The California Employment Development Department has projected annual job growth through September 2008. With a base of over 1.5 million jobs and a projected increase of 4.3% (4.6% if including only food, beverage, and lodging services), the Hospitality and Leisure sector ranks behind only Professional and Business Services (with 4.8% growth) and Administrative and Support and Waste Management and Remediation Services (also 4.8%).1
Although economic conditions have changed since these projections were compiled, the California Travel and Tourism Commission (CTTC) noted that residents accounted for 83% of domestic travel within the state in a recent report. In addition, four of the top five states from which California draws visitors are nearby: Arizona, Nevada, Oregon, and Washington. In economic downturns, domestic travelers are more likely to forego trips abroad in favor of more accessible locations offering similar attractions. In such circumstances, California's 11.5% share of the domestic travel market is likely to remain stable if not increase.2
The number one retirement activity Baby Boomers plan to engage in is travel.
-Del Webb Baby Boomer Survey, 2005
California has an opportunity to capture a significant share of this lucrative market as fuel prices make the cost of travel abroad more prohibitive.
The CTTC also reports that California welcomed 14 million international visitors, 4.6 million of whom traveled from overseas. Of the approximately 9 million visitors arriving from Mexico, 4.8 million were day visitors; the remainder required some form of overnight accommodations. 3 Even with enhanced security measures, California remains an attractive destination for overseas travelers, with the ports of San Francisco and Los Angeles welcoming approximately 13% of U.S. arrivals from overseas. 4
The hospitality market is varied and dynamic. The diversity of offerings, employers, strategies, and styles continues to breathe new life into the industry as the fortunes of other industries ebb and flow. The resiliency of the hospitality industry is perhaps best illustrated by this excerpt from an article in the June 30th edition of Nation's Restaurant News:5
With consumer confidence at a 16-year low, fewer families dining out and oil prices spiking above $130 a barrel, the time seems right for restaurant companies to retrench, not grow. ... But executives at such chains as Chipotle Mexican Grill, Bruegger's Bagels, BJ's Restaurants and Buffalo Wild Wings nonetheless view 2008 as a great time to roll out new restaurants.
Compelled by the opportunity to take business from competitors and capitalize on more favorable leasing conditions for tenants, including stable or decreased rents, chains that have continued to post revenue and same-store sales gains despite the economic downturn are laying the foundation for long-term growth.
Chipotle is leading the charge with projections of 130 to 140 new units this year, for a total of more than 830 units. Buffalo Wild Wings also is flying high, planning about 75 new locations for a total of roughly 568 restaurants.
"Our sales model and restaurant performance have been very, very strong, and this is a great time for us to be more aggressive," said Rex Jones, chief development officer at Chipotle. "We look at this as a long-term [opportunity]."
1 California Employment Development Department, Projections of Employment by Industry and Occupation, Industry Projections 2006-2008, http://www.calmis.ca.gov/file/indproj/cal$indproj-2006-2008.xls.
2 California Travel and Tourism Commission, California Domestic Travel Report, 2006, http://www.visitcalifornia.com/media/uploads/files/CAYE2006DomesticTravelReport-Final.pdf, pages 1-3, passim.
3 California Travel and Tourism Commission, California Tourism Outlook, http://www.visitcalifornia.com/media/uploads/files/editor/Outlook%20for%202008%20Santa%20Barbara%20CVB%20wNotes.pdf.
4 California Travel and Tourism Commission, California Statistics and Trends, http://www.visitcalifornia.com/AM/Template.cfm?Section=California_Statistics_and_Trends.
5 Curan, Catherine, Still-Growing Chains Bullish About Prospects to Gain Market Share, Nation's Restaurant News, Lebhar-Friedman, New York, NY, Volume 42, Number 26, page 6, http://www.nrn.com/article.aspx?id=356172.
