Buncombe TDA passes $30.6M operating budget, awaits state tweak to distribution formula

The Buncombe County Tourism Development Authority Board passed a $30.6 million operating budget June 29, but it might be making some tweaks to the budget's distribution model in July.

The North Carolina General Assembly created the local TDA in 1983, with the authority receiving nearly all of its revenues from a now-6% occupancy tax on hotels, vacation rentals and bed & breakfast lodging. Its state-mandated distribution model requires the TDA to spend 75% of revenue on advertising and promotion, and 25% on its Tourism Product Development Fund, which funds projects and venues that can result in visitors staying in the area longer.

In a unanimous vote, the board approved the fiscal year 2023 budget, which goes in effect July 1. The approved budget also includes a Tourism Product Development Fund administrative budget of $415,000 and an earned revenue budget of $225,000.

Vic Isley, the TDA's president and CEO, explained to the board that the state legislature appears to be on the way to changing the distribution formula this week.

Initially, local senators filed a bill in the Senate June 1, and it passed June 28 as was referred to the House of Representatives, where it was read into the record and referred to the Rules Committee. House Bill 1057 would change the distribution model from the current 75/25 split to two-thirds of TDA revenues going to advertising and promotion, and one-third to the Tourism Product Development Fund.

"So there will continue to be action in Raleigh the next couple of days, with anticipated wrapping up of the (state) budget on Friday,” Isley said. “Because this is a local bill, once the House passes it, it will become law. So we’ll be tracking that with our leaders down in Raleigh, along with the North Carolina Travel & Tourism Coalition.”

New regulations: 13 months after hotel moratorium, officials, others opine Asheville's new regulations

If and when the bill passes in the House, it will become law immediately, Isley said. Like the TDA, the state operates on a fiscal year that ends June 30 and begins July 1.

At its May 25 board meeting, the TDA discussed two possible budget scenarios, based on the possibility of the new bill passing. The budget passed June 29 operates on the 75/25 model, but the TDA can tweak it in July.

TDA board member Leah Wong, a member of the budget committee, said if the bill passes, "we’ll come back to the board at the July meeting with a budget amendment that complies with the new law and its effective date.

"Our expenditures are not in any violation or exceeding anything in that very short time period, so we'll just apply that law back to when it passed,” Wong said.

The TDA's funding and expenditures have become controversial in recent years, as some local residents feel the organization spends too much money promoting visitation to the area and not enough funding local projects that could benefit locals and tourists alike. Some locals have called for the TDA to allocate funding to public infrastructure or even affordable housing, but the state legislation restricts spending to advertising or funding of projects that can result in hotel stays or extensions.

No one from the public signed up to speak about the budget.

Tourism rebound still strong

In other action, the board received a financial report for May that showed tourism remains strong in the area, as the COVID-19 pandemic has eased. Tourism took a huge hit in 2020, but it continues to rebound.

Buncombe County Finance Director Don Warn, who tracks the TDA's finances, said lodging sales were up 23% in May over April, and are up 48% for the year. An accompanying graph "shows 2022 outpacing all the previous years," Warn said.

TDA annual report: Annual hotel sales hit $275M, vacation rentals up 110% despite pandemic: TDA annual report

Call for reform: After Buncombe's hotel tax budget balloons, commissioners call for reformed legislation

Warn further noted that:

• Hotel/motel sales were up 30.5% for the month of May, and 52.8% for the year.

• Vacation rentals were up 11.3% for the month, and 40.8% for the year.

• Bed & Breakfast sales were up 34.3% for May, and 26.5% for the year.

Isley did note that Buncombe is beginning "to soften" a little in visitation. The benchmark year for the area was 2019, before the pandemic, and hotel/motel lodging occupancy rates for May of that year stood at 77%.

"For May of this year, our hotel partners were at 70%, so 7 points down from the benchmark year and just a point down from last year of 2021," Isley said. "So we are starting to see a little softening in the market, both on the hotel side as well as vacation rentals."

Vacation rental occupancy in May 2019 stood at 58%, then hit 71% last year. This year, they're down to 64%, or a 7-point drop from 2021, Isley said.

But the Asheville Regional Airport is seeing passenger counts that "are really off the charts," Isley said, noting traffic from January-April of this year was up 71%.

Gas prices may hurt more local travel

Soaring gas prices might be putting a damper on more localized travel, Isley said, citing two industry groups that have conducted surveys.

A survey fielded in mid-June shows "higher gas prices are starting to impact travel decisions from those surveyed,” Isley said.

Paying more at the pump: Asheville gas prices surge to a record-high; will the increasing prices continue?

The survey noted that 41% of respondents said higher gas prices will impact their travel decisions over the next six months, and 39% are looking at taking a trip closer to home or reducing the number of trips. Respondents also said they would likely curtail spending on retail and other purchases.

“But yet there is still a silver lining – despite these inflationary pressures and concerns, that demand for travel is still at record highs, with 91%, or 9 in 10 American travelers, indicating to take plans for trips in the next six months,” Isley said. “So, we’re going to want to make sure we are in the hearts and minds of those travelers who are looking to take a trip.”

This article originally appeared on Asheville Citizen Times: Buncombe TDA passes $30.6M budget, awaits distribution formula tweak