Will Savings At The Pump Inspire More Travel?

Will Savings At The Pump Inspire More Travel?

Gas prices and auto travel are not so closely tied anymore.

Late last year, consumers applauded as gas prices fell. By January, U.S. regular gasoline retail prices averaged barely $2 per gallon, their lowest level in nearly six years.

So road trip, right?

Not necessarily—or at least no more than usual. Travel marketers are sounding a cautiously optimistic note about state tourism prospects this year against a backdrop of potentially far lower gas prices. Those in the industry say it will take a while to assess the effects of lower prices on tourism, especially with the busiest season (June through August) still to come.

By that logic, a trip from Des Moines to MSP could extend up to Nisswa, where Jim Benson has run the Grand View Lodge for 25 years. “Our market gets a little bigger,” he says.

A year before gas prices plunged, Explore Minnesota had already embarked on its most ambitious marketing campaign yet, expanding into six new states and provinces, as far as Saskatchewan and Wyoming. Tourism is a $13 billion business in Minnesota, up from $8.7 billion in 2003. Every $1 spent on advertising produces a $6 local tax return on investment and $68 in traveler spending ROI. Though much of tourism here involves Minnesotans or out-of-staters hitting the road, just 16.5 percent of spending is on transportation—behind food, lodging and retail. “It’s a small piece of the pie,” Explore Minnesota Tourism’s Alyssa Ebel says.

Furthermore, the U.S. Energy Information Administration suggests that gas prices and travel aren’t closely tied. Whereas a 10 percent rise in airfares will produce a comparable decline in air travel—or vice versa—it now takes a 25 to 50 percent drop in gasoline prices for people to increase travel just 1 percent. Compare this to the 1990s, when just a 12 percent decrease in gas prices keyed a 1 percent increase in auto travel. The EIA attributes this to fewer miles driven due to an aging population, and population migration to urban areas.

So maybe it’s best not to bank on a summer road tourism boom, even though airfares are at all-time highs. “People are somewhat hesitant,” Benson notes. “Gas tends to go up more than it goes down.”