The Impact of the BP Oil Spill in the Gulf of Mexico on the State of

Report
Author: Holly Spencer, MBA Candidate
Adviser: Dr. Woody Kim, Robert H. Dedman
Professor of Hospitality Management
Florida State University
Dedman School of Hospitality
Introduction
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Literature Review
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Introduction
Statement of the Problem
Purposes of the study
Natural disaster and outbreak research relating to
the tourism industry
Articles relating to industry growth in the U.S. for
2010
Data Source
Analysis
Results
Discussion and Future Studies
Implications
April 20, 2010 – Transocean’s Deepwater Horizon
Oil Rig explodes killing eleven people and
dumping oil into the Gulf of Mexico
 Media frenzy amplified the effects by showing
intense coverage of oily beaches and damaged
wildlife causing consumers to question visiting
Florida and eating Gulf seafood
 Initial review of Smith Travel Research data
showed an interesting picture as Fort Walton
Beach showed continued losses June – August in
2010 compared with 2009 while Pensacola
showed steady growth over 2009
 This brought to question what the effect of the
BP Oil Spill actually was throughout the state of
Florida


Because of the intense media coverage, many
hoteliers throughout Florida felt that their
hotel’s performance was affected by the BP Oil
Spill.
This can best be determined on a property by
property basis, however, this study aims to quantify
the effects on an aggregate level in order to
summarize how this event has shaped Florida’s hotel
industry
 The oil spill caused relief workers to deploy to some
regions buffering the displacement of leisure
travelers
 Cannibalization factor: “People who want to go to
the beach will go to the beach regardless of if they
have to switch coasts”, Paul Tang, Hyatt Regency
Grand Cypress


While the entire Gulf region has been affected
by the BP Gulf Oil Spill, this study focuses on its
effects on Florida’s hotel industry including
regions whose shores were not actually reached
by the oil as well as the regions which saw oil on
their sand. The purpose of this study is to a)
show the effects of the oil spill on regions within
Florida in comparison with those results from
other directly affected states and to b) show its
effects on the state as an entirety in
quantitative terms and by interviewing Florida
hoteliers. This study will in turn lead to a better
understanding of the economic impact of an
environmental crisis on the lodging segment.
There is little discussing effects of actual crises
on the tourism industry.
 Chandler (2004) found that national media
coverage during the hurricanes Dennis, Floyd,
and Irene influenced prospective visitors’ travel
plans to the North Carolina Coastal Plain region.
 Pizam (2009) cited DLA Piper’s 2009 Hospitality
Outlook where 90% of American respondents
described the 12-month outlook for their
respective hospitality industries as “bearish” and
that 43% felt that this recession has had the
biggest impact on RevPAR.

 Reynolds
and Belinbin (2003) studied the
effects of Mad Cow Disease and found that
outbreaks of disease lead to product
avoidance which changes consumer buying
behavior while educating consumers showed
to add value.
 Miller and Glantz (1988) found that Florida’s
freezes were partially responsible for
growing the Brazilian Frozen Concentrate
Orange Juice market.

Frietag (2010) of STR stated that 2010 gave
optimistic signals for the U.S. hotel industry
Demand up by over 10 percent (luxury, upper upscale,
and upscale)
 ADR maintaining or increasing in June 2010



Upper upscale and upscale stagnant ADR due to group
business
Hart (2010) of Rubicon stated that group room
nights committed in Q2 2011 was up 4.5 percent
and group pace up 43.7 percent.
Group and business segments occupancy rates at their
worst in first half of 2009
 Loss of promotional rates from during recession
caused some loss of demand for lower-rated leisure


Secondary data of 25 separate
regions from Smith Travel
Research


Monthly occupancy, ADR, RevPar,
and total room revenue
statistics
Directly Affected in Florida:
Fort Walton Beach
 Panama City
 Panhandle Area
 Pensacola MSA


Directly Affected not in
Florida:






Baton Rouge, LA
Biloxi/Gulfport, MS
Mobile (City)
Mobile Area, AL
Southern Louisiana
Southern Mississippi

Not Directly Affected in
Florida:















Daytona Beach
Florida Keys
Fort Myers
Fort Pierce
Fort Lauderdale
Jacksonville
Lakeland Area
Melbourne
Miami/Hialeah
Naples MSA
Ocala MSA
Orlando
Sarasota
Tampa/St. Pete
West Palm Beach
 “Directly
Affected”- area that was either
touching or highly publicized in association
with the BP Oil Spill
 Paired t-tests and ANOVA using mean percent
change for the three months prior to and the
three months after the event month (April)
from 2009 to 2010
 Interviewed hoteliers by telephone as done
in Reynolds and Balinbin (2003), Chen et al.
(2006), and Chandler (2004).

The performance factors asked about included






a) in which market segment(s) did the respondents see
the biggest drop(s) from April 2010 to August 2010
b) if they saw a decline in group business, what
percentage of those canceled plans does the respondent
expect to reschedule
c) to what does the respondent most directly attribute
the departure from their property’s forecasts,
d) what segment does their property fit into
e) what is the ownership/management structure of their
property
Respondents were also asked about Occupancy, ADR,
RevPAR, and Revenue trends in their region as well as
demographic items about themselves such as age,
years of experience in the hotel industry, prior
background, and current position.
 July

Occupancy


2009 – July 2010:
5% increase for Florida’s East Coast
.1% increase for Florida’s Gulf Coast
RevPar

$6 increase for the East Coast
$3.64 increase for the Gulf Coast
 Many
articles in the media expressed
dramatic increases in occupancy on the East
Coast implying possible cannibalization
 Mean
percent change from 2009 – 2010 after
the BP Oil Spill was improved and of greater
magnitude than the before in tested areas
including state of Florida as a whole and
some Gulf Coast areas outside of Florida

Only statistically significant in areas tested on
the Gulf Coast outside of Florida


Many emergency management personnel even from
Florida were directed to Mobile, AL
Mean Percent Change Before versus After
 -3.61% Before, 20.23% After




Mean percent change for Directly Affected area of
Florida after oil spill proved to be of significantly less
magnitude and had a vastly smaller percent change
than those areas directly affected outside of Florida
Mean percent increase for directly affected area
outside of Florida was of significantly greater
magnitude than those areas in Florida not directly
affected by oil
Mean percent change for area not in Florida showed
significantly smaller mean percent change before oil
spill compared with the areas in Florida not directly
affected
BOTTOM LINE: Areas outside of Florida on Gulf Coast
experienced much better effects in occupancy than
the areas in Florida both affected and not affected

Florida Department of Emergency Management:

May 1st, 2010 Situation Report:



May 19th, 2010 Situation Report:




More than 2,000 personnel involved in the response as of
that date both on and offshore with additional resources
ready to deploy
242 BP and contract personnel in Pensacola, FL
19,400 personnel working on offshore response
538 BP and contract personnel working on the effort in
Florida
33 members on-site at Unified Command in Mobile
July 3rd, 2010 Situation Report


587 state personnel currently deployed
188 of those 587 in Florida’s Panhandle
Both directly affected outside of Florida and not
directly affected in Florida areas’ mean percent
change after was significantly smaller than the
before thus their ADR had improved.
 The directly affected area had a significantly
greater mean percent change (negative) than
both the tested areas outside of Florida and the
not directly affected areas in Florida after the
oil spill.
 In terms of ADR, it appears that the BP Oil Spill
truly negatively impacted the Gulf Coast of
Florida’s hotels and did so more significantly
than in the other tested areas.

 RevPAR
results nearly mirror the ADR results
implying that ADR had a bigger impact
overall on performance than did Occupancy
 The mean percent change after is
significantly greater in magnitude and
improved in all areas except for those
directly impacted and in Florida.

The mean percent change for the directly
impacted areas of Florida did in fact improve
over 2009 despite not being significant
 The
mean percent change of Total Room
Revenue after the oil spill for all areas tested
both in and outside of Florida proved to be of
greater magnitude than the mean percent
change in the months prior and showed
improvement in mean percent change in
2010 over 2009.
 All areas also showed higher after mean
percent changes than the months leading up
to the spill and were significant with the
exception of the directly impacted area of
Florida.
Occupancy % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Fort Walton Bch
9
6
7
10
2
-7
-15
Panama City
1
6
0
-2
7
8
2
Panhandle Area
-24
-24
-13
-15
-10
6
14
Pensacola MSA
5
-2
11
14
15
15
9
-2
-3
1
2
3
6
3
Average D
Occupancy % Change 2010 - 2009
Market/Tract
Baton Rouge
January
February
March
April
May
June
July
-17
-11
-11
-7
5
3
-3
Biloxi/Gulfport
-2
6
9
11
32
12
3
Mobile (City)
12
10
15
24
65
53
48
Mobile Area
-8
2
9
20
37
31
30
So. Louisiana
-34
-27
-13
-9
16
17
21
Southern Miss.
-2
-2
-1
-18
-17
0
11
Average DNF
-9
-4
1
4
23
19
18
Occupancy % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Daytona Bch
-5
0
12
6
8
-2
-5
Florida Keys
-2
0
5
1
3
1
0
Fort Myers
-5
0
12
6
8
-2
-5
Fort Pierce
0
5
19
19
5
4
3
Ft. Lauderdale
6
5
11
6
8
9
6
-2
2
7
5
7
9
12
-11
-3
2
4
4
11
11
7
14
6
17
8
-5
-2
Miami/Hialeah
10
8
10
5
5
8
6
Naples MSA
14
7
11
7
1
4
-2
Ocala MSA
-6
-3
-2
3
1
1
7
Orlando
3
0
9
-1
2
4
8
Sarasota
5
3
9
7
7
-1
-2
Tampa/St. Pete
-3
0
10
7
8
7
6
West Palm Bch
3
12
12
9
9
8
17
Average ND
1
3
9
7
6
4
4
Jacksonville
Lakeland Area
Melbourne
ADR % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Fort Walton Bch
-9
-6
-5
-7
-4
-2
-11
Panama City
-3
-3
3
-2
-5
-7
-8
Panhandle Area
1
0
-4
-3
-6
2
-4
Pensacola MSA
-2
-3
-2
0
-2
-6
-10
Average D
-3
-3
-2
-3
-4
-3
-8
ADR % Change 2010 - 2009
Market/Tract
Baton Rouge
January
February
March
April
May
June
July
-10
-10
-5
-7
-2
-1
-1
-4
-6
-3
-1
0
2
3
Mobile (City)
-10
-14
-11
-8
4
8
14
Mobile Area
-12
-15
-10
-10
-9
-10
-12
So. Louisiana
-7
-8
-6
-4
-2
3
7
1
1
-1
-4
-6
-3
0
-7
-9
-6
-6
-3
0
2
Biloxi/Gulfport
Southern Miss.
Average DNF
ADR % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Daytona Bch
-5
-7
-1
3
3
7
2
Florida Keys
2
3
9
5
2
4
4
Fort Myers
-10
-13
-8
-6
-3
-5
-3
Fort Pierce
-12
-12
-7
-4
-6
-1
1
-7
4
-1
-8
-3
-3
0
Jacksonville
-11
-11
-7
-5
-8
-5
-2
Lakeland Area
-16
-1
-2
2
2
0
-6
Melbourne
-4
-4
-8
0
-1
-6
-6
Miami/Hialeah
-6
12
6
-2
-1
4
2
Naples MSA
-5
-7
2
5
2
1
-2
Ocala MSA
-1
-1
0
3
0
3
2
Orlando
-11
-8
-6
-2
-11
2
3
Sarasota
-14
-11
-7
-9
-2
-2
0
Tampa/St. Pete
-25
-17
-5
-6
-4
-2
-3
West Palm Bch
-11
-9
-5
-4
-5
-1
-1
-9
-5
-3
-2
-2
0
-1
Ft. Lauderdale
Average ND
RevPAR % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Fort Walton Bch
-1
0
2
2
-2
-9
-25
Panama City
-2
4
3
-4
2
0
-6
Panhandle Area
-23
-24
-17
-18
-15
8
10
Pensacola MSA
3
-5
9
14
12
8
-2
-5
-6
-1
-2
-1
2
-6
Average D
RevPAR % Change 2010 - 2009
Market/Tract
Baton Rouge
January
February
March
April
May
June
July
-26
-20
-15
-13
2
2
-3
-6
-1
5
11
33
14
7
Mobile (City)
1
-6
3
14
72
65
68
Mobile Area
-19
-14
-2
9
25
18
14
So. Louisiana
-38
-33
-19
-13
14
20
29
-1
-1
-2
-22
-22
-3
11
-15
-12
-5
-2
21
19
21
Biloxi/Gulfport
Southern Miss.
Average DNF
RevPAR % Change 2010 - 2009
Market/Tract
January
February
March
April
May
June
July
Daytona Bch
-4
-11
-3
2
13
8
15
Florida Keys
0
3
15
7
5
5
5
Fort Myers
-15
-13
3
-1
5
-7
-8
Fort Pierce
-12
-7
11
14
-1
4
4
-1
9
10
-2
5
5
7
Jacksonville
-12
-9
-1
0
-1
4
10
Lakeland Area
-25
-3
0
6
6
11
4
Melbourne
3
9
-2
17
7
-10
-8
Miami/Hialeah
4
21
17
4
5
13
8
Naples MSA
8
0
14
12
3
5
-4
Ocala MSA
-7
-5
-2
6
1
4
9
Orlando
-9
-8
3
-2
-10
6
11
Sarasota
-10
-8
2
-3
4
-3
-2
Tampa/St. Pete
-27
-17
4
1
3
4
3
West Palm Bch
-8
2
6
4
4
7
16
Average ND
-8
-3
5
4
3
4
5
Ft. Lauderdale
Total Room Revenue % Change
Market/Tract
January
February
March
April
May
June
July
Fort Walton Bch
0
0
2
2
-3
-10
-25
Panama City
1
6
6
-1
5
3
-3
Panhandle Area
-12
-13
-6
-10
-7
18
20
Pensacola MSA
1
-5
10
15
13
12
1
-3
-3
3
1
2
6
-2
Average D
Total Room Revenue % Change
Market/Tract
Baton Rouge
January
February
March
April
May
June
July
-20
-15
-8
-8
8
8
3
-5
0
7
13
37
17
12
Mobile (City)
3
-4
4
15
75
68
68
Mobile Area
-4
-3
8
14
28
20
15
So. Louisiana
-33
-27
-12
-5
25
30
38
2
2
1
-19
-20
-1
11
-10
-8
0
2
25
24
25
Biloxi/Gulfport
Southern Miss.
Average DNF
Total Room Revenue % Change
Market/Tract
January
February
March
April
May
June
July
Daytona Bch
-3
-4
11
4
10
-2
-4
Florida Keys
1
4
16
8
7
7
6
Fort Myers
-3
-4
11
4
10
-2
-4
Fort Pierce
-7
-4
16
18
2
7
7
6
16
15
1
8
10
12
Jacksonville
-10
-7
2
3
2
8
12
Lakeland Area
-23
-1
2
8
8
14
6
Melbourne
4
10
-2
17
7
-9
-8
Miami/Hialeah
5
4
4
3
3
3
2
Naples MSA
9
1
15
14
4
6
-2
Ocala MSA
-7
-5
-2
6
1
4
9
Orlando
-6
-5
6
1
-7
9
15
Sarasota
-8
-6
5
1
9
0
1
Tampa/St. Pete
-27
-16
6
2
5
6
5
West Palm Bch
-3
5
10
8
8
11
20
Average ND
-5
-1
8
7
5
5
5
Ft. Lauderdale
 It
can be inferred from the data that while
the Gulf Coast of Florida was affected in
terms of ADR and thus RevPAR, their overall
performance was not severely affected in
comparison with the prior year.
 Looking at the other areas of Florida,
however, as well as the rest of the U.S.,
summer 2010 marked an uptick in occupancy
and in revenue higher than that which was
felt in the directly affected areas of Florida,
though this study was unable to trace how
much growth was lost in that region.
 Areas
of Florida not bordering the Gulf of
Mexico, however, who did not have oil on
their beaches, appear unaffected and seem
to have seen growth over 2009 due to the
rebounding economy.
 It is uncertain from this data how the areas
outside of Florida which also had oil on their
beaches achieved such astronomical gains
over 2009, although it can be at least
partially attributed to government aid
agencies reacting to the BP Oil Spill.

Interviews with Florida General Managers:
 Mr. Dale Haney of the Ponte Vedra Inn and Beach Club, a five diamond
resort near the Jacksonville, FL market, noticed an uptick in leisure
travel from Alabama with some travelers noting that they normally
traveled to the Gulf beaches of Florida but instead chose Ponte Vedra
during summer 2010 in fear of the oil spill. The Ponte Vedra Inn and
Beach Club saw a large increase from April 2010 to August 2010 in
individual leisure travelers.
 As stated by Paul Tang, Vice President and Managing Director of the
Hyatt Regency Grand Cypress in Orlando, “People who want to go to
the beach will go to the beach regardless of if they have to switch
coasts”. Mr. Tang also noted that his hotel experienced a great drop
in individual leisure travelers mostly due to the effects of the current
economic downturn and felt that the Orlando market remained largely
unaffected by the oil spill.
 Mr. Derrick Morrow of the Hyatt Regency Tampa also saw a downturn in
his hotel’s business but also attributed it to the recession. It is also
noteworthy to mention that Mr. Morrow disclosed an increase in group
business throughout summer 2010.
 Note that Gulf Region General Managers were unavailable for
comment due to pending litigation.
Future studies may include findings as to why
the Gulf region outside of Florida made such
positive gains in summer 2010 over 2009 and
factor in how much of that growth was due to
government aid and relief attempts.
 Future studies may be able to figure in how
much the economy actually played a part in this
disaster by going further in depth analysis of the
government’s response both in Florida and in the
surrounding areas.
 Future studies may also be able to measure the
long-term impact of the oil spill on the hotel
industry by being able to measure summer 2011’s
performance to 2010 and 2009 performance.


State Tourism Bureau:




Natural disasters will undoubtedly affect your state’s
industry
Acting swiftly and strongly will buffer the blows dealt to
your operators by the media
Florida’s State Tourism Bureau could have benefitted by
getting the word out there sooner that Florida’s beaches
were clean as the state was unfortunately bundled in to
the rest of the spill prior to oil hitting their beaches
Hotel Marketers:


Fighting with deeply discounted rates to increase
occupancy may not be necessary
Working with your local visitor’s bureau, you may look to
attract state government relief and task forces in your
state and look to attract relief from other states to help
out your state

Hotel Operators:
Having good relations with state government is more
important than ever when disaster strikes
 This disaster proves that attracting government
customers, despite typically lower rates, will at least
buffer the blow to your total revenue


Hotel Owners:
It is important to keep abreast of new happenings
related to natural disasters even if they do not
originate in your own state
 Be proactive and empower your management team to
contact state government to attract their business


State Government Officials:

Support your state by holding task force response
meetings in your state
Region
Occupancy
ADR
RevPAR
Revenue
Fort Lauderdale
positive, spike in May and
June
negative, but better from May on
positive, spike May - July
positive, big spike May - July
Daytona Beach
positive, spikes May - Sept
except in June
positive, spike in June
positive, spike May - Sept
positive, big spike May Sept
Panhandle
negative in April and May,
positive from June on
continually negative
positive, June on; negative in
Apr and May
positive, June on; negative in
Apr and May
Baton Rouge,
LA
positive, spike in May and
June
slightly negative
positive, slightly
positive from May on
Mobile, AL
positive spike in May, huge
decreases after
positive, increasingly so from May
on
positive, huge spike from
May on
positive, huge spike in May
Jacksonville, FL
positive, increasing from
May on
negative, slightly more negative in
May
positive, spike from July on
positive, big from June on
Fort Myers
positive in May and June,
negative in June and August
positive April and May, negative
June - Aug
positive up until May,
negative from June on
positive in Apr and May;
negative June - Aug
Tampa
positively increasing growth
negative, but better from May on
positively increasing from
May on
positive, increasing from
May on
Florida Keys
positive but decreasing
gains from May on
positive, but decreasing gains in
summer especially May
positive, steady increases
positive, steady increases
Orlando
positive, huge spike in July
positive, huge spike in July
positive, June on; largely
negative in May
positive, June on; largely
negative in May






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