Hotels a bright spot for state
Occupancy up, but worries about marketing grow
Fairfield County entered the summer with a hotel sector suddenly in boom mode, with occupancies up nearly 12 percentage points from the first five months of 2017 and room revenue on an even steeper trajectory.
This year, in every month through May, as tracked by STR, Fairfield County hotel bookings have topped the totals from equivalent periods in prior years during the current economic expansion, with the lone exception of April 2016, which had a slightly higher occupancy rate than this past April.
This year, the region’s hotels have combined for a 63.9 percent occupancy rate, STR determined. The Nashville, Tenn.based firm market research firm tracks 75 local hotels with nearly 8,700 rooms.
As the case in many parts of the country, Fairfield County’s hotel market draws two very different crowds. Weekday reservations are dominated by businesspeople and the slower weekend traffic by leisure visitors. With the goal of spurring more visits from the latter crowd, in 2012 Gov. Dannel P. Malloy unveiled the “Still Revolutionary” marketing campaign, but has since cut tourism funding.
Brand awareness of Connecticut as a destination is dependent on advertising, according to Randy Fiveash, director of the Connecticut tourism office in the Department of Economic and Community Development, who spoke on the topic in April before a tourism caucus of the General Assembly. More than five years after Connecticut debuted its marketing campaign, ebbing investment has hurt the state’s tourism sector, Fiveash said.
“It’s going down because we are not able to have the brand awareness available out
there, and doing the advertising and marketing,” Fiveash told the legislative caucus. “If you look at the revenue that was generated by the lodging tax, in 2017, it was $116 million — we got $6 million of that, and it’s going down to $4.1 million. Ask yourself if that makes sense.”
High costs
Connecticut has the highest combined lodging and sales tax in the nation at 15 percent, according to HVS Convention, Sports & Entertainment’s most recent state-by-state study in 2017. It is one of only five states in double digits, along with Maine, Hawaii, Rhode Island and New Jersey.
Adding in local lodgings taxes in many U.S. cities — Connecticut law does not allow it — 34 cities have higher combined rates than in Connecticut, HVS determined, none in the Northeast. St. Louis led the nation in 2017 at nearly 18 percent, with New York City highest in the Northeast with a 14.75 percent rate that is only slightly below that of Connecticut.
While Connecticut hoteliers routinely complain the state’s tax hurts their business, the HVS study provides evidence that hotels and inns can fare well in a higher-tax environment. Maine had the single largest year-over-year increase in hotel tax revenue in 2017, despite bumping up its lodgings tax in 2016 to give it a combined 14.5 percent rate, trailing only Connecticut.
Still, of the 22 states that charge a dedicated lodging tax, Connecticut and New Jersey had the third and fourth worst performance in hotel tax collections, behind only Texas — the lone state to register a decline — and Kentucky.
Speaking at the same forum as Fiveash, DECD Deputy Commissioner David Kooris echoed some of Fiveash’s points while underscoring the opportunities Connecticut has to draw tourists.
“Whether its the Litchfield Hills, the Fairfield County coast, the southeast corner, the ‘Quiet Corner’ or greater New Haven, there are really remarkable destinations that make the state unique and that are really strong attractions,” said Kooris, the Stamford resident and former head of economic development for the city of Bridgeport. “But they’re not as well known as I think many of us expect them to be throughout the state . ... We run the risk of really slipping (compared) to our neighboring states — and we’re starting to already see those indicators.”
Paying the bills
As of May with a month to go in the state’s fiscal year, the state Department of Revenue Services reported a 4.8 percent increase in lodging tax collections, producing $103 million in revenue for the state’s general fund. The state data included collections from the tourist magnets of the Foxwoods and Mohegan Sun resorts in eastern Connecticut.
The Connecticut fiscal year that ended in June was the second in which the home-share booking company Airbnb charged the state’s lodging tax, presumably helping to nudge up total tax collections. Entering July, Airbnb listed an average rental rate of about $175 a night in Connecticut across more than 300 listings, ranging from a $10 guest room in Milford; to a Lake Zoar cottage in Newtown for $159; to an eight-bedroom beach house in Greenwich for $1,000.
Travel websites like Norwalk-based Booking Holdings and Expedia, meanwhile, are working to combine home lodgings in the search returns for regular hotels. Marriott International is testing its own program in a bid to hang onto some of the business it has lost to alternative accommodations.
“Bookings in this category are growing nicely and we firmly believe our customers want a one-stop shopping experience to find a great place to stay, whether it is a hotel, resort, home or apartment,” said Booking Holdings CEO Glenn Fogel in a May conference call. “We know our customers want it (and) we’re ... getting that inventory.”