October Hotel Tax Collections Up 30% From Last Year

ORLANDO-Orange County’s hospitality industry is off to an encouraging start as tax collections from 113,000 hotel and motel rooms for October reached $8.63 million, up from $5.8 million in September and 11.3% over the county’s budgeted $7.76 million. October is the first month in the local government’s fiscal year.

Compared with October 2001–the first month after the Sept. 11 terrorist attacks–October 2002 numbers are 30.1% up from the $6.64 million collected last year.

“While collections are up 30%, we must keep in mind that collections for last October were down 28%,” county comptroller Martha O. Haynie says in a prepared statement. “However, if we compare this month’s collections to those of October 2002 (our highest October collections of record), we are only down 5%, which indicates October 2002 was a fairly strong month.”

“In light of the many prognostications of doom and gloom for the tourism industry (in Central Florida), these numbers are good news,” says Steven M. Ekovich, vice president/Florida regional manager, Marcus & Millichap Real Estate Investment Co. of Florida.

The monthly tax collection numbers are watched closely by hotel developers and investors as a barometer of the area’s industry health. The revenue comes from a 5% tax added to each hotel and motel room occupancy. The bulk of the money is used to pay down debt on the $750 million, one-million-sf expansion of the Orange County Convention Center. The center hopes to be at 2.2 million sf of exhbition/meeting spce in early 2003.

If October’s $8.63 million collections carry through for most of the year, the annualized figure for fiscal 2003 conceivably could amount to $103 million, up from $91.6 million collected in fiscal 2002 but still under the $104.8 million logged in fiscal 2001.

However, Robin L. Webb, a 30-year professional in the hospitality industry and managing broker of Coldwell Banker Commercial NRT in suburban Winter Park, FL, cautions against such projections.

“It is wise to tread cautiously in projecting collections based on a single month,” Webb tells GlobeSt.com. “With the seasonality in Central Florida, projections must be tied to inconsistent monthly market performance.” For example, he says, “March may run 80% occupancy while September may run a little more than half of that.”

Webb says “in order to reach reasonably reliable numbers, each month must be calculated individually as opposed to multiplying one month’s collections by 12.”

Haynie’s staff had initially projected $112.6 million for fiscal 2002 and later revised the number to $90.6 million when the tourist count waned. Orange County’s best collection year was 2000 when $108.19 million was recorded.

Webb tells GlobeSt.com “there were signs of a turnaround (in Central Florida’s hospitality market) as early as the beginning of the summer, with occupancies recovering from the softness following Sept. 11.”

The broker says “the challenge for hoteliers has been to obtain sufficient rates following the drastic rte cutting done by many hotels in the market following the terrorist attacks.”

He acknowledges year-to-date occupancies and tax collections were “significantly improved” in September and “slightly improved” in October.

“However, until the industry is able to restore rate, revpar will lag behind prior years,” Webb tells GlobeSt.com.