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Hospitality

Room Occupancy Tax Numbers Take A Dive In April

By Cece Nunn, posted Jun 11, 2020
The Wilmington Convention Center and the convention center hotel, Embassy Suites by Hilton Wilmington Riverfront. (Photo courtesy of Wilmington and Beaches Convention and Visitors Bureau)
Room occupancy tax numbers in the Wilmington area sank in April, as expected, because of measures to slow the spread of the coronavirus pandemic.

For New Hanover County, the countywide room occupancy tax (ROT) in April this year dropped by 87%, from nearly $1.3 million in April 2019 to $164,136 during the same month this year. That's according to numbers provided by the Wilmington and Beaches Convention and Visitors Bureau.

Every taxable accommodation in New Hanover County, which includes hotels, motels, inns, room rentals, tourist camps or other short-term rentals, is subject to the 6% ROT rate.

For downtown's Wilmington Convention Center District by itself, the April drop in ROT amounted to a 95% decrease, said Wilmington Mayor Bill Saffo on Thursday. Those taxes fund the Wilmington Convention Center, which opened in November 2010.

"Over 10 years, we've built up a considerable amount of fund balance so we can take care of the mortgage payment on the convention center this year and we can take care of it for next year if we have to," Saffo said.

For the city overall, Saffo said, the ROT figures decreased 77%.

The disbursement of the first 3% of ROT collected in New Hanover, the city of Wilmington and the county's beach towns -- Carolina Beach, Kure Beach and Wrightsville Beach -- breaks down to 60% going toward beach renourishment and 40% to the New Hanover County Tourism Development Authority, doing business as Wilmington and Beaches CVB.

"We've had to put off some initiatives in regards to marketing, will hold the line on some stuff until we get through this," Saffo said. "It's hard. This community depends a lot on tourism and that kind of downturn in tourism business has definitely taken a toll on our marketing opportunities, our conventions, and obviously, most importantly, it's taken a toll on the businesses that are supported by tourism."

As a result of COVID-19’s projected impact on occupancy when stay-at-home orders were enacted, the CVB estimated a revenue shortfall through June 30 of about $1 million, said Kim Hufham, president and CEO of the New Hanover County TDA.  

"In anticipation of the drop in occupancy, all paid and earned media was put on hold beginning in mid-March through April," Hufham said in an email Thursday. "Additionally, all business travel, including tradeshows, was canceled through June 30. The CVB suffered budget reductions in all areas for the remainder of fiscal year 19/20. Year-to-date thru April, lodging occupancy levels are down -40.8% (according to Smith Travel Research)."

Hotels in North Carolina were allowed to open during the first phase of the state's reopening, which started May 8, but some local restrictions remained in place. Restrictions that applied to hotels in the city of Wilmington were lifted May 29.

Hufham said as a result of some limitations being lifted, "we anticipate that May will be down considerably but may not be quite as drastic as April due to Memorial Day weekend travel.  However, we will not receive these ROT numbers until mid-July to know for certain."

In Carolina Beach, where part of the ROT can be used for tourism-related activities, some of the funding pays for lifeguards.

"You can roll back advertising. You can't roll back lifeguards," said Greg Reynolds, president of the Pleasure Island Chamber of Commerce.

Mitzi York, executive director of the Brunswick County Tourism Development Authority, said that as of Thursday, she had not received the April ROT numbers for Brunswick.

"I would anticipate that they'll be significantly reduced since the majority of the accommodations were not available in April for bookings or rentals," she said.

Officials are hoping the future is brighter.

"I think people are more optimistic about the summer certainly than they were at the end of March or in April," York said.

But they've also been planning for continued shortfalls.

Hufham said in the email, "With so much uncertainty about the future of travel due to COVID-19 visitor concerns and the possibility of future restrictions, our revenue projections for fiscal year 20/21 are down by -33.92% and budget cuts have been made in all departments.

"Overall expenses for fiscal year 20/21 are being reduced by 27%. Budget highlights include Administrative costs reduced by 5%; Visitor Services reduced by 54%; Marketing/Promotions reduced by 29% (paid advertising cut by 33%, some of which will be offset by a unified campaign with Wilmington and the beaches that will save costs in all 4 budgets to reach a larger audience)."

She said CVB personnel cuts include the elimination of three full-time positions and a greatly reduced staffing of part-time visitor information center employees.
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