Local hotel industry: Room tax revenue sets record in 2011 as occupancy strengthens
The Dahlmann Campus Inn on Ann Arbor's East Huron Street.
Melanie Maxwell | AnnArbor.com
The average daily occupancy rate in the county jumped from 54 percent in 2010 to 62.5 percent in 2011 — indicating that the local hotel industry is strengthening, but not quite back to its 2006 levels of 68 percent occupancy.
“Washtenaw County has come back very strongly,” said Chuck Skelton, president of the Hospitality Advisors Group of Ann Arbor. "In 2011, it had the highest occupancy in the state, and really, in any major Midwestern metropolitan area.”
At the same time, the 2011 hotel room tax collections mark a 13 percent increase over 2010 when revenue totaled $3.5 million, and a 31 percent increase over 2009’s $3 million.
The tax — which is imposed on all hotel guests in the county’s 51 lodging establishments — was increased to 5 percent in 2009 from 2 percent.
Guests pay the 5 percent accommodation tax based on their room costs and that money goes to both the Ann Arbor Area Convention and Visitors Bureau and the Ypsilanti Area Convention and Visitors Bureau for tourism marketing efforts.
The 2009 tax hike, said Skelton, has helped generate enough revenue to put Washtenaw County in a national advertising spotlight via a new Pure Michigan campaign.
Downtown Ann Arbor's Nickels Arcade was featured in a recent Pure Michigan 30-second TV spot.
Ryan J. Stanton | AnnArbor.com
The $1 million campaign, which was announced in February, features Washtenaw County in national cable TV ads and on the state’s Pure Michigan website. Four articles will appear on the site throughout the year, written by the local Convention and Visitor Bureaus (CVBs) and featuring various local attractions.
A 30-second TV spot featuring Ann Arbor was posted to the Pure Michigan YouTube channel in March. The ad’s message: “Ann Arbor does it up different.”
“I think this is a huge deal,” Skelton said. “Now we’re on every major cable network out there, when we never would have been able to have that variety and exposure without that increase in funding.”
He added: “People see that ad everywhere and they get this picture of Ann Arbor in their minds.”
The Michigan Economic Development Corp. plans to contribute $500,000 to the campaign, with Ann Arbor SPARK allocating $70,000. The CVBs are allocating the remaining $430,000, which will come directly from the county’s hotel room tax revenue.
“In years past, (the CVBs) wouldn’t even have been able to consider contributing that money,” Skelton said. But the county’s increasing room tax revenues made it a feasible option.
Aside from the Pure Michigan campaign, the tax revenue increase is paying off in additional marketing campaigns by the bureaus, said Mary Kerr, president of the Ann Arbor Area CVB and Debbie Locke-Daniel, executive director of the Ypsilanti Area CVB. The CVBs also:
-- Brought nearly 50 travel journalists to the county, generating 300 stories and an estimated $2.6 million in media publicity.
-- Ran online sweepstakes on visitannarbor.org and visitypsinow.com while increasing the number of unique visitors to the sites.
-- Developed a Japanese language micro website. . -- Serviced hundreds of conventions and events.
Locke-Daniel attributed those marketing campaigns with helping to drive up the county’s occupancy.
“You have to say some of it is helping,” she said. “You have to spend money to make money, and I think the tax revenue is very critical. It puts us on a more level playing field with our competitors.”
With the launch of the Pure Michigan campaign this year, she said, she hopes to see the county’s hotel occupancy rates continue to increase in 2012.
Skelton agreed: “What we’re hoping is that by making this investment in Pure Michigan and other campaigns, that we are going to be able to look at solid growth going into 2012 and moving forward into 2013.”
Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.
Comments
Lets Get Real
Mon, Apr 30, 2012 : 12:42 a.m.
In those "51 lodging establishments" are small, independent operators - predominately Bed and Breakfasts or Inns, but also individuals doing short term housing, which get absolutely NO support from the Visitor's and Convention Bureau. The CVBs like the big hotels with the a high number of rooms and fill them first. When those "travel journalists" came to town, not one was housed at a B&B. They weren't even offered the opportunity. Ann Arbors CVB thinks so little of these establishments, there is not one mention of the unique lodging opportunities that make the town diverse and attractive to visitors here in any of those Pure Michigan promotions. Does anyone know there are 14 B&B's in Ann Arbor? Ask anyone of the owners how many guests the CVB has placed at their inns. The AA and YPSIl CVB would sooner support the national franchise hotels than thinking local first. The DVB would welcome and support the Hiefte Luxury Hyatt because it will charge more per room, placing more money in their own pockets, since their budget comes from the revenue from the accommodation tax. I wonder what the pay increases have been at the county contractor? And don't miss the statement, "not back to its 2006 levels . . . of occupancy." Revenues are up because they raised the tax in 2009, not because occupancy was up. In the midst of the recession, with fewer people able to afford to travel, the county granted an increase in tax. And occupancy went to down to 54% for existing spaces. By the way, how many of you got a 150% budget increase in 2009? My guest is - not many. Now they're bragging, and occupancy still hasn't returned to 2006 levels? What a business concept. Skelton is the Chair of the advisory group to the CVB; he owns a market rsearch company in the industry. So Chuck pat Mary's back, Mary pat Debbie's back, and Debbie, pat Chuck's back - and we'll fool 'em all into thinking we're doing a great job! Let's get real. It's a
Veracity
Sun, Apr 29, 2012 : 10:10 p.m.
While private developers of the Hilton Garden Inn and Towne Pace Suites are taking considerable risks by adding 230 more rooms to the 4000-room Washtenaw County hotel market. With only 62.5% occupancy rate Washtenaw County hotels are not saturated with guests. Very likely the additional hotel room availability could reduce the average occupancy rate for all Washtenaw County Hotels. Special discounts may be offered to induce increased occupancy and may reduce overall hotel revenues and therefore room tax revenue. The so-called "Hieftge Hotel", known better as the Valian Partners proposal, would fare worse because, as a luxury hotel offering room rates at around $200, the occupancy rate would have to be at least 75% in order for the hotel to operate profitably (by developers own admission). Achievement of such a lofty occupancy rate would be next to impossible endangering the financial viability (and tax revenues). Even Chuck Skelton agreed with this conclusion in his well-documented feasibility study. For this reason City Council rejected the Valiant Partners proposal. Let us hope that two new hotels are successful but at the same time realizing that success is not guaranteed.
ffej440
Sun, Apr 29, 2012 : 3:01 p.m.
Occupancy rates in Ann Arbor are kinda skewed. As a former AA hotel manager, I can tell you the market is not the norm. Weekdays are good but not sell out good like metro areas, weekends are full of special events and sell out way better than metro hotels. Football and race events drive rates to the moon, now if the AAVCB would keep conventions away during these events that would sure help- plumbers and pipefitters for example.
A2comments
Sun, Apr 29, 2012 : 11:46 a.m.
If organizations are going to attribute increases in business to activity they undertook, more facts should be examined, including the actual room numbers available year over year as a2grateful noted. Also of interest would measureable traffic volumes on websites year over year, including those mentioned on TV or in print ads. How many people entered the sweeps? What was the cost to run them including prizes? How many people requested info packets? How many requestors then visited? How many views does the YouTube video have and how much web traffic came from it (25,280 when I checked just now which is multiples higher than their other videos - maybe only ours was also on TV)?
a2grateful
Sun, Apr 29, 2012 : 10:49 a.m.
That 8.5% ADR increase will be offset 5.7% by two new hotels. The net increase is 2.5%, resulting in an ADR of 56.5% (2010 54% + 2.5%). Hilton Garden Inn and Towne Place Suites add about 230 rooms to the 4,000-room Washtenaw County hotel market. Some may say, "See, the market has recovered. . . We need the Hieftje Hotel!" Others may say, "An ADR of 56.5% means that avg daily vacancy is still 43.5%. . . Ouch!" Others might say, "Look. . . Two new hotels are being constructed by private developers. These investors assume 100% risk using their own money. . . Not one taxpayer dollar is at risk. . . And, their properties will contribute to the tax base outside of the DDA tax death grip that robs public schools and libraries of their rightful monies!" Finally, others might say, "Development follows the path of least resistance, on its way to profit goal. These developers stayed far away from the library lot, even though the city threw gravel trains of cash to lure them." Personally, I am glad to see new rooms being added to the market, benefitting consumers. Increased occupancy offers a glimmer of hope for our profit-lean hotel market.