Declines in hotel occupancy and visitors to the Disney Resort may make a projected increase in Transient Occupancy Tax (TOT) revenues zero out.Â The visitors generating the TOT also drop sales tax revenue in the city.Â Declining sales tax revenues directly impact the general fund.Â Â
The FY 2008/09 budget (completed in July 2008) forecast an increase in TOT of 8.5% (about $7 million) over projections for FY 2007/08.Â Anaheim was looking to the addition of new hotel rooms and steady to increasing hotel room occupancy levels to increase the TOT. Â The news from the hotel and business travel industries and Disney are not supporting this projection.
- Hotel News Now (a division of Smith Travel Research, a major source of reliable hotel industry data and trends) reports that Anaheim-Santa Ana had a 19.5% decline in occupancy compared to the same period in the previous year during the period of Jan 25-31, 2009.Â The reported Anaheim- Santa Ana occupancy rate during this period was 52.5%.Â This is still higher than the overall nationalÂ hotel occupancy rate of 48.0% for the same week.Â Â Anaheim-Santa Ana was listed along with New Orleans and Orlando as having the largest drops in occupancy during this period.Â During the same period in 2008, the overall national hotel occupancy rate was 54.9%.
- The Travel IndustryÂ Association, in an October 2008 report, forecastÂ a 6.7% decline in business travel volume during 2008 with an additional 3.5% decline in volume forecast for Â 2009.
- For the Oct-DecÂ 2008 period, Disney reported a 4% drop in revenues forÂ parks and resorts from the same period in 2007.Â Disney reported that part of this drop was caused by declines in park attendance and hotel stays.Â Â
What does this mean for Anaheim?Â The current trends do not bode well for hitting the numbers projected in the FY 2008/09 budget. Â The projected $7 million increase can be wiped out if the downturn at Disney and hotel occupancy continues.Â Much of the TOT money is used to pay for bonds on the convention center improvements, improvements in the resort areas and funding the convention and visitors bureau.Â However, some of the money does go into the general fund to pay for city operations.Â Â Â
It’s unlikely the city will have to allocate money from other funds to cover the TOT decreases and pay for operations and debt in the conventions/sports/entertainment area, but the decrease in TOT, coupled with the decline in sales tax revenue dropped by visitors, will cause more pain in the general fund.