won’t be flying to another destination, they won’t go to Florida, Europe or the Caribbean. Air fares are going to go up, too, driving to Ocean City is a better deal.”

A billboard aimed at Pennsylvania folks will feature a little boy on the beach, holding a towel as if he were to go airborne in the breeze. The ad will read “no air fare necessary,” with the “less than a gas tank away” moniker.

“When it gets hot, people are not going to want to be at home,” she said. “We had a mild winter; they didn’t go skiing, so they’ll want to come to the shore. We’re the first exit on the Parkway, the first stop. We’re growing our market; not just assuming everything is going to be OK. We’re reaching out to new markets that are still within that one gas tank.”

Traffic at the Chamber’s Welcome Center on Ninth Street was brisk all weekend. Folks were checking out summer rentals – and buying beach tags.

“They’re cutting back, we are aware of that, but they are coming,” Gillian said.

It’s a shame that Americans are held hostage, victims of rising gas prices.

When President Barack Obama took office in 2009, the price of gas averaged $1.83. The “lame-stream” media blamed former President George Bush, but give Obama – who could alleviate the problem – a pass.

In an interview on Fox News John Hofmeister, CEO of Shell Oil, said the U.S. used to produce 10 million barrels of oil, now it’s down to seven.

“We can get back there,” he said.

The U.S. is the world’s largest consumer of oil, but a big rival is China. Problems in the Middle East are exacerbating the problem. Tensions with Iran are feeding fears that oil supplies could be blocked.

“We are facing one of the most unprecedented, volatile geo-political situations, but the failure of this administration to develop an energy policy has hurt us,” Hofmeister said.

He said he would like to see Obama develop a “robust drilling program.” He said he advised the president to do this three years ago. Instead, Obama said the answer was bio-fuels.

Obama placed a moratorium on drilling off the Gulf Coast. The internal combustion engine, said Hofmeister, is here to stay until something more efficient and economical comes along. Meanwhile, we’re sitting ducks, at Obama’s mercy.

“We wouldn’t have to worry about the Middle East if we used Canada and Mexico,” said Hofmeister, adding that it was a big mistake for Obama to scuttle the 700,000-barrels-a-day Keystone XL pipeline, despite approval by the State Department after an exhaustive three-year review. The pipeline would provide cheaper gasoline and thousands of jobs.

While pushing to slam “excess profits” with higher taxes, Obama demonizes oil companies. There are 1.4 trillion “recoverable” barrels of oil available in the U.S. according to the Institute for Energy Research, but federal regulations make it off-limits.

If Obama would announce an “aggressive effort to tap domestic oil,” Hofmeister said there would be an immediate downward effect on prices.

As a vulnerable seashore resort community, we can only hope for change in November.

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