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Decrease of bed tax revenue hurts Convention and Visitors Bureau budget

Tuesday, March 17, 2009 | 12:01 a.m. CDT; updated 10:09 a.m. CDT, Tuesday, March 17, 2009
Construction superintendent Brian Burns, left, and George Nieto walk toward the construction site of the new Holiday Inn at the Lake of the Woods Exit on March 6.

COLUMBIA — Columbia’s crowded hotel market, coupled with the economic recession, is hitting hotels and the Convention and Visitors Bureau equally hard.

The tourism bureau saw its revenue sharply decline from Oct. 1 to Dec. 31, especially in November, when revenue dropped 15 percent from November 2007, according to both the global hotel database STRglobal.com and the tourism bureau.

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The tourism bureau, which was formed in the 1980s, operates solely off revenue from a 4 percent bed tax paid by Columbia hotels and will trim about $104,750 from its $1.75 million budget because of declining revenue, said Executive Director Lorah Steiner.

Meanwhile, according to an e-mail from the database, the occupancy rate for Columbia hotel rooms dropped to 51 percent from Oct. 1 to Dec. 31 after hovering around 55 percent for the past five years. The 42.5 percent occupancy rate for Columbia hotels in November was lower than any November in the past six years, according to the database.

The nationwide occupancy rate stands at a healthier 62 percent, but it is also declining, though at a lesser rate than Columbia's. 

Fewer overnight stays in Columbia have led to a 5 percent decrease in the revenue of the tourism bureau, which now has to be more cautious with its spending.

“This is the first time in my 22-year term with the bureau that we’ve been down for a quarter,” Steiner said. “I had one year where we came out just above even — that’s as bad as it got.”

According to Steiner, if the bed tax revenue continues to drop past 5 percent in the upcoming months, the tourism bureau might have to restrict funding to its tourism development fund for upcoming events and attractions. Events coordinators such as the University Concert Series will have to apply to the tourism bureau for funding, and the events could be negatively affected if revenue continues to rapidly decline.

“Some applications just won’t get funded or they’ll get less money than requested,” Steiner said. “A 5 percent drop makes you sit up and take notice, but we’ll be OK as long as it doesn’t drop much more than that.”

To prepare for continuing losses, Steiner said the tourism bureau will cut 7 percent of its $475,000 tourism development fund, which accounts for about one-quarter of its revenue. Steiner said she is staying on the safe side, though, because she expects only a 5.5 percent decrease in revenue within the next year. 

The tourism bureau's $1.3 million operating fund, which makes up the remaining three-fourths of its revenue, will be cut by 5.5 percent, Steiner said. The operating fund pays the salaries of the tourism bureau's eight employees as well as building maintenance and other operating expenses.

Steiner said she is saving nearly $20,000 by not replacing an administrative assistant position that was vacated by Megan McConachie, who was recently promoted to web and communications manager for the tourism bureau. Steiner said, however, that the tourism bureau is prepared to deal with the revenue shortcomings because of its budgeting prudence in previous years.

“When revenues exceeded expectations, the revenue overages went into our unreserved fund balance of a little over $300,000,” Steiner said, likening the reserve fund to insurance to cover unexpected costs. “Should we have to, we could pull from those funds in a very lean year, but we want to be careful stewards of it because we don’t know what 2010 and 2011 will look like.”

The tourism bureau is also worried about Columbia’s expanding hotel market. Since January 2005, seven hotels have opened in Columbia and two have closed, resulting in a net gain of 471 hotel rooms. Steiner said that Columbia now has 3,495 total hotel rooms with another 124 on the way when a Holiday Inn opens later this year at the Lake of the Woods exit off Interstate 70.

“Anytime you have supply outdoing demand, you could have unstable rates,” Steiner said, adding that the instability could drive rates down across the board, thus decreasing revenue. “Luckily, we haven’t seen it much in our market yet, but it is a concern.

“Before the recession hit, this was a growth market,” she said. “Soon, the financing dried out, and many developers were saying, ‘We’d be lucky to break even.’ When you build more hotels, you divvy up those customers among more and more properties.”

Daniel Wait manages the Wingate Inn, located just off the I-70 and U.S. 63 interchange, where there are 12 hotels in an approximate 1-mile radius.

“When more hotels came in, a lot of hotels cut rates,” Wait said. “Consumers are looking to save a buck, so hotels aren’t as rate-solid as before.”

Hotel and motel owners either mail or personally deliver a written statement of their gross receipts to the city Finance Department, said Janice Finley, the department’s business services administrator. Finley said the department checks to make sure each hotel has paid its 4 percent tax — occasional audits are used to keep the hotels in check — and then credits the tax payments to the tourism bureau net fund that same day.

“The Convention and Visitors Bureau receives a monthly report that outlines the gross receipts reported, as well as the amount of tax submitted for each hotel/motel, for their review,” Finley said.

The revenue from the 4 percent bed tax, which is actually applied by room rather than by bed, is sorted into two funds by the tourism bureau: an operating fund and a tourism development fund.

According to the tourism bureau's Web site, the Tourism Development Program was created in 1999 to finance and provide support for attractions, events and festivals with the intent of attracting visitors outside the local market and generating overnight stays. 

The program comprises the Festival Event Fund and the Sports Development Fund — created in 2006 — and the Attraction Development Fund — created in 2005. Requests for funding must be received by the bureau 120 days, or at least four months, before the event or project.

Steiner said Columbia’s “tough” hotel market is forcing the tourism bureau to be more creative in attracting customers, with the simple mission being to “create economic benefit for the city of Columbia through destination promotion and development,” she said.

She said that business travelers and vacationers simply aren’t traveling as much, so the tourism bureau is “getting more involved in social media marketing.”

“We’re looking at Web sites where we might be able to reach more people more directly,” Steiner said. “We’re using Twitter, Facebook and other sites that reach a broader audience. Social media is no longer just for the younger generations.”

The tourism bureau’s Facebook page, Columbia Missouri CVB, had 99 fans as of Friday. The tourism bureau’s Twitter account, which McConachie said gives the tourism bureau an opportunity to easily communicate with other locations to exchange questions, information and strategies, had 441 followers and was following 549 other Twitter users, businesses and government-funded organizations as of Friday.

Steiner said the most exciting new feature for the tourism bureau can be found near the bottom of its Web site, where there is a link called "Sights, Sounds & More." The link allows users to browse through a new device called a "wowget" (pronounced "wow-jet") that displays videos and images of the YouZeum, MU and other local attractions. Steiner said the wowget window is essential to the tourism bureau’s online advertising because of its easy access and because other Web sites, tourism and otherwise, can host the wowget for a small fee without sacrificing bandwidth.

“The wowget, combined with our social media and other communication efforts, can create viral marketing components that spread to prospective visitors to Columbia,” McConachie said.

The Missouri Division of Tourism is also targeting Missourians with its advertising, having recently changed its slogan from “Where the rivers run” to “Close to home. Far from ordinary.” 

The Tourism Division is also being affected by the economy and will likely have its funding cut by about $3 million when the fiscal 2010 budget goes into effect in July, according to Lorinda Foster, a research analyst with the agency.

As a result, Foster said, the Tourism Division is “cutting back on the amount of advertising (it does) and advertising closer to home.

"We want to emphasize Missouri’s great value as a travel destination to people who live within close driving distance,” she said.

Steiner agreed with Foster, pointing out that the upside to the sagging economy is that some Missouri residents won’t be able to afford expensive vacations this year and vacationers might seek shorter, cheaper destinations.

Hotel revenue nationwide is expected to be down 7.8 percent this year, Steiner said. Although she doesn’t believe Columbia will be hit that hard, Columbia hotel managers are being resourceful to fight their way through tough times.

Steiner said the tourism bureau is in the process of creating hotel package getaways for girlfriends and senior citizens. McConachie, who is responsible for organizing the tourism packages, is hoping to complete them in time for summer.

Wait, who has been managing Wingate Inn for five months, has cut back his budget by not replacing workers who quit or are fired. “The days of sitting in the back office counting the cash are over,” Wait said. “We just have to do more work with less now.”

Even so, he has increased expenditures on services and amenities, such as higher-quality coffee and breakfasts, to try to attract repeat business.

“Word-of-mouth is still the best form of advertising,” Wait said. “Competition is rife here, so we’re using various mediums to reach out to businesses.”

Nari Rajani, manager of the Econo Lodge on I-70 Drive Southwest, is doing much the same. He offers hot breakfast for longer hours and has increased other amenities and services. To cut costs, Rajani now sends his hotel’s laundry to a cleaning service instead of having his staff do it. He also doesn’t carry as much inventory as usual and shops around for the best price before buying supplies.

Travel on I-70 also has a lot to do with hotel revenue nowadays.

According to the Missouri Department of Transportation, miles traveled by vehicle on I-70 in Missouri decreased by about 2.5 percent in 2008 from 2007. The number of miles traveled on I-70 had been steadily increasing or at least staying constant year-to-year since 2003. If travel continues to decline at last year’s rate or at a higher rate, Columbia’s hotels might face yet another challenge.

“A big chunk of most hotels’ everyday business is transient customers from I-70,” Steiner said. “When that business starts to decline, that really hurts.”

Wait said the Wingate Inn has made a concerted effort to develop a local relationship with companies and to not rely too heavily on the tourism bureau. In Columbia’s oversaturated hotel market, Wait said establishing his hotel is important to increasing sales efforts.

“Your hotel is only as good as the people you have, and I feel like we have better people now than we did when I started,” Wait said. “Now, it’s about trying to get face time in the community.”

Steiner said hotels have few options if they fail in a market decline because they're not like restaurants, which can be transformed into an office building or another store.

“Once you a build a hotel, it’s tough to turn it into something else,” Steiner said.


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Comments

marvin saunders March 21, 2009 | 2:24 a.m.

I wonder if some of Jim Heath's workers have the proper papers to work here?

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