The Compass Report economist: Area tourism sector ‘turned the corner’

Editor’s note: This is the first of four reports related to The City Wire’s The Compass Report. The Compass Report, presented by Benefit Bank, is the first comprehensive quarterly analysis of the Fort Smith Regional Economy. The Consumer Compass Report will be released Wednesday (Dec. 1), and third-quarter 2010 The Compass Report will be released Thursday (Dec. 2).

Economist Jeff Collins believes part of the regional hospitality sector has “turned the corner” and may be headed for better days.

Hospitality tax collections in Fort Smith and Van Buren for 2009 were below those of 2008 and 2007, and the first half of 2010 indicated a second year of decline. But third quarter activity suggests 2010 may bring better results than 2009.

FORT SMITH
For 2009, Fort Smith hospitality tax collections totaled $671,912, down more than 16% from 2008. Fort Smith hospitality tax collections in 2008 totaled $803,591, 11% more than the $723,548 collected in 2007, and more than 19% above 2006 collections. Fort Smith hospitality taxes are collected from a 3% tax on hotel room rates.

For the first eight months of 2010, collections total $463,074, down just 0.62% compared to the 2009 period.

VAN BUREN
For all of 2009, the city collected $381,372 in hospitality taxes, down 7.1% compared to 2008. Hospitality tax collections for Van Buren in 2008 totaled $410,914, up 7.4% over 2007 and up more than 14.5% over 2006.

For the first eight months of the year, the collections have totaled $298,833, down 1.35% compared to the same period in 2009. The year-to-date decline was 3.1% for the first six months.

TOURISM SECTOR NOTES
“The hospitality industry in the Fort Smith area, as measured by hospitality related tax collections is currently improving. While the slow recovery nationally has significantly affected the sector. Tax collection data indicate for the Fort Smith and Van Buren hospitality sector things may be looking up,” said Collins, the economist for The Compass Report and the former director of the Center for Business and Economic Research at the University of Arkansas.

Continuing, Collins noted: “Comparing quarterly data. revenues related to hospitality appear to be improving in both Fort Smith and Van Buren. Data indicate the Fort Smith hospitality sector has improved for consecutive quarters. This increases the degree of confidence that the Fort Smith hospitality sector has turned the corner.”

However, regional hospitality employment continued a decline that began in mid-2009. September 2010 saw 8,800 jobs in the regional hospitality sector down from the 9,300 jobs in September 2009. In the third quarter 2010 The Compass Report to be released Dec. 2, Collins gave the sector a D- grade, meaning it saw relative decline compared to the same quarter of 2009.

Collins, in preparing the third quarter 2010 The Compass Report, provided the following notes about the regional tourism sector.
• Hospitality related tax collections are indicators of both leisure and business travel. They are strong indicators of the overall health of the commercial real estate sector.

• Importantly, tax revenues from the hospitality sector provide an additional source of revenue for municipalities.  The improvement in hospitality related tax collections implies a modest offset to poor retail sales numbers and resulting tax collections.

• In percentage terms the data collections have been more volatile for Fort Smith hoteliers. This is particularly striking given the Fort Smith hotel market is about twice the size of the Van Buren market.

• The improvement in collections is welcome news for the metropolitan area. The leisure and hospitality services sector has shed 500 jobs from September 2009 to September 2010 according to the U.S. Bureau of Labor Statistics. In percentage terms, this was a loss of 5.4%.