Will Culture Survive the Recession?

New York City’s Metropolitan Opera struggles as its $300 million endowment drops by a third. A few blocks from The Met, venerable Carnegie Hall cuts $4 million from its budget and takes a scalpel to its 2009-10 schedule, slashing it by 10 percent. The Akron (Ohio) Art Museum makes internal cuts and postpones exhibitions as it faces a fiscal freefall. In Massachusetts, the Worcester Center for Crafts, one of the city’s oldest cultural institutions and one of the oldest craft schools in the country, suspends daily operations and faces permanent closure if it fails to raise $1 million by the end of the month.

It’s a scene that is being replayed across the country. Cultural institutions in the U.S. are facing cutbacks as state and local governments hammer out new budgets with reduced revenues. Even when cuts are equal across the board, cultural institutions such as museums and theaters find it necessary to rein in their plans and vision for the year. For example, the Department of Cultural Affairs in Nevada will suffer a 35 percent reduction in its budget, meaning Nevada’s museums will be closed four days of the week.

In Detroit, the General Motors Foundation has already notified about a dozen arts and cultural groups, including the Detroit Symphony Orchestra, Music Hall, the Michigan Opera Theatre and the Detroit Institute of Arts, that their customary annual support of $1 million from the company won’t be forthcoming in 2009.

“When the economy gets a cold, the arts get pneumonia,” observes Michael McDowell, senior director of cultural tourism, LA INC, a division of the Los Angeles Convention & Visitors Bureau.

How This Influences Your Business

What does this mean for travel agents? While golf, spa and honeymoon vacations might be more high-profile than cultural attractions, surveys show how important cultural venues and special events are in attracting high-spending visitors to a destination.

McDowell shared some eye-opening statistics from the 2007 Annual TNS American Traveler Survey. The study shows that about half of the visitors to Los Angeles participate in at least one cultural activity, a figure that holds true for other cities throughout the U.S. Twenty percent of total visitors to Los Angeles choose the destination primarily for a cultural activity.

These visitors represent revenues of $2.8 billion. Visitors who have culture at the top of their travel agenda also tend to stay a day and a half longer and spend 50 percent more.

This creates a ripple effect that contributes to restaurants, hotels, shops and local transportation. It’s easy to see how these clients could be especially profitable for the travel agent.

The lure of culture also hits travelers in the midst of their visit. Coincidental tourists who just happen to go to a cultural institution during their trip contribute an additional $7.4 billion in revenue to Los Angeles.

“From all the research we’ve seen, the cultural tourist stayed longer and spent more,” says McDowell. “Agents tended to reap higher commissions from these clients.”

Now as the economy tanks and budgets are slashed, some Los Angeles cultural institutions are finding themselves up against the wall. The Los Angeles Museum of Contemporary Art recently faced a financial drama brought on by plummeting donations. Luckily, a rescue plan led by billionaire philanthropist Eli Broad garnered $75 million to stave off a move to another location or a merger with the Los Angeles County Museum of Art.

“Many cultural institutions are heading for a perfect storm,” says McDowell. “We’ve seen a 40 percent drop in endowments to cultural institutions, similar to the drop we’ve all seen in our 401(k)s.” L.A.’s cultural institutions are also seeing a dip in the amount of donations from bread-and-butter annual fund donors. McDowell notes that many of those who customarily give from $2,500 to $5,000 are now reducing their donations to $500.

“Our country doesn’t have a particularly robust record of supporting the arts,” says McDowell. “Cultural institutions have relied on other ways of surviving, and in these difficult times any loss of support is threatening.”

McDowell notes that given the sad state of the economy, many Los Angeles residents are postponing vacations to destinations such as Hawaii or Mexico. “We’re reaching out to these ‘staycationers’ and suggesting they visit an L.A. attraction that they haven’t yet experienced,” he says.

One of these initiatives is the current LA Arts Month, which is going on until March 31. When visitors show their Wells Fargo or Wachovia credit or check card at more than 30 participating museums or institutions around Los Angeles, they receive discounts on admission and gift-shop items. “A family of five can visit the L.A. County Museum of Art for $60—but for some families, it’s a choice of lunch or the museum, and lunch wins,” says McDowell. Attractive discounts like those offered by LA Arts Month may be the deciding factor in getting that family hooked on a cultural experience instead of a lunch at Sizzler.

Island Culture

Hawaii is another destination that is struggling to keep its culture front and center. The Islands are famous for enveloping guests in their appealing culture, from musicians greeting arriving visitors with music at the airport, to free nightly hula performances in Waikiki.

The Hawaii Tourism Authority (HTA) points to plummeting hotel room tax revenues that are forcing the authority to cut money from various programs.

“Our cultural programs are very important—our marketing program is based on Hawaii’s culture,” says Lloyd Unebasami, interim HTA president and CEO. “The HTA’s revenues come from the Transient Commuter Tax, or hotel tax. At one point, we had an $88 million budget for fiscal year 2009—that’s now been reduced to $70 million.”

Hawaii tourism players are concerned that cuts like these could jeopardize such popular attractions as Sunset on the Beach movies and the daily hula show and torch lighting at Kuhio Beach.

“We were always in support of these performances,” says Unebasami. “At our first budget meeting, it was determined that we would cut our support of these programs to zero. At our upcoming meeting, HTA staff is proposing that these events once again receive funding from the HTA, although it will be at a lower level of funding than the $300,000 a year.

“Down the road, as long as I’m here, there’ll be committed funding,” Unebasami continues. “If our funding is reduced proportionately, we’ll cut proportionately.”

Things Are the Same All Over

New York may be as far as you can get from Hawaii, but the problems are similar. “The picture in New York is the same as everywhere—great uncertainty,” says Dr. Lalia Rach, divisional dean and HVS International Chair at the Tisch Center for Hospitality, Tourism, and Sports Management at New York University in New York City. “Right now, although you’re seeing that everything is being impacted, there’s not a panic going on in New York’s cultural institutions.”

Rach observes that in the face of reduced funding from state and local governments and endowments, cultural institutions need to establish a contingency plan to determine how they will be able to continue to provide services.

Rach notes that New York City’s occupancy figures are currently 84 percent, while it was previously closer to 90 percent. “The issue is that these changes happened very quickly,” says Rach. “November and December were bad. Without a doubt, the full impact will be felt in 2009.”

While New York’s cultural institutions are facing definite challenges, according to Rach, the city’s financial community has taken the biggest hit. “Experts are saying that Wall Street will be half the size it was,” she says. “This will affect business all the way down the line, from hotels and restaurants to taxi drivers. It will also affect group business travel—we’ve heard that on average many businesses will be sending groups one-fifth their usual sizes.”

Rach has some advice for travel agents. “As a travel agent, you don’t overlook any client, including the cultural traveler,” she says. “Know your client and utilize this knowledge. For example, with so many Broadway shows closing, agents will see special offers and values for their cultural clients. Push this knowledge toward them.”

San Francisco is another city that is passionate about tourism. “The mayor and the San Francisco CVB are really rolling up their sleeves and doing everything they can to help the city’s cultural institutions,” says Richard Peterson, travel industry sales director, California Academy of Sciences.

The recently reopened California Academy of Sciences is home to Steinhart Aquarium, Morrison Planetarium and Kimball Natural History Museum. “We’re not only the newest cultural institution, but we’re also the oldest, with 150 years of operation,” says Peterson. He notes that the academy’s budget was established before the financial meltdown. He points to a strong corporate donor base, a successful seeking of scientific grants and through-the-roof attendance as establishing a firm base for the institution.

The California Academy of Sciences is one of the partners in CultureBus, a new bus route that links passengers with a selection of San Francisco’s cultural institutions. For one flat fare ($7 for adults and $5 for seniors), riders have unlimited access to CultureBus for the day, with service from downtown San Francisco to Golden Gate Park. Stops along the way include the Asian Art Museum, the Contemporary Jewish Museum, the de Young Museum, the San Francisco Museum of Modern Art, the Yerba Buena Neighborhood and the California Academy of Sciences.

“People love urban adventures,” notes Peterson. “In San Francisco, we see from our research that the visitor booking a theme park or attending a baseball game is the same customer demographic as those booking a cultural institution.”

Peterson’s advice for how cultural institutions should weather the storm is simple and direct. “Look for better ways to finance—that’s what it comes down to,” he says.

Surviving the Recession

In a withering economic climate, the first things to be cut are those deemed luxuries. It’s a huge mistake to put our cultural institutions in this category. Undervaluing our cultural institutions will harden our country’s collective soul and widen the class divide. The average age of an arts event attendee is 52. Without major efforts to attract younger patrons, cultural institutions will dwindle on the vine. If the scenario of a country putting its cultural institutions on the chopping block doesn’t give you pause, then consider this: It’s bad business, bad for the bottom line and will do irreparable damage to a destination’s ability to attract tourists.