Money & Business

Deep Impact: Trade Groups Tally Cost of Government Shutdown

By / Oct 21, 2013

Calculating the economic damage caused by 16 days of federal gridlock has begun, and the numbers aren’t pretty—especially for the travel and hospitality sectors, say industry associations.

Hundreds of thousands of U.S. government employees settle in today for their first full week of work since Congress finally passed legislation to temporarily fund the federal government. Meanwhile, tallying has begun on the damage done by the 16-day shutdown that ended October 17.

It’s a real noticeable hit to the economy, more so because we weren’t growing that fast to begin with.

USA Today reported that the shutdown cost the U.S. economy in the neighborhood of $12 billion to $24 billion, hurting job and economic growth significantly. Home sales were affected nationwide: The Mortgage Bankers Association said mortgage applications during the shutdown dropped to their lowest levels since 2007. Retail sales were also down, as was consumer confidence, according to the paper.

“It’s a real noticeable hit to the economy, more so because we weren’t growing that fast to begin with,” Paul Edelstein, director of financial economics at consulting firm IHS, told USA Today.

The effects were felt in nearly every facet of American business, especially in the travel and hospitality sectors.

Travel Troubles

The U.S. Travel Association estimates that the 16-day impasse on Capitol Hill cost up to $152 million a day, or more than $2.4 billion, in economic output from the travel industry alone. That figure includes losses to local economies due to closures of the nation’s national parks and monuments and other inconveniences that prompted U.S. and international travelers to change or cancel vacation plans.

A report on the industry website Travel Agent Central (TAC) said that several countries, including China, Germany, and the U.K.— which together account for more than 5 million visitors a year to the United States—issued statements warning their citizens to beware of delays and closures related to the shutdown.

U.S. Travel Association President Roger Dow said those warnings would likely continue to affect future travel plans. “The shutdown’s damage cannot be undone,” Dow told TAC on Thursday, “but reopening the government will allow America’s travel community to get back to work and continue to drive U.S. economic recovery.”

Dow urged Congress to agree to a long-term funding solution that would help restore consumer confidence in the travel industry and other business sectors.

“Economies hate uncertainty,” Dow said. “Now that the shutdown has been concluded, the best thing our federal policymakers can do for our economy is to pursue a long-term fiscal plan that includes commitments to invest in our country’s aging travel infrastructure.”

Hospitality Hurt

The hospitality sector also took a hit. Like U.S. Travel, the American Hotel & Lodging Association (AHLA) applauded last week’s funding measure and urged lawmakers to agree to a more permanent solution.

“After 16 long days of uncertainty, the loss of $115.2 million in economic activity in the lodging industry, and billions of dollars more in lost collective income and visitor spending, hoteliers across America are grateful Congress and the president have finally come to the table and passed a bipartisan bill to end the government shutdown,” Katherine Lugar, AHLA president and CEO, told TAC.

Lugar added, “We urge policymakers to take these next few months to engage in a serious dialogue to find a meaningful and long-lasting solution to the fiscal issues still facing this country—solutions that will allow the lodging industry to continue its role as a major driver of economic growth and job creation.”

Back from the back burner

With President Obama having signed the legislation to reopen the government last week, the U.S. Travel Association’s Dow said he hoped lawmakers would turn their focus to political issues forced to the back burner during the impasse, such as immigration reform.

“Immigration reform was among the constructive legislative efforts that unfortunately were derailed by the shutdown,” Dow told TAC. “The travel community strongly supported the package that has already been passed by the Senate, and we have every confidence that leaders in the House will move forward on this important issue.”

How did the government shutdown affect your industry?

Corey Murray

Corey Murray is a contributor to Associations Now. More »

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