Local marketing could help fill hotels
ADVISER FRED CROWLEY Strategies for the business sector
I have written about the importance of tourism to our local economy in the past. Visitors spend their money on hotel accommodations, entertainment, shopping, transportation, gasoline and other items while visiting our community. This creates jobs and incomes for the people who live here. One measure of tourism’s impact on the economy is the hotel occupancy rate. I compared the Rocky Mountain Lodging Report’s occupancy data for June 2007 with June 1997 and June 2004. The past ten years provide a good historical comparison. The data since 2004 reflect an overall growth economy after the 2001-2003 recession and recovery. Top right are the results: From 1997 to 2007, available room nights grew 130 percent faster than occupied room nights. A room night, a measure of hotel occupancy, means one room occupied for one night. The expected effect of an oversupply of room nights would be tougher competition, declining or modestly increasing room rates and the closure of unprofitable hotel units. From June 1997 to June 2004, hotel revenues for the month of June increased 64.3 percent. This is well above the 28.1 percent inflation for the period. Since then, revenues have remained virtually unchanged despite a 12.5 percent increase in the average room rate. A quick review of the data finds that the number of occupied room nights declined by 12,686 units (10.1 percent). The apparent overbuilding through June 2004 did create a highly competitive market for hotel room rates. Room rates lagged inflation. Unprofitable hotel operations closed. This contributed to the decline in the number of occupied room nights from June 2004 to June 2007. But the health of our hotel industry goes beyond overbuilding issues. For example, Colorado Springs captured 12.8 percent of all occupied room nights in Colorado during June 1997. By June 2007, we saw our capture rate decline to 9.9 percent of the Colorado total. The decline in occupied room nights took place despite a national economy that, on average, grew steadily. The decline also took place despite a national program to promote tourism in Colorado. Clearly, we are having problems attracting destination visitors to our area. It appears the hotel tourism business in Colorado Springs might benefit from a marketing plan aimed at current customers and those who are not customers. This is something that should be done at the local level. National tourism promotional programs on behalf of Colorado appear to be working statewide. A decline of 10.1 percent in occupied room nights since 2004 suggests the programs are not working for Colorado Springs. Tourism is too important an industry to allow it to atrophy. Fred Crowley is an associate research professor and senior economist for the University of Colorado at Colorado Springs, Southern Colorado Economic Forum. Reach him at fcrowley@uccs.edu.
