With Hotel Occupancy Likely to Drop, New Tourism Fees Start Rolling In

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Hilton Palacio del Rio.

Bonnie Arbittier / Rivard Report

Tourism and hospitality generate more than $15 billion in annual economic impact. Hotels account for more than 21 percent of that total.

Fewer vacancies and higher room rates fueled healthy revenues for San Antonio hotels last year. But without the Tricentennial and 2018’s other big-ticket events, the local hospitality industry is looking to the City’s Tourism Public Improvement District to bolster hotel bookings.

The San Antonio hotel market finished 2018 with increases in hotel occupancy, average daily room rates (ADR), and revenue per available room (RevPAR), according to CBRE Hotels Research. Occupancy rates were up 1.6 percent, with an almost 4 percent gain in ADR and an overall 5.3 percent boost in San Antonio’s RevPAR. The national average RevPAR increase was almost 3 percent.

Though CBRE’s recent lodging forecast report shows continued increases in both ADR and RevPAR through 2020, occupancy is expected to rise only 0.4 percent in 2019, reaching an overall occupancy rate of just over 66 percent. Occupancy is expected to drop by 1.7 percent in 2020.

“San Antonio continues to serve as both a stable and growing market for hotels,” said Jeff Binford, director of CBRE Hotels group. “While demand for hotel rooms is expected to increase over the next few years, the new addition of new hotel rooms is expected to cause occupancies to decrease slightly.”

Tourism and hospitality is the third-largest industry in San Antonio, generating more than $15 billion in annual economic impact. Hotels account for more than 21 percent of that total. One in every seven employed people in the city works in hospitality. San Antonio remains one of the most stable hotel markets in Texas, Binford said, and a steady increase in room rates will keep revenues coming.

Analysts credit the number of new hotels being built for the predicted dip in occupancy after a banner year with the NCAA Men’s Final Four and other events, such as the Tricentennial. In addition, San Antonio’s convention and meetings calendar for the coming years is not as robust as it has been.

Liza Barratachea, president and CEO of the San Antonio Hotel and Lodging Association (SAHLA), said hotel and tourism industry leaders foresaw the decline, and that was the chief motivator for the creation of the Tourism Public Improvement District (TPID).

In December, at the urging of the SAHLA and Visit San Antonio, City Council approved a new fee for hotel guests that created the TPID. And on Jan. 1, the TPID began collecting a 1.25 percent fee per night from guests staying in hotels with 100 or more rooms.

So far, the City has collected $1,452,285 in TPID fees for the months of January and February from the 154 San Antonio-area hotels currently on the TPID rolls. There are a total of 30,500 TPID hotel rooms in San Antonio.

Liza Barratachea, president and CEO of San Antonio Hotel and Lodging Association.

Bonnie Arbittier / Rivard Report

Liza Barratachea, president and CEO of San Antonio Hotel and Lodging Association

“We are hopeful the addition of the TPID will have a positive impact on the market and San Antonio’s overall economy,” Barratachea said. The TPID is expected to raise more than $10 million a year for marketing and advertising programs designed and led by Visit San Antonio.

Payouts of TPID funds to Visit San Antonio will begin soon, said a spokesman for the tourism bureau, and will be used to buy brand awareness advertising on television and outdoor and digital ads.

“The immediate focus would be driving summer leisure tourism traffic to San Antonio,” stated Richard Oliver, director of partner and community relations at Visit San Antonio, in an email to the Rivard Report. “As you might expect, that’s the busiest and most lucrative time for the hospitality industry.”

Between April and August of this year, he said, TPID dollars will be used to buy 183 million additional impressions – the number of users who potentially see the advertisements or outreaches.

In Dallas, a TPID went into effect in 2012 and was renewed in 2016. The Texas Hotel and Lodging Association reported the district has been instrumental in doubling the city’s conversion rate for securing conventions and facilitated a 17 percent increase in occupancy on average throughout the city.

The CBRE report showed that the Dallas hotel market is expected to remain steady in the foreseeable future, with occupancy remaining in the mid- to high 60 percent range and ADR projected to grow between 1.6 and 1.7 percent over the next two years.

CBRE’s Binford, who is based in Dallas, said he’s been seeing a lot more ads promoting San Antonio lately. “I haven’t seen that in years,” he said. “I attribute this to aggressive marketing on the TPID, and I believe it will pay off well for San Antonio.”

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