Drop in room tax revenue from COVID-19 is unprecedented for struggling Reno-Sparks
Jason Hidalgo - Reno Gazette Journal, June 17, 2020
The room tax numbers are in for the first full month of Reno-Sparks’ COVID-19 shutdown and they paint a sobering picture.
Area hotels reported just $3.5 million in taxable room revenues for April, according to the Reno-Sparks Convention and Visitors Authority. The number represents an 89% drop from the same month last year, when room tax revenue totaled $32.2 million.
The decline was described by the RSCVA as unprecedented for Reno-Sparks. Hotel-casinos were closed for a few months after Gov. Steve Sisolak announced the shutdown of all non-essential businesses in the state on March 17.
Room tax revenue is used not only to fund the RSCVA and its various facilities but also provides additional funding for the state, Washoe County, Reno and Sparks. The city of Sparks, for example, uses room tax revenue to fund capital improvements for Victorian Square.
The unprecedented nature of the crisis has made projecting the pandemic’s economic impact on room tax revenue much more difficult, said Robert Chisel, RSCVA chief financial officer. The closest event would be the Great Recession in the early 1900s but detailed records are sparse on how that impacted the area, he said.
“This is brand-new territory for everyone.” Chisel said.
Pandemic deals tough blow on room tax revenue
Some of the RSCVA’s early projections forecasted even worse numbers. The revenue generated by non-gaming hotels that remained open for business, however, ended up being better than expected, according to the RSCVA.
<aside aria-label="advertisement" class="gnt_m gnt_x gnt_x__lbl gnt_x__al">The tourism authority initially projected a 5% occupancy rate and about 22,000 room nights for the month. Cash-occupied room nights, however, ended up being more than double those initial projections at 49,924. Just because the numbers are not as bad as they could have been, however, does not mean they aren’t, well, bad, according to the RSCVA.
“Last year, we had 275,000 room nights,” Chisel said. “The (April 2020) numbers were better than we thought they were going to be but they’re still bad.”
The closure of the hotel-casinos in April was an especially tough blow on room tax revenue. The total number of available rooms from non-hotel properties — motels, RV parks, timeshares and vacation rentals — were only down by 14% year-over-year at 193,014. In contrast, the number of available rooms from hotels dropped by 78% from 480,679 to 105,937.
Even the rooms that were available generated significantly less revenue compared to last year as visitation tanked due to the pandemic. The average cash rate for rooms in April dropped by 40% from $116.97 to $69.95.
Numbers for May will likely be low once again. Like April, hotel-casinos were also closed for the whole month of May.
“We continue to project low numbers,” Chisel said. “The numbers, which are preliminary, are looking decent but again, it’s all in context to what we were projecting (due to COVID-19 impacts) and not what a normal month is.”
Event cancellations throw a wrench to recovery
One of the many scenarios calculated by the RSCVA includes one that projects a reopening of hotel-casinos by June. With the governor giving Nevada hotel-casinos approval to reopen this month, room tax numbers are expected to be improved over April and May. Just how much improved they will be, however, is a matter of debate.
“For June we are again projecting a very low occupancy rate of 14% because we’re not really sure what reopening is going to be like,” Chisel said. “We’re cautiously optimistic.”
The forecasted occupancy rate is nowhere near the area’s historical levels. During the last two years, for example, the occupancy rate in Reno-Sparks for the month of June was 71% in 2019 and 78% in 2018.
The RSCVA has typically been fairly conservative with its projections during the pandemic, which is one reason the actual numbers have been better than forecasted. For June, however, its projections did not account for one key detail.
“We were not anticipating that all our events would be cancelled,” Chisel said.
While events such as the Great Reno Balloon Race will still be held this year, one of the area’s biggest events — Hot August Nights — has been cancelled due to concerns about the coronavirus. August was a big month for Reno-Sparks last year, generating $46.6 million in taxable revenue.
Accurately gauging the impact of event cancellations at this point would be difficult, especially given the unprecedented nature of COVID-19, said Ben McDonald, RSCVA spokesman.
“We know it’s going to be significant but there’s no way for us to guesstimate any of the numbers,” McDonald. “We just don’t have the historical data. </aside>
Jason Hidalgo - Reno Gazette Journal, June 17, 2020
The room tax numbers are in for the first full month of Reno-Sparks’ COVID-19 shutdown and they paint a sobering picture.
Area hotels reported just $3.5 million in taxable room revenues for April, according to the Reno-Sparks Convention and Visitors Authority. The number represents an 89% drop from the same month last year, when room tax revenue totaled $32.2 million.
The decline was described by the RSCVA as unprecedented for Reno-Sparks. Hotel-casinos were closed for a few months after Gov. Steve Sisolak announced the shutdown of all non-essential businesses in the state on March 17.
Room tax revenue is used not only to fund the RSCVA and its various facilities but also provides additional funding for the state, Washoe County, Reno and Sparks. The city of Sparks, for example, uses room tax revenue to fund capital improvements for Victorian Square.
The unprecedented nature of the crisis has made projecting the pandemic’s economic impact on room tax revenue much more difficult, said Robert Chisel, RSCVA chief financial officer. The closest event would be the Great Recession in the early 1900s but detailed records are sparse on how that impacted the area, he said.
“This is brand-new territory for everyone.” Chisel said.
Pandemic deals tough blow on room tax revenue
Some of the RSCVA’s early projections forecasted even worse numbers. The revenue generated by non-gaming hotels that remained open for business, however, ended up being better than expected, according to the RSCVA.
<aside aria-label="advertisement" class="gnt_m gnt_x gnt_x__lbl gnt_x__al">The tourism authority initially projected a 5% occupancy rate and about 22,000 room nights for the month. Cash-occupied room nights, however, ended up being more than double those initial projections at 49,924. Just because the numbers are not as bad as they could have been, however, does not mean they aren’t, well, bad, according to the RSCVA.
“Last year, we had 275,000 room nights,” Chisel said. “The (April 2020) numbers were better than we thought they were going to be but they’re still bad.”
The closure of the hotel-casinos in April was an especially tough blow on room tax revenue. The total number of available rooms from non-hotel properties — motels, RV parks, timeshares and vacation rentals — were only down by 14% year-over-year at 193,014. In contrast, the number of available rooms from hotels dropped by 78% from 480,679 to 105,937.
Even the rooms that were available generated significantly less revenue compared to last year as visitation tanked due to the pandemic. The average cash rate for rooms in April dropped by 40% from $116.97 to $69.95.
Numbers for May will likely be low once again. Like April, hotel-casinos were also closed for the whole month of May.
“We continue to project low numbers,” Chisel said. “The numbers, which are preliminary, are looking decent but again, it’s all in context to what we were projecting (due to COVID-19 impacts) and not what a normal month is.”
Event cancellations throw a wrench to recovery
One of the many scenarios calculated by the RSCVA includes one that projects a reopening of hotel-casinos by June. With the governor giving Nevada hotel-casinos approval to reopen this month, room tax numbers are expected to be improved over April and May. Just how much improved they will be, however, is a matter of debate.
“For June we are again projecting a very low occupancy rate of 14% because we’re not really sure what reopening is going to be like,” Chisel said. “We’re cautiously optimistic.”
The forecasted occupancy rate is nowhere near the area’s historical levels. During the last two years, for example, the occupancy rate in Reno-Sparks for the month of June was 71% in 2019 and 78% in 2018.
The RSCVA has typically been fairly conservative with its projections during the pandemic, which is one reason the actual numbers have been better than forecasted. For June, however, its projections did not account for one key detail.
“We were not anticipating that all our events would be cancelled,” Chisel said.
While events such as the Great Reno Balloon Race will still be held this year, one of the area’s biggest events — Hot August Nights — has been cancelled due to concerns about the coronavirus. August was a big month for Reno-Sparks last year, generating $46.6 million in taxable revenue.
Accurately gauging the impact of event cancellations at this point would be difficult, especially given the unprecedented nature of COVID-19, said Ben McDonald, RSCVA spokesman.
“We know it’s going to be significant but there’s no way for us to guesstimate any of the numbers,” McDonald. “We just don’t have the historical data. </aside>
