Tourism leaders see multiyear hit to tourism business and hotel tax from Covid-19

The Covid-19 pandemic is expected to cause a drop in local tourism and events business for at least five years, with a decline of at least 25 percent in hotel business this year and an ongoing drag on the city’s Hotel Occupancy Tax collections going forward.

A summary of the current state of hotel tax revenue at last week’s meeting of the Tourism Commission showed an $8 million reduction in money for three line items – cultural arts, historic preservation and the newly created Live Music Fund – that together represent 30 percent of the city’s total tax collections. Those categories had been budgeted for just over $30 million total in this budget year, but now are expected to have $22.1 million in total revenue.

As of April 30, hotel tax collections for the year stood at $58.5 million, though that figure includes two normal months in January and February plus at least some bookings related to South by Southwest, which was canceled in early March and erased the biggest annual spike in local hospitality business.

The city’s projections through 2025 show a slow recovery, with the total spending for the three tourism-related categories funded but hotel tax dipping to $20 million in 2021 and climbing to just over $26 million in five years.

“It’s not as bad as I thought, just looking at these numbers. It still is sobering to see,” Chair Catlin Whitington said.“It’s interesting to see that even in five years it doesn’t look like we’re back to the previously projected number and we might actually see greater impact in future years with a continued decrease in revenue.”

Presentations from local tourism leaders showed that thus far, local hotels have lost $81 million worth of business, with the city losing $316 million in economic impact. The SXSW cancellation alone is believed to have cost hotels 58,000 room nights of business worth $34 million.

Tom Noonan, president and CEO of Visit Austin, said the hotel industry had been on pace to exceed its business projections for 2020 before the pandemic, and that business leads are down 60 percent from the same time last year. With the low point in April, when downtown hotels that stayed open were operating at around 3 percent of total capacity, business has started to grow to around 30 percent of capacity citywide.

Noonan said events and convention business will be the last category to rebound, with leisure travel and some segments of business travel already showing growth.

“The way this is going to come back is with leisure travel, and then you’ll start to see more business travel, then nonessential business travel, and then you’ll see small groups start to take place in hotels,” he said. “Then you’ll start to see large groups and events happening once you have a medical solution for Covid-19.”

Noonan repeatedly cautioned that a successful vaccine or treatment for the disease is the biggest determining factor in how the city’s tourism business rebounds.

For comparison purposes, Whitington and Noonan said the 9/11 terrorist attacks caused a five-year hit to local tourism, and the 2008 financial crisis impact lasted about three years.

“I think we’re going to see a multiyear hit for sure. It’ll take us a while to get back, a few years at least. It’s going to come down to what kind of medical solution there is to make people feel safe and secure to travel like they’re used to,” Noonan said. “Austin’s trajectory for coming back will be a lot faster than other destinations, because there has always been this desire to come to Austin … what that time period is, it’s really hard to guess.”

Photo made available through a Creative Commons license.

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