Hamilton County hotel room tax collections fell hard in 2020 as hospitality industry took hit from pandemic

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Mary Fortune, Chattanooga Times Free Press, Tenn.
·4 min read
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Feb. 20—Hamilton County hotel room tax collections were down about 30% in 2020 from 2019 levels, abruptly ending a steady streak of growth for a tourism scene that was attracting about $3 million a day in visitor spending before the pandemic struck.

"Obviously it's been devastating," said Barry White, president of the Chattanooga Tourism Company, which gets about 90% of its funding from the Hamilton County portion of the room tax.

Recovery will take time, and will be dependent on the effective rollout of vaccines, White said. In 2021, the Chattanooga Tourism Company is projecting a budget about 17% below 2019 levels, he added.

"We anticipate spring break will outperform last year's spring break," he said. "It will not, however, be at 2019 levels. It will be several years — estimates are 2023 — before hotels operate at a 2019 level at the earliest."

As hard as the local hospitality industry was hit, though, Chattanooga fared better than some markets. Nashville area room tax collections fell 93% in April, and are were still down 67% in November 2020. In Memphis, collections fell 81% in April and were still down 45% in November, according to state data.

"It could have been worse for Chattanooga," White said. "We performed better than the national average, better than the state of Tennessee average."

As a drive-in destination known for its outdoor attractions, Chattanooga was relatively well-positioned to draw travelers looking for ways to get away, get outside and stay socially distant, White said.

And there are signs of optimism after nearly a year in survival mode. A half dozen new hotels are under construction or planned this year as Chattanooga area operators anticipate a return to more leisure and business travel.

Newly opened hotels include a stayAPT Suites in Ooltewah that began operating this month, and the Hotel Indigo that DeFoor Hospitality opened in downtown's West Village in October 2020.

"We do have optimism," said Richard Pauley, director of sales and marketing at the downtown Westin, another DeFoor property. "As we look at the numbers, we continue to see leisure guests are starting to travel more, and as we see the vaccine roll out we'll see more of that travel."

At the Chattanooga Choo Choo hotel on Market Street, however, operations are still bare-bones, said Adam Kinsey, a principal with Choo Choo Partners.

"We closed the hotel from the end of March all the way through late June," Kinsey said. "We reopened for the Fourth of July, and we've been open since then, but only on weekends and we're also not at full capacity."

The iconic attraction's business is down about 60%, he added. It typically had a lot of international tour groups that kept it busy during the week, and that has changed dramatically, though there are signs of a thaw, Kinsey said.

"We are having those group tours reach back out to us," he said. "It's hard. We have to make sure it's worth it."

Before the pandemic landed in mid-March and drove collections off a cliff, room tax revenue had been ticking up steadily in Hamilton County, from $6.9 million in the 2015 calendar year to nearly $8.8 million in calendar 2019.

The most severe drops came in April, May and June 2020, what White calls "the dark months" of the shutdown. Collections fell 48% in April, 66% in May and 52% in June from 2019 levels.

"It happens like a faucet," White said. "You shut it off — restaurants shut, attractions shut, hotels are in the tank."

Since 2007, Hamilton County has paid all of its portion of the hotel-motel tax to the Chattanooga Tourism Company, formerly the Chattanooga Convention and Visitor's Bureau, to promote tourism. Last year was a cautionary tale on over-reliance on a single revenue source, White said.

As dollars dried up, the organization laid off a handful of employees, left empty roles vacant, furloughed about eight visitor center workers, and dramatically cut marketing, travel and other initiatives, White said. There are about 25 Chattanooga Tourism Company employees now, down from about 30 before the pandemic and an organizational change that predated the crisis.

"We would love to have a more diverse revenue stream — it's not healthy for the long-term health of our mission to have dependence on 90% of our budget in one basket," White said.

However, the room tax makes sense as a revenue source because it's largely borne by visitors, while the work of the Chattanooga Tourism Company also benefits local residents, he said.

"We generate a return a very good return for the community on the economic benefits of that investment," he said.

Contact Mary Fortune at mfortune@timesfreepress.com. Follow her on Twitter at @maryfortune.