Available data on the cost of living indicate that living costs in Arizona are close to the national average — thus, the state’s lower-than-average wages are not offset by low living costs. No productivity data exist for Arizona. Worker productivity in Arizona could be below the national average due to lesser investments in physical or human capital, which would result in lower wages. Labor market supply and demand factors are a likely cause of the low wages in Arizona. A substantial number of people seem willing to move to Arizona and accept a substandard wage in exchange for perceived qualitative advantages to living in Arizona, primarily climate.

Tourism is one of 12 industry clusters widely considered to be driving the Arizona economy according to the Governor’s Strategic Partnership for Economic Development (GSPED). The term "cluster" refers to a geographic concentration of interdependent companies, suppliers, products, labor pool, and institutions that together constitute an important competitive advantage for a region. In northern Arizona, tourism ranks as the predominant industry cluster. This paper provides a profile of the tourism cluster in Coconino County, with special focus on the Flagstaff area. It examines the cluster’s composition, relative size and importance to the regional economy. It addresses the cluster’s dynamics and requirements for growth. It reviews important national and worldwide trends affecting tourism in Arizona, as well as the special characteristics of gateway communities. And, finally, it presents a menu of actions to choose from for strengthening the cluster in both Flagstaff and Coconino County.

The Governor's Strategic Partnership for Economic Development has identified 12 industry clusters in Arizona that collectively drive the economy. The term "cluster" refers to a geographic concentration of interdependent companies, suppliers, products, labor pool, and institutions that together constitute an important competitive advantage for a region. Tourism is recognized as one of Arizona's 12 industry clusters. In northern Arizona it ranks as the dominant cluster.

Much of the analysis in this report is based on the concept that industry clusters act as primary growth influences on local economies. Strong clusters produce goods or services that can be sold to consumers outside the region, creating a flow of revenue into the region. This influx of revenue stimulates economic activity in other areas of the local economy such as the retail, real estate, or constructions sectors.

This report profiles the tourism cluster in Coconino County with special focus on the Page area. It examines the cluster's composition, relative size, and importance to the regional economy, and it addresses the cluster's dynamics and requirements for growth. In its conclusion, it presents a menu of options for strengthening the cluster in the Page area.