May 28, 2008 - Tax revenue from hotel visitors in Pima County was down about 19 percent in the first quarter of 2008 compared with last year, sending tourism officials scrambling to find replacement tourists as U.S. consumers scale back on discretionary spending.

Visitors from Mexican border states are the target of the Metropolitan Tucson Convention & Visitors Bureau, whose $9 million annual budget is largely funded by the bed tax paid at hotels and resorts.

"One area that, oddly enough, hasn't been affected is the Sonora and Sinaloa areas," said Jonathan Walker, the bureau's president and CEO. "They're not seeing the downturn in the economy that the U.S. is."

Along with efforts to lure more tourists from Mexico -- who have historically provided a steady dose of shopping dollars in Southern Arizona -- the visitors bureau is focusing its outreach on tourists who live a day trip away, he said.

Bed-tax collections in Pima County dropped by more than $24 million in the first quarter, the high tourist season in Tucson.

Walker said the bureau was braced for the drop in revenue and no staff cuts are planned in the near future.

In March, which is normally the prime time for Arizona tourism, Pima County bed-tax collections were the lowest in five years, according to the county's Financial Control and Reporting office.

"We have felt that there is the softening of the economy that everybody is feeling," Walker said. "It's not all bad, it's just soft."

Along with the visitors bureau, bed taxes also support the stadium district.

Walker said commercial travel is holding steady and it appears that it will next year, too.

"2009 looks real solid," he said.

MTCVB, along with the Arizona Office of Tourism, the Phoenix visitors' bureaus and the University of Arizona are conducting a survey of shoppers from south of the border to determine their spending habits and see what it would take to increase the frequency and length of their visits.

The last such survey, done in 2001, showed they spent $962.9 million in Arizona in the previous year and the highest percent of those dollars -- $301.6 million -- was spent in Pima County.

The report on the yearlong study is due to be released this summer.

Meanwhile, Mexico is challenging the wisdom that a U.S. slowdown means tough times for its southern neighbor.

President Felipe Calderon plans to spend 2.5 trillion pesos -- about $240.5 billion -- in public and private funds on roads, energy, airports, dams and ports during his six-year term.

The government says the first projects are already stimulating local economies, helping Mexico weather the slump in the U.S., which buys 80 percent of its exports.

"This is the big economy story of the year," said Gray Newman, chief Latin America economist at Morgan Stanley in New York. "We're in the middle of a reacceleration of the Mexican economy precisely at the moment that the U.S. economy is weakening."

While U.S. first-quarter growth was 0.6 percent, Mexico's seasonally adjusted annualized rate was 2.1 percent, according to Juan Trevino, chief economist for HSBC Holdings Plc in Mexico City, who calculated the figure based on government data released last week.

Includes information from Bloomberg News.

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