Every year we anxiously look forward to the tourism season, which consists mostly of about 8 months. While we see tourists travel here year round, when you come to the beach, you usually want to get out in the water, so the higher concentration of tourists always falls in the summer. Of course, the kids being out of school plays some part in that too, I suppose. 😉
A quick history
The last few years in the tourism industry has been an interesting ride. We had the great pleasure of riding an appreciation wave where we saw real estate values sky-rocket. Then, we subsequently saw a meltdown as we came off the inflated prices and realistic terms finally again began determining pricing.
We had a number of new economic developments in the area that made our beaches look significantly more attractive than they used to. Some of the many changes include Pier Park, the relocation of the airport and a wide variety of new commercial, retail and dining establishments that have cropped up all over the beach.
As our area has grown, and more have made this their vacation spot, the demand for a greater variety of shops, restaurants, entertainment and attractions has slowly been met.
This is growth, my friend. Sometimes it may seem slow, but it is definitely happening.
Tourism revenue numbers
Because accommodations are offered from endless mediums, including property management companies (like ours), full scale resorts, or private owners, it’s extremely difficult, nay impossible to gather occupancy rates market wide.
So, the way we typically determine market growth is by looking at bed tax revenue numbers. But, as was explained to me earlier (which I have certainly considered in the past), just because we have a growing revenue number, it doesn’t mean we have more people coming to the beach. Touche.
However, more money, DOES mean more growth, because greater revenue fuels expansion opportunities elsewhere. And it also means that if more money is coming in with fewer people, then the pricing is going up, which then leads to an assumption that we are catering to a higher-end clientele. But I digress.
Lets take a look at the data
Below is a breakdown of the raw data over the last few years. We’ve requested historical data back to 1997 but haven’t gotten it just yet. We should note that the amount of bed tax collected was 3% up until February 2009, 4% for March 2009, then beginning in April 2009 the rate was increased to 5%.
Here is the bed tax revenue – raw numbers.
And the best way we could compare year over year, same month numbers was to break down the whole number by each percentage point collected. So, for the 2006/2007 through the period in which the rate was increased, we divided the total number by 3. Then we did the same, for the respective points for February and March 2009, then the remaining periods through the 2010/2011 reporting period.
Here is what we got.
Then, we took those numbers and broke down the percentage increases year over year, comparing same month periods.
I think it’s fascinating to look at these numbers because you can actually watch the real estate market tumbling in the 2007/2008 period, and begin to see slight growth the following years. Of course, with the exception of the 2009/2010 reporting period, where we had the oil spill, the growth was in the negative direction.
I know, this is what you’ve been waiting for. You’ve been wanting me to pull out my crystal ball and tell you what our growth will be like this upcoming summer. Here goes!
There are a bunch of ways to do this. For example, one can look at the average percentage increases in the last column in the last data set up above and average that out to a total 5.7% increase. This approach would tell us that based on the historical averages over the last 5 reporting periods that we should see said percentage growth this year.
But I think we’re going to do better than that.
I think we should use the 2008/2009 reporting period as the baseline. That was the second year Pier Park was open, the year before the new airport came online and frankly the first year we would have begun seeing an explosive growth pattern (in my opinion) had we not had the oil spill in the gulf.
Looking at the periods from 2008/2009 and on, and averaging the monthly bed tax revenue collected during the months of May through August, we get the following numbers for average monthly bed tax revenue collected.
- 2008/2009 — — $1,548,918.49
- 2009/2010 — — $1,433,777.21 — — 7.4% down from 2008/2009
- 2010/2011 — — $1,866,137.53 — — 30.2% up from 2009/2010 and 20.5% up from 2008/2009
So, now if we scratch out the 2009/2010 reporting period, and pretend it didn’t exist, then divide the percentage increase the 2009/2010 reporting period had over the 2008/2009 period (20.5%) by 2, we’d have a healthy 10.25% annual growth average.
Using this projection, our bed tax collections for the May-August 2011/2012 reporting period should average at $2,057,416.62 per month.
What does this mean?
Projecting an average 10% increase in bed tax revenue for our summer season doesn’t mean that everyone should expect to see a 10% increase in occupancy over last year, nor does it mean that we all should see a 10% increase in rental rates charged. Some of my properties, we increased our prices by more than that, and bookings are fine. And bookings seem to be coming in faster this year than last year as well.
But, a projected 10% increase this year is just a projection, and the way it will affect the tourism industry market-wide will vary as great as their are specks of sand on our beach.
But this is my prediction, and I’m sticking to it!