Q&A with Anirban Basu
Economist Anirban Basu has been a crowd favorite the past three years at Visit Orlando’s annual Business Insights Luncheon & Economic Forum. As chairman and CEO of Baltimore-based Sage Policy Group, Basu teaches at Johns Hopkins University and serves as chief economist for a number of organizations across the country. Here, he discusses how national and global economic trends stand to shape Orlando’s largest industry.
Where do you see America’s economy heading in the short term?
Over the next one to two years, the U.S. economy should be in decent shape. For the first time in 10 years, we are in the midst of a synchronized global economic recovery, with every major world economy now expanding. That should help stimulate export growth, which will be a nice companion for the consumer spending growth that has been driving our economic recovery.
What about any potential risks?
Highly inflated asset prices — including U.S. stocks, bonds and commercial real estate — pose risks to economic growth. My sense is inflationary pressures are now becoming more apparent, and that will lift interest rates over the next two years. That, in turn, could cause some downward repricing of assets, triggering negative wealth effects and setting the stage for the next economic downturn, perhaps in 2019 or 2020. It is important to remember no U.S. economic expansion cycle has persisted indefinitely.
How might these larger economic trends impact visitation to Orlando?
One might think an economic downturn would be unambiguously negative for Orlando, which depends heavily upon the willingness and ability of families to spend discretionary income. For the most part, that is true.
However, Orlando offers such a wonderful value proposition that some families who might otherwise travel abroad may choose to spend time in Orlando instead. Local hotels may also offer incentives to visit. Still others will continue to come to Orlando but may alter the way they travel to Orlando and reduce the length of their stay by a day or two.
Orlando’s biggest global markets are Canada, the United Kingdom and Brazil. What is the outlook for these countries?
Canada is the 10th-largest economy in the world, and after two shaky years, the country has strengthened economically thanks in part to more stable commodity prices. Markets like Toronto and Vancouver continue to expand rapidly, helping create significant new Canadian wealth in the process.
The United Kingdom is the world’s fifth-largest economy, and unlike much of the world, is slowing economically. This is primarily due to uncertainty stemming from Brexit, Great Britain’s planned exit from the European Union. However, the British pound has strengthened recently, which should help stabilize visitation from Great Britain.
The Brazilian economy remains weak. After a recession in 2016, it is now expanding, but very slowly.
You have said there are indications of “mini-bubbles” forming in commercial real estate.
How could that affect Orlando’s tourism industry?
The significant growth in office, hotel and other commercial real estate valuations has triggered a wave of construction, including of hotel rooms. This creates an environment ripe for overbuilding. If commercial real estate prices begin to decline as a result of overbuilding and rising interest rates, banks may begin to lend more cautiously. That could slow overall U.S. economic growth, which would impact Orlando. It may also lead to slower hotel construction there.
“Any way you crunch the numbers, it is obvious that Orlando’s economy benefits tremendously from being America’s most visited destination.”
President & CEO
of Visit Orlando
IT PAYS TO ATTRACT VISITORS
How tourism, and tourism promotion, benefit Orlando
Just how big is Orlando’s tourism industry? If we think of it in terms of revenue generated by a single company, the $41.8 billion that visitors spent here in 2016 would rank 65th on the Fortune 500 list — right between
Coca-Cola and New York Life.
When we break down tourism’s impact on our regional economy, the results grow even more impressive. The industry, which supports more than 1 in 3 area jobs, not only gives us access to world-class entertainment, shops, restaurants and attractions, it also results in tourists to Orange, Seminole and Osceola counties paying $5.2 billion each year in state and local taxes. In Orange County alone, out-of-town guests account for approximately half of all sales tax revenue — money that helps fund upgrades to the county’s infrastructure, parks, schools and public safety.
In addition to being Orlando’s biggest industry, tourism also continues to be one of its hottest. Since 2011, visitor spending has increased at an annual rate of 5.7 percent, with records constantly being shattered in attendance, tax revenue and numerous other areas, as well.
Any way you crunch the numbers, it is obvious that Orlando’s economy benefits tremendously from being America’s most visited destination.
The lesson is clear: For maximum economic impact, it pays to attract visitors.