ASHEVILLE – Citing a tourism economy that continues to rev up, the Buncombe County Tourism Development Authority has adopted a “revenue objective” of $40.8 million for the upcoming fiscal year, which starts July 1.
That’s a 12% increase over the current fiscal year. The TDA, which derives its revenues from the occupancy tax paid by hotels, vacation rentals and bed and breakfast inns, is projecting its revenues for this fiscal year (ending June 30) will hit $36.4 million.
The board voted unanimously to establish the $40.8 million revenue objective at its monthly meeting March 24. One member, Andrew Celwyn, did not vote.
Established in 1983 to promote tourism, the TDA, by law, has to spend 75% of its revenues on marketing and 25% on its Tourism Product Development Fund, which provides grants to enterprises that can result in more visitation for the area.
Victoria “Vic” Isley, CEO of the TDA, told the board that staff would prepare two budgets for the upcoming year, one with the 75/25 split, and one with a one-third/two-thirds split. Isley said the latter occupancy tax ratio might surface again in the General Assembly’s short session, which starts May 18.
Some locals have been critical of what they consider excessive spending on tourism promotion and want more money to go toward projects that benefit locals and tourists.
Vacation rentals drove rebound
While the tourism picture became bleak in the spring of 2020 as the pandemic took hold, it’s since rebounded.
Isley said for this fiscal year, which ends June 30, the board approved a revenue objective of $27 million, and that would have been a 9% increase over the benchmark, pre-COVID year of 2019. But this year’s revenues have actually come in much higher.
Isley said based on the current collections and the most recent financial data, our “forecast for the remainder of this fiscal (year), we’re anticipating occupancy tax collections to reach between $36 million and $37 million.”
While hotels still provide the “lion’s share” of the occupancy tax, Isley noted that much of the increase in revenues since the pandemic hit is from vacation rentals.
“The rapid growth of the vacation rental segment and its resilience through the pandemic is apparent,” Isley said. “So far in fiscal year 2022, vacation rentals account for 34% of all revenue.”
Chip Craig with GreyBeard Realty told the board, “When the pandemic hit in 2020, it was like the summer never ended.
“People were not having to go back to school, and (they) were working from where they chose to be, in the mountains, so vacation rental growth has been off the charts,” he said. “We’re seeing some softness now. People are going back to work and schools are in session, so I anticipate the spring will be soft for vacation (rentals), but still very strong compared with 2019.”
Isley said that based on projections from fiscal years 2019-2022, “we are estimating vacation rental sales growing by 180%. During that time frame, hotel sales growth was 17% and bed & breakfast growth was tracking at 7%.
“What that means in net numbers in terms of dollars, is from fiscal year ’19-fiscal year ’22, growth in vacation rental occupancy tax collections was $8 million,” Isley said. “Growth in hotel occupancy tax collections was $3.4 million, and we expect growth from B&B partners to be up $60,000 by the (fiscal) year end.”
Strong numbers for January, February
For February, hotel occupancy stood at 54%, up 9 points from February 2021, but still below the February 2020 mark of 60%, which was pre-COVID, Isley said. Vacation rentals stood at 52% occupancy for February, down 3 points from last year but above 2020 by 6 percentage points.
TDA Board member Leah Wong Ashburn, CEO of Highland Brewing, said they’re seeing “great success” in their on-site business, which include the main brewery and event center in East Asheville and a spot downtown in the S&W Cafeteria building food hall downtown.
“Supportive of the trends going on, it’s really stronger than ever,” Ashburn said. “And we’re seeing those trends in most of the businesses in town that are not inside event venues.”
In his financial report, Buncombe County Finance Director Don Warn told the board that the occupancy tax through February of this fiscal year was up 49.9% from last year. For total lodging sales for January of this year, sales were up 32% compared to last year, and for the year to date they’re up 54%.
Warn presented a chart showing the figures and noted, “You can see the spread between the previous years and how 2022 is just outperforming everything we’ve done in the past.”
Breaking it down by category, Warn said hotel/motel sales were up 26% in January and 55.8% year to date. Vacation rentals were up 39.3% for January and 53.4% year to date, while bed & breakfast sales increased by 2.1% for the month, and 19.9% year to date.
More hotel rooms coming, visitor spending could hit $3B
Buncombe County has 8,830 hotel rooms in the market, Isley noted.
“We have 516 additional rooms that we anticipate coming into the market and opening (next fiscal year),” Isley said. “That would be just under 6% growth in room inventory for Buncombe County.”
Those visitors coming to town are spending a lot of money, too. Isley said data showed tourists spent $2.2 billion here in 2019, a figure that dropped to about $1.6 billion in 2020, the worst year of the pandemic.
“What this chart shows, though, is that Asheville has experienced a dramatic recovery,” she said, allowing that visitor spending in our community did drop 26% from 2019 to 2020.
Isley said final economic projections from Tourism Economics, a firm the TDA consults with, will be in later this summer. However, that firm has looked at the forecast and tourist spending of late, and when the numbers come in, “they estimate visitor spending could reach $3 billion in direct spending” and they’re “looking even better for this coming year,” Isley told the board.
Still, Isley and the board indicated they’ll take a cautious approach, as variants of the coronavirus still linger throughout the country, and gas prices have risen sharply in recent weeks.
Isley present three scenarios for this coming fiscal year, which starts July 1, and potential TDA revenues: a “down-side” projection of $34.2 million in revenues, a “baseline” projection of $38.7 million, and an “upside” of $42.8 million.
Ashburn said she and the other members of the Finance Committee recommended a spot in the middle, $40.8 million, the number the board adopted.
Travelers want to travel
Citing survey data from Longwoods International, which has surveyed travelers since the beginning of the pandemic, Isley said COVID is becoming less of a factor in travel plans over the next six months. Longwoods International survey found 38% of respondents said COVID is not a factor impacting travel plans, although Isley said they take that with caution because the pandemic has been unpredictable.
Gas prices are on travelers’ minds, though, with the survey finding 38% of American say gas prices will impact decisions to travel in next six month, up 9% in two weeks. Also, 34% said they will reduce trips, and 33% will travel closer to home.
On a positive note, only 7% say they will cancel trips.
“The bottom line here is that folks will still travel, it’s just how they’ll spend on travel that is most impacted,” Isley said, noting that 90% of American travelers say they have plans to travel in the next six months.
That, Isley said, indicates that pent-up demand to travel remains strong.
Employment has come back, too
Isley also noted that Buncombe County has a very low unemployment rate — 3.1% in January, well under the state average of 3.9%.
“Data from the St. Louis Federal Reserve Bank says we’ve recovered the majority of leisure and hospitality jobs lost during the pandemic, but we’re still down about 2,800 jobs in our area,” Isley said.
The pre-pandemic peak aw the area with leisure and hospitality employment of 31,057, she said. In January of this year, “we’re back to 28,256 now employed in our sector,” Isley said.
Tourism Product Development Fund coming back
In his presentation Warn noted the Tourism Product Development Fund has $11.6 million in available funds.
The TDA agreed last November to restart the TPDF, which has been on pause since the 2019 cycle. It’s not likely that all of that money will be disbursed this coming cycle.
Since 2001, the fund has granted $44 million to 39 community tourism projects, ranging from a zip line expansion and improvements to local soccer fields to enhancements at the Harrah’s Cherokee Center and riverfront redevelopment.
The program has generated some controversy, though, and the TDA agreed in 2018 to pause it for the 2019 cycle to develop a long-range plan, with community input. The COVID-19 pandemic spurred the TDA to pivot, and after getting special permission from the North Carolina General Assembly, it disbursed $5 million from the fund to help struggling local businesses.
The TDA set a deadline in August for applications and said it will make funding decisions at its October 2022 board meeting, with grant contracts going out in November and December.