Triangle Tax Revenues’ Drop Tell Story of Tourism Decline

July 31st, 2009 by WY Daily Staff

Triangle Tax Revenues' Drop Tell Story of Tourism Decline

Tourism in the Triangle is slipping, which has had some local groups involved in the industry arguing over who or what is to blame. But is it really as bad as everyone says?

WYDaily looked at how local hoteliers’ reported occupancy numbers lined up with government room tax revenues. Both indicate that business is markedly down, and the usually booming summer months aren’t shaping up well so far either.

According to Sue Mellen, Assistant Manager of Financial and Management Services for James City County, the June room taxes collected (these actually represent May occupancy due to lag time in the collection process) were very poor, down about 31 percent over last year. The county is home to Busch Gardens, but has the fewest lodging rooms in the Triangle.

“In recessionary times, there is bad news,” she said. “We have to decide if the trend is continuing or bottoming out. [June numbers] are not a good indicator for the rest of the summer.”

Hotel/Motel Revenue in the 23185

According to Smith Travel Research Corporation, this is how revenues stack up in the Williamsburg 23185 zip code.

2005 – $68.6 million

2006 – $65.4 million

2007 – $75.6 million

2008 – $63.1 million

2009 – unavailable

Mellen, who helps project county revenues used to set the budget, keeps close watch on trends and previous years’ taxes collected to estimate budget numbers. She said the recession generally began last September, when the height of the Triangle tourist season was finished, so this summer will be the first to indicate how the recession might be affecting the local tourism market.

June numbers were no better in the city of Williamsburg, home to multi-million-dollar tourist draw Colonial Williamsburg. Room taxes for June were $471,600, down from $598,700 the previous year, a 21 percent drop.

“The recession has wiped us back to 2 to 3 years ago in revenues,” said City Manager Jack Tuttle.

The $2 lodging tax, an additional tax on room nights on top of the 5 percent room tax rate, began in 2005. While collected by hoteliers, it goes directly to a state-mandated tourism group for promotion of the area as an overnight destination. That total also dropped substantially. The city collected $165,000 this June versus $212,700 last year, a 22 percent drop.

York County (home of Great Wolf Lodge and Water Country USA) saw a smaller dip in collected room tax, from $292,600 in June 2008 versus $267,700 this year, about 9 percent, but actually saw an increase in the $2 tax from $99,500 in 2008 to $113,900 this June.

When the $2 tax – charged per night versus a percent of cost of stay – increases more than the room tax, it indicates hotels are dropping their rates to attract guests. More rooms are booked, but the lodging facilities – and the localities – lose money.

York County administrator James McReynolds says York has seen a decline in revenue for all of fiscal year 2009 in lodging tax, just like the other two localities.

How does this line up with what the hotels are reporting?

The Williamsburg Area Hotel Motel Association uses the company Smith Travel Research to analyze monthly trends in occupancy at local hotels that choose to share their numbers. Not all do, among them Great Wolf Lodge and Colonial Williamsburg’s properties. For June, Smith Travel reported an 8.4 percent drop in occupancy, and an 18.6 percent drop in revenues. Local hotels are charging less and making less: The average room rate in 2009 was $88.02; in 2008 it was $100.

For the past several years, in fact, room tax revenues have not increased substantially in the Triangle. (see chart below).

These taxes go towards tourism – the $2 tax goes to fund the Williamsburg Area Destination Marketing Committee, and when revenues are down, WADMC has less to work with in their ad campaigns. Read a story on their current ad campaign here. The room tax also partially goes to tourism-related projects, with 60 percent by law going towards tourism spending.

“With tourism [tax] spending, we have to readjust based on what we get,” said James City County administrator Sandy Wanner. The county spends its tourist money on the Jamestown Settlement and the Williamsburg Area Chamber and Tourism Alliance, as well as other destinations in the county.

According to James City’s Mellen, a tourist grant was eliminated in 2009, along with the amount of funding to the Alliance, which helped make up for the lower taxes collected.

Taxes by the Numbers*February 1, 2006, room tax (Transient Overnight Tax, or TOT) increased from 4 to 5 percent

** 2007 Jamestown 1607-2007 celebration

Williamsburg

  • 2005 $3.7 million TOT; $1.4 million $2 tax
  • 2006* $3.6 million TOT; $1.6 million $2 tax
  • 2007** $4.2 million TOT; $1.6 million $2 tax
  • 2008 $4.6 million TOT; $1.7 million $2 tax
  • 2009 $3.7 million TOT (estimated); $1.4 million $2 tax (estimated

James City County

  • 2005 $1.8 million TOT; $733,000 $2 tax
  • 2006* $2 million TOT; $802,000 $2 tax
  • 2007** $2.6 milion TOT; $798,000 $2 tax
  • 2008 $2.5 million TOT; $772,00 $2 tax
  • 2009 $2.1 million (estimated); $714,000 $2 tax (estimated)

York County

  • 2005 $2.0 million TOT; $821,000 $2 tax
  • 2006* $2.7 million TOT; $1 million $2 tax
  • 2007** $3.1 million TOT; $1.1 million $2 tax
  • 2008 $3.4 million TOT; $1.2 million $2 tax
  • 2009 $2.8 million TOT (estimated); $1.2 million $2 tax (estimated)

4 Responses to Triangle Tax Revenues’ Drop Tell Story of Tourism Decline

  1. Anonymous

    July 31, 2009 at 9:42 am

    Desiree does an excellent job of reporting facts. She is far and away the best reporter in the area. You would never see this type of complete and accurate reporting in the local print media. BRAVO DESIREE PARKER!

  2. Anonymous

    July 31, 2009 at 12:49 pm

    My compliments to Desiree Parker for an informational report on numbers and status.

    I still believe you folks should present more about proposed solutions for these problems. For example, my proposal for an HTA TOURISM INDUSTRY TASK FORCE remains a viable approach for a positive dialogue among our Owners and Operators.

    Keep up the good work.

    Thank you.

    Frank G Tsutras

  3. Anonymous

    July 31, 2009 at 2:47 pm

    Great article. Another problem: Online sellers (Orbitz, Hotels.com, etc.) charge the consumer the tax on the retail rate. The online sellers only turn in to the city or county the tax on the wholesale rate.

    Under this scheme, if Expedia charges me $80 for a room, but pays the hotel company $50, it charges me the $4 tax(Williamsburg at 5%). It sends Williamsburg $2.50, i.e. 5% of the $50. it pockets the $1.50 tax I paid. This issue in court across the nation.

  4. Anonymous

    August 1, 2009 at 8:32 am

    Mark, you are absolutly right. These third party sites (Expedia, hotels.com) are the the sites the chamber of commerce wants to use as our primary booking engine. How wrong is that.

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