Spokane Journal of Business

Room-tax revenues rise sharply

15 percent increase said due to rising demand, hikes in room rates here

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Hotel room-tax revenues in Spokane County shot up 15 percent through Octoberthe highest increase through the first 10 months of the year since 1991thanks both to rising demand and hikes in room rates, the Spokane Regional Convention and Visitors Bureau says.

Through October, room-tax revenues jumped to nearly $1.9 million, up from $1.6 million in the year-earlier period, the CVB says. Room-tax revenues for all of 2006 totaled roughly $2 million, up 10 percent from 2005. With the exception of 1991, when room-tax revenues jumped 20 percent, annual growth in room-tax collections over the past 16 years has ranged between 2 percent and 10 percent, says Pam Scott, communications manager at the CVB.

This was an incredible year, says Keith Backsen, vice president and director of sales at the CVB. Things continue to increase our visibility as a community.

Owners of lodging establishments with more than 40 rooms pay a lodging tax of 2 percent, with part of the money dedicated to marketing the hospitality and tourism industry in Spokane, Scott says. Lodging tax advisory boards in Spokane County, the city of Spokane, and the city of Spokane Valley decide what to do with the remainder, she says.

Some of the factors that have contributed to the growth in room-tax collections include high-profile sporting events, such as the U.S. Figure Skating Championships, and meetings held here by trade groups that the newly-expanded convention center has attracted, Backsen says. In addition, the Best of Broadway Spokane, Northwest Museum of Arts & Cultures Tyrannosaurus Rex exhibit, and the Spokane Arenas Walking with the Dinosaurs show all brought healthy numbers of visitors to Spokane this year, Backsen says. The Spokane areas robust economy also has boosted room-tax revenues, he says.

Room demand in Spokane County was up 8 percent, or by nearly 95,000 rooms, year-to-date through September, according to the most-recent available figures compiled by Hendersonville, Tenn.-based Smith Travel Research Inc. The U.S. Figure Skating Championships accounted for about 14,000 of those additional room nights, Scott says.

The rest of the 15 percent growth in room-tax revenues through October stems from an increase in revenue per available room, which means that hotels have been able to raise their rates, Backsen says. In the past, hotels in bigger markets such as Seattle have been able to raise their rates because of high occupancy rates there, but hotels here didnt have the demand they needed to do the same, he says.

Were still a value-driven destination, compared with Seattle and Portland, but we have opportunities to continue to raise our rates, Backsen says.

The average room rate in Spokane as of September was nearly $83, up 9 percent from more than $75 in September of 2006, Smith Travel Research says. In comparison, the average room rate in Multnomah County, Oregon, rose 8 percent to $100 during the same period, while the average room rate in King County rose 7 percent to $128. In Ada County, Idaho, where Boise is located, room rates increased an average of 4 percent to nearly $82.

Meanwhile, room demand increases in those three counties ranged between about 2 percent and 4 percent, compared with Spokane Countys much stronger 8 percent, Smith Travel Research says.

Dan Zimmerer, general manager at the Red Lion River Inn downtown and president of the Spokane Hotel-Motel Association, says another sign of the strength of the hotel industry here is that occupancy levels have stayed pretty steady despite increased room inventory here in recent years. Some of those new hotels include the Davenport Tower downtown and the Stratford Suites Inn on the West Plains, he says. Also, a Spokane couple announced this past summer their plans to build a Best Western hotel near downtown.

Theres been an increase in hotel rooms, but occupancy and rates are still increasing, so weve all been able to see a benefit, Zimmerer says.

Smith Travel Research says hotel room occupancy in Spokane County was up 2.5 percent year-to-date through September. Multnomah Countys occupancy had risen 3.2 percent, while King Countys rose 2 percent. Occupancy in Ada County dropped 8.5 percent.

Scott says the CVB typically relies on room demand, rather than occupancy level, as an indicator of the strength of the industry, because Smith Travel Research bases room demand on the number of rooms rented. Occupancy level is based on the percentage of rooms that are filled, which fluctuates yearly depending on the number of rooms available. Thus, the occupancy increase in Spokane this year appears small because of the addition of the Davenport Tower to available inventory here, she says.

Looking ahead

Zimmerer attributes the industrys growth primarily to the expanded convention center and the revved-up marketing efforts of organizations such as the CVB and the Spokane Regional Sports Commission.

He says future growth in room demand will depend largely on how well the Spokane area is able to keep up its momentum.

Increased marketing only opens more doors, he says. Our destiny is kind of in our hands at this point.

Although there wont be an event next year that will have the magnitude of the U.S. Figure Skating Championships, several big events are slated, including the regional womens NCAA basketball tournaments this March, Zimmerer says.

Backsen says theres still more work to be done to market the Spokane area to tourists and business groups and bring more events here. He says its important to promote different segments of the hospitality industry, such as trade shows, sporting events, and leisure travel, so that when one category is experiencing a downturn, the others can make up the difference.

Could I say were going to see 15 percent growth next year? Im not sure, he says. People outside the Northwest still have a hard time finding Spokane on a map, so while weve got a lot of great things happening, we still have a story we have to get out and tell people.

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

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