How Declines in Tourism Affect Municipal Bonds and Local Economies

International tourism's decline poses a tangible risk to municipal bond markets and local economies, a factor often overlooked in favor of interest rate discussions. States like Florida, New York, Nevada, and California rely heavily on tourism-driven revenues—sales taxes, hotel levies, and transportation fees—to fund essential services. Florida's fiscal year 2023 saw over $36 billion in state sales tax collections, accounting for more than 70% of general revenue.

Cities such as Las Vegas and New Orleans face direct budget shortfalls when hotel occupancy drops, while metropolitan areas suffer from reduced transportation-related taxes. VanEck warns that dwindling foreign visitor numbers could destabilize revenue bonds, eroding investor confidence in municipal debt tied to tourist hubs.