Following are remarks presented by Terry MacRae, 2018 chair of the California Chamber of Commerce Board of Directors, at the 93rd Annual Sacramento Host Breakfast on May 24. MacRae is CEO, president and founder of Hornblower Cruises & Events, San Francisco.
Good morning. I am honored to be on the podium this morning representing the California Chamber. It’s great to see all the happy smiling faces here that only want the best for California’s future.
I have been very fortunate over the last 40 years to grow our California-based passenger vessel and cruise business to an industry leader that provides amazing experiences to over 20 million passengers each year. But, as all of you in the audience—those that are in business, particularly—know, it’s not easy to be successful in California.
It requires perseverance, patience, dedication and good planning to be a shipbuilder and a ship owner. If we are not shipshape, we may be shipwrecked. By the way…I like the “ship” words, so I will ask your forgiveness in advance.
Albert Einstein is credited with the statement: “A ship is always safe at shore, but that is not what it’s built for….”
It is a lot easier to pilot a ship when the sky is blue and the water is calm—the calm before the storm, as they sometimes say. But there are inevitably storm clouds out there on the horizon, and you don’t always know what is under the water below you.
Prudent Planning
And, not just for those of us in business do these storm clouds require prudent, strategic planning; our governments share in the consequences of economic downturns and bad planning, and they require the same thoughtful prudence and adaptability that successful businesses need.
Our state and our businesses certainly face serious issues, some of which were just as significant 40 years ago as they are today. Water, infrastructure, immigration and education were actually priorities in the news when I bought my first boat, just as they are today.
In many respects, just as our businesses must be dynamic to survive, our state’s issues and challenges, even if we’ve solved them in the past, need constant updating to meet the needs of an ever-changing California. For example, with warmer temperatures of late, should we take our natural water reservoir, the Sierra snowpack, for granted or anticipate the need for more reservoirs?
Our population has grown by almost 16 million people in that 40 years. To put that in perspective, if those 16 million people were a state today, it would be the fifth largest state in the country. That type of growth puts additional demands on our infrastructure and it must be met.
Today, we’re still playing infrastructure catch-up. After more than two decades, with leadership from this Governor, the Legislature approved a transportation revenue plan to maintain and improve our road and highway network.
Needs of New Economy
But it isn’t just the sheer number of new Californians; it’s how they integrate with the needs of the new economy.
Forty years ago, manufacturing supported twice as much of our economy as it does today. But 40 years ago, the tech industry was an upstart, a wannabe. We all know that the growth of tech is a major economic driver today, but do we recognize it may require different relationships with government—on education, on tax policy, on employment laws— in order to support their growth?
New challenges beyond these key issues also require attention. Incredibly, when California had one-third fewer residents than today, we had twice as many new housing starts. This has led inevitably and predictably to a housing affordability crisis.
No wonder parents are uneasy about their kids’ futures. According to a recent CalChamber survey, of voters with children living at home, three out of five agree that their children will have a better future if they leave California—mostly because of the high cost of staying.
As a long-term business owner, I am proud to say that we are now recruiting the adult children of employees who may have worked their first job at Hornblower, met and married their spouse at Hornblower, bought their first house and funded their kids’ college education with their Hornblower paychecks. This is a talent pool that needs to stay in California!
International trade, with the increased wealth of the Pacific Rim countries, has also become a significant driver of our economy. And that has impacted agriculture, the tech sector, but also the industry near and dear to my heart—tourism.
Tourism
I would like to take one moment to speak to the value of the California tourism industry, and thank all of those who work in that industry and support it. There are three important thoughts you might take away this morning on this point.
First, tourism is one of the foundations of California’s economy and a major economic engine. You might think of it as the rising tide that floats all ships.
• Travelers spent $132 billion last year, roughly the same as the state’s General Fund.
• That spending generated almost $11 billion in tax revenue for state and local jurisdictions, more than enough to fund CHP and Cal Fire combined, or enough to defray a $1,000 per household tax.
• California’s tourism industry is a job creator, providing more than 1.1 million California jobs. And, it’s a hands-on service industry, service-oriented in all respects, so these jobs can’t be outsourced, offshored or automated.
• Tourism is the state’s largest export—international visitors spend $25 billion every year in California. For comparison, that’s more than the value of our state’s annual agricultural exports.
Second, we are most fortunate to have Visit California, a public-private partnership, and one of the strongest destination marketing organizations in the world, to share and market the California brand around the globe.
• Visit California’s global marketing programs create a strong affinity for the California brand. Over the last five years and the next five years, they will spend over $500 million in brand advertising in 14 markets around the world to protect and develop this important industry for California. By the way, this advertising and marketing funding does not come from the state; rather it’s funded by a unique public-private partnership.
• When a natural disaster occurs, producing a tourism deterrent, like the recent Napa fires, Visit California springs into action immediately to mitigate that.
• Some of the best marketing minds in California are behind these efforts. I want you to take a look now at a short clip of a TV spot from the most recent broader campaign called Living the Dream to showcase the quality of their work. [50-second Living the Dream commercial] Great stuff. Obviously some friends of California and California tourism in that clip there.
• This is your takeaway on this point this morning. It’s a competitive world for tourism dollars. We need to continue to support the efforts of Visit California to drive this important part of our economy.
And lastly, on tourism. While the industry is strong, it is not impervious to our neglect.
• California’s tourism industry has always been resilient in times of global, national and statewide economic uncertainty. Tourism actually creates an important hedge against economic downturns.
• The occupancy taxes that are generated by tourism are vital sources of revenue for local governments—almost every county in California depends significantly on it, particularly during times of economic downturn, or economic cycles when income and sales taxes typically plummet.
• However, this is the takeaway on this point this morning. All the marketing in the world won’t mitigate the permanent damage we do to the brand experience when we fail to provide clean, safe cities and the infrastructure necessary to visit. And the industry is not sustainable if we fail to provide affordable housing and transportation alternatives for the amazing folks that work in this industry. An immigration reform package that includes work visa solutions is also critical to the success of this industry.
These are issues that require both immediate action, and permanent solutions, or one of the foundations of the California economy will certainly crumble away. In this day and age of social network marketing, you can negate years of building a brand and developing an industry with a few shocking viral images that we all now see on a regular basis in many parts of California today.
The world has many beautiful places to visit and do business that are unique, and you can receive an amazing experience that is very economical. Once the market moves away from California, it will be much harder to sustain or recover it.
Work in Partnership
So in California, business and government are certainly in the boat together. If we are not pulling on the oars in concert, we will spin in circles or be swamped by the winds of change. That’s why we must commit to be true shipmates and work in partnership to ensure the success of California.
We need to leverage our strengths: a skilled workforce—whether they are high school or university graduates—and remain open to retaining innovative companies.
We should take every opportunity to chart a course that addresses our major headwinds, like high housing and energy costs, discriminatory taxes, and frivolous litigation that drives productive, law-abiding businesses out of state.
I’d like to thank you for your attention, and close with one last takeaway.
Let’s all commit to endorse and support those captains and shipmates of both business and government who clearly recognize that we cannot sustain our voyage independently or reach our destination separately as we are in the same boat. We’re all going to get there together or not get there at all.
Support those individuals and organizations that express a willingness to work side by side and to row together, that favor creative leadership over partisanship, that take pride in ownership rather than one-upmanship, and those that value sponsorship and stewardship over showmanship.
Folks, there is a long, hard voyage ahead, and we are going to be in rough seas much of that time with powerful external forces, so let’s also recognize that one of our most powerful ships can be our individual and collective friendships, and, hear…hear… [raises glass] may they always be.
