YOUR BUSINESS AUTHORITY
A month ago, you described the local hotel industry as hitting rock bottom, with occupancy rates at roughly 21%. Can you outline the COVID-19 pandemic’s impact on travel and tourism?
When there’s stay-at-home orders in virtually every state in the union, there’s no travel and tourism. As a result, the hotel industry and the travel industry, in general, were clobbered. (Hotels) would have probably run a citywide occupancy of somewhere above 70% for March. We wound up, I think, it was a little over 40%. Then in April, the bottom dropped out. We dropped down to just over 20%. It recovered a little bit, but when we’ve still got roughly a fourth of the business that you should have, it’s impossible to make money. Here in Greene County, the travel and leisure industry employs roughly 20,000 people. Somewhere in the neighborhood of 70% or so of everyone who worked in a hotel in Springfield was either laid off or furloughed.
Some people are ready to resume traveling, while others are going to be cautious for some time. What do you predict on the appetite for leisure and business travel?
There is going to be a pent-up demand to get out of the house, but there’s also going to be safety concerns about traveling, especially long-distance travel, air travel, cruise ships, international travel. It’s going to be a long time before they come back. Shorter domestic drive destinations, like us and Branson, we’re probably going to be more of the destinations of choice, at least in the initial stages of the recovery. Visiting family and friends is probably going to be the first thing that people do. Hotels and restaurants, and a lot of industries, the attractions, are taking extra precautions as far as cleanliness. Things like crowded venues are probably going to be avoided by many people, large gatherings. It’s going to take awhile for people to feel comfortable again. And frankly, I don’t think people will feel comfortable again until we either have a good treatment or a vaccine.
If the industry hit rock bottom in April, what’s happening now and what’s the forecast for summer?
There are signs of life. Hotel occupancies here in the last couple of weeks have inched up a little bit. (Early May) it was about 27%. States have to open back up before travel is going to come back. As long as stay-at-home orders are still in place, that restricts people from moving around. Initially, it’s going to be more in-state travel. Then, it will eventually spread out. Meetings, conventions and sporting events, that business is going to be very slow to come back. For the most part, conventions are just not being held right now at all. We’ve had virtually everything canceled between now and July 1. We’re not really looking for the travel industry to get back to what I would consider looking normal until probably next spring.
With many spring and summer group events canceled, what’s the economic impact?
It started with the National Christian Homeschool Basketball championship and it just continued all the way through the (Wing Ding 42). This was going to be the best group year probably we had had here in Springfield, and it quickly turned into the worst group year. So far, there have been 50 of them canceled, a total of over 48,000 room nights and total economic impact of $27.3 million. That’s the number of groups and room nights that we had booked from mid-March through June.
How will group events change if or when they come back?
Short term, attendance at conventions is going to be down. Social distancing is not going to go away for a good while, until we have good treatment and/or a vaccine. That means a room that used to hold 500 now may only hold 150, 200. One of the things that we are relatively sure of is that hybrid meetings are going to be expected. That’s where you could go to the convention either in person or watch it remotely.
How will this affect general sales tax revenue going forward?
This comes from Smith Travel Research. This accounts for virtually all hotels in Springfield. Last March, hotel room revenue was $11,928,822. This March, it was $6,438,463. The Springfield total city sales tax is 2.125%, so the sales tax revenue just for that month on room sales alone is $106,000 down right now. Most research says that the total amount the traveler spends, only about 40% of it is spent on a hotel room, so you can assume that there was another $5 million-$6 million out there that didn’t get spent in restaurants and attractions. So now you’re up to over $200,000 [in lost taxes], and that was not the worst month. These are tentative that in April of last year, we had $10,229,248 in room revenue; this year we had $2,532,875. You’re pretty quickly up to well over half a million [dollars in lost] city sales tax revenue just from the decrease in overnight travel in, really, a month and a half because this didn’t happen until mid-March.
Tracy Kimberlin can be reached at firstname.lastname@example.org.
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