Spokane Journal of Business

More heads on beds

Hoteliers hope for healthy growth in 2008 after room-tax revenues shot up 14 percent in 2007

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Spokanes hotel industry, following a year in which room-tax revenues rose at their highest rate in 16 years, is expected to see more modest growth this year, and pick up steam again in 2009, experts here say.

Room-tax revenues in Spokane County rose 14 percent last year to $2.3 million, the highest percentage increase since 1991, the Spokane Regional Convention and Visitors Bureau says. Room-tax revenues rose 10 percent in 2006. In the first two months of this year, room-tax revenues jumped roughly 15 percent to nearly $317,000, from $274,000 in the year-earlier period.

Meanwhile, room demand in 2007 increased nearly 8 percent, or by nearly 114,000 rooms, according to figures compiled by Hendersonville, Tenn.-based Smith Travel Research Inc. During the first two months of this year, room demand fell about 5 percent, Smith Travels most recent numbers say. Because room-tax revenues for January and February include amounts paid from the previous year, they can rise even when room demand falls.

The dropoff in room demand in January and February 2008 is partly due to the fact that the U.S. Figure Skating Championships, which were held here in January of 2007, boosted the year-earlier numbers, but the two-month decline doesnt foreshadow softness in room demand in the remaining months of this year, says Harry Sladich, CVB president and CEO.

Hoteliers are saying, Wow, 2007 was a phenomenal year. Can we do it again? Sladich says. Theyre all holding their breath, and hoping theyll find this will be another good year.

Dan Zimmerer, general manager at the Red Lion River Inn downtown and president of the Spokane Hotel-Motel Association, expects that demand here will hold steady this year.

The bright side is that if you look at us compared to markets we compete with, we stand head-and-shoulders above them, Zimmerer says.

Room demand in King County, for instance, grew 3 percent last year, while demand in Ada County, home to Boise, rose 2 percent, Smith Travel Research says. Demand in Multnomah County, Ore., home of the Portland market, grew nearly 4 percent.

Were still in an area thats not so adversely affected by things going on in larger cities, such as huge corporations that may curtail what theyre doing in a slower economy, Sladich says. We keep hearing talk about a recession, but were just not seeing it.

Zimmerer says that bigger cities such as Seattle also are hit harder than Spokane when turmoil strikes the airline industry, because many leisure travelers drive to Spokane rather than fly.

One thing weve seen in the past in Spokane, and were expecting it to hold true in the future, is that as a regional hub, its more of a drive market, he says. In economic downturns, people still drive regionally, and may even increase regional travel when airline prices or safety is jeopardized.

He says rising gas prices havent deterred travelers from driving here.

So many people need to come to Spokane that gas prices havent really been a factor, Zimmerer says. They come here to fill their needs for recreation, business, and medical services.

He says, though, that hotels cant rely on the strength of demand alone to fuel growth. Competition among hoteliers has been heating up in recent years due to new inventory that has been added to the market, such as the Davenport Tower downtown, he says. As a result, hotel operators have to find ways to keep ahead of the competition, here and elsewhere.

Spokane-based Red Lion Hotels Corp., for example, renovated the River Inns rooms and restaurant about a year ago and is wrapping up work on the facilitys public spaces.

Competition is huge, Zimmerer says. You have to make improvements to be competitive or you jeopardize the amount of your business.

Sladich says he doesnt expect that any hotels will be added to the market this year, and that hoteliers are being cautious about making capital expenditures due to the uncertainty of the economy. While he doesnt expect demand to decline this year, he tells hoteliers that if it does, they shouldnt react by reducing their rates.

Hoteliers have done a very good job of responding to demand by raising their rates, and we have to keep that going, he says, adding that Spokane is still a good value compared with bigger cities such as Seattle and Portland.

The average room rate in Spokane was nearly $83 in 2007, up 9 percent from 2006, Smith Travel says. In comparison, the average room rate in King County rose 7 percent to $128 last year, while the average room rate in Multnomah County rose nearly 9 percent to $101. In Ada County, room rates increased an average of roughly 4 percent to nearly $82.

Sladich says the CVB plans to hold a hotel symposium here in August, which will feature hospitality and travel experts from across the country who will talk about conditions theyre seeing in the industry nationally.

The CVB is budgeting for 3 percent growth in room demand this year, which is what it budgeted for last year, he says. Its expecting that room demand will increase by 5 percent to 7 percent, he says.

If we saw something on the horizon that would be cause for concern wed be taking measures to address that, Sladich says. Were just not seeing anything on the horizon that says it will be anything but strong once again this year.

Sladich says the number of large events that will be held here this year is helping fuel his optimism. Although the community wont have the U.S. Figure Skating Championships this year, which generated 14,000 room-nights in Spokane last year, the Phantom of the Opera, which will run at the INB Performing Arts Center in October, is expected to draw a similar attendance, he says.

Additionally, the 100 Years of Motorcycles rally, which claims to be one of the largest motorcycle rallies in the U.S., will roar into the Spokane market for the first time when its held at the Spokane County Fair and Expo Center in July, he says. Also, big sports events such as the Pacific Northwest Volleyball Qualifier and the NCAA Womens Division I regional basketball tournament, both held here last month, and annual events such as Hoopfest, provide a big boost to the hospitality industry, he says.

Meanwhile, Canadians, who make up the bread and butter of the leisure travel industry here, are expected to cross the border in droves this year, both because of the weakening U.S. dollar and because goods generally are cheaper here than in Canada, he says. Californians, also, have shown more interest in visiting Spokane in recent years, he says.

Tourism and hospitality representatives say theyre also starting to see fruits from the Spokane Convention Center expansion, completed in 2006, and remodeling project, which wrapped up last summer. Johnna Boxley, general manager of the convention center and performing arts center, says attendance at the convention center last year was higher than expected, largely because of the figure skating championships and the Antiques Road Show last summer. The convention center estimates its attendance will be 260,000 this year, down from roughly 291,200 last year, with the drop mainly owing to the figure skating championships, she says.

Boxley expects attendance to pick up in 2009 and continue to rise in 2010. Convention groups often book events three to four years in advance, so groups that booked their events shortly after the expansion project wrapped up will start coming here in the next few years.

The expansion has made a big difference in the size and types of events we can bring to Spokane, and we find ourselves having two or three events going on at one time, which we couldnt have done before, Boxley says. Next year is already looking better than this year.

Sladich says that groups such as the CVB, the Public Facilities District, and the Spokane Regional Sports Commission, along with WestCoast Entertainments Best of Broadway series, are working to keep the pipeline full of events to drive continued growth.

Weve been getting the word out about Spokane, and I think thats making a difference, Zimmerer says. I think now were starting to see the benefits of the extra marketing efforts of our community over the past few years.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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