Fayetteville Sales Up Despite Airport Departure

With the departure of the area’s largest airport to Highfill in early 1999, Fayetteville’s restaurant and hotel owners braced for a financial jolt.

But like the New Madrid earthquake that was predicted for 1990, the big one never came.

When the pollen cleared this spring and the year’s numbers were calculated for the city’s hotel-motel-restaurant tax, business people all over town were surprised to learn that Fayetteville’s economy was actually up by 6.9 percent in 1999 over the previous year.

That number may look anemic compared with a 26.5 percent jump in Bentonville’s “hospitality tax” collections, but folks in Fayetteville are elated nonetheless.

“It was really amazing when we looked at the HMR taxes,” said Alex Jerde, manager of the Fayetteville Hilton Hotel.

“It was kind of a crystal-ball thing going into it,” said Marilyn Johnson, director of convention and visitor development for the Fayetteville Chamber of Commerce. “Nobody knew what to expect. So I expected it to dip, certainly.”

The Numbers

The 6.9 percent increase is for collections from Fayetteville restaurants and hotels combined. The 1 percent HMR tax collection – generally considered a good barometer of the city’s economy – was up from $1,094,520 in 1998 to $1,170,114 in 1999. (Multiply the collections by 100 to get total sales in the city for restaurants and hotels.)

The money collected from the city’s original 1 percent HMR tax is used for advertising and promotions, so it’s referred to as an A&P tax. Another 1 percent HMR tax was enacted in 1996 and is earmarked for the city’s Parks & Recreation Department. The second tax isn’t included in the numbers used in this story.

The 1999 increase was slightly less than the 10.2 percent jump from 1997 to 1998. But 1998 was an unusual year. The 6.9 percent increase in 1999 is higher than the 3.9 percent annual increase in 1997 and the 2.6 percent increase in 1996.The Fayetteville numbers were twice as high as Bentonville’s, but Fayetteville’s percentage increases looked puny in comparison to booming Bentonville, which appears to be awakening with construction of new hotels and restaurants.

Bentonville’s HMR tax collections were up 26.5 percent (to $562,829) in 1999 over the previous year. The city’s collections were up 16.5 percent in 1998 and 24.7 percent in 1997. The city enacted its “hospitality tax” in 1996. In Bentonville, restaurants pay a 1 percent tax and hotels pay 2 percent.

But the increase in Bentonville was expected, and the airport is obviously a factor in that increase.

In Fayetteville, restaurants fared better than hotels in 1999.

Tax collections increased by 8.3 percent at restaurants (from $930,720 in 1998 to $1,007,948 in 1999) and dropped slightly – by 1.06 percent – at hotels (from $163,800 in 1998 to $162,058 in 1999).

“We expected to take a bigger hit,” Jerde said. “We were projecting a 10 percent loss in revenue across the board. Instead, we were only down by 2 percent.”

Jerde said revenue from rooms was down by about 10 percent in 1999 at the 19-year-old, 235-room Hilton, the city’s largest hotel. But the Hilton made up the difference through its restaurant and banquet services. Jerde shifted priorities with the change in 1999 and began soliciting groups to stay at the Hilton and hold banquet meetings there.

North Toward Wal-Mart

The Northwest Arkansas Regional Airport, which opened in November 1998, is only 12 miles from Bentonville, home to Wal-Mart Stores Inc., the nation’s largest retailer, and a beehive of vendors who swarm the home office on a regular basis.

Four of the five commercial airlines serving Northwest Arkansas moved to the new airport in the first quarter of 1999. The last holdout – Atlantic Southeast Airlines, a Delta carrier – moved there in September.

The new airport sports an 8,800-foot-long runway – long enough to accommodate jet traffic – and is on the top of a plateau near Highfill. Drake Field, which can only support turboprop aircraft, is located in a valley ringed by mountains south of Fayetteville. Drake Field is still open but is used primarily for private aircraft now.

The popularity of the Northwest Arkansas Regional Airport can’t be denied. The new airport had 329,216 enplanments (passengers boarding planes) in 1999. That’s an increase of 22 percent over 286,898 for both airports in 1998, when Drake Field was still the area’s primary airport.

Previously, many vendors would fly into Fayetteville’s Drake Field and stay at the Hilton Hotel (or other Fayetteville hotels), driving north when necessary to do business with Wal-Mart. Some vendors still do that but most appear to have migrated north for lodging.

Final Destination

Fayetteville hotels, on the other hand, cater to people coming to town for conventions and events involving the University of Arkansas, like ball games and graduation.

The sales figures seem to indicate that Fayetteville is more of a destination than many area business people realized. Besides having a plethora of restaurants – about 200 of them – Fayetteville is a wet county. Only private clubs can serve liquor by the drink in Benton County.

The Hilton paid $38,039 in 1 percent A&P taxes in 1999. That indicates sales at the hotel were about $3.8 million for the year, which includes sleeping rooms, Charlie’s Restaurant and banquet rooms. In 1998, the Hilton paid $39,385 in A&P taxes.

Jerde believes the opening of Interstate 540 from Alma to Fayetteville – which coincided with the opening of the new airport – helped offset some of the damage of the airport leaving Washington County.

“I really think 540 opened some options for folks,” Jerde said. “You can slide down to Fort Smith now in 40 minutes.”

The Future

Jerde expects 2000 to be a better financial year than 1999 for the Fayetteville Hilton, but he hopes things will improve even more in two years with the $9.2 million Town Center is completed on the downtown Fayetteville square.

Marilyn Johnson HMR tax collections for 2000 were up 12 percent in both January and March and 7 percent in February when compared with 1999.