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Galveston Hotels
by David Stanowski
17 May 2009


Abstract:
The hotel business is an important part of the Galveston economy. With the national hotel business mired in a deep slump, how is the local hotel business faring?

Introduction:
E-forecasting.com in conjunction with Smith Travel Research announced that
the Hotel Industry's Pulse index (HIP) declined at an annual rate of 21.9% in March and 21.4% in April.

HIP is a composite indicator that gages business activity in the U.S. hotel industry in real-time. Simply put, it tracks monthly overall business conditions in the industry, like an industry GDP, and points in a timely way to the changes in direction from growth to recession or vice versa. The composite indicator is made with the following components: revenues from consumers staying at hotels and motels adjusted for inflation; room occupancy rate and hotel employment; and other key economic factors that influence hotel business activity.
Full article: Hotel News Now
     HIP
 
The hotel industry’s occupancy rate fell 14.0% on a year-over-year basis to end the week at 53.6%. The average daily room rate dropped 9.8% to finish the week at $97.58. Revenue per available room for the week decreased 22.4% to finish at $52.32.
Full article: Hotel News Now

The following graph shows the hotel occupancy rate from 2001 to the present.

Hotel Occupancy


Galveston hotel receipts show a clear pattern of peaking every third quarter up until the third quarter of 2008 when they failed to better second quarter revenues due to Hurricane Ike hitting the City at that time, but 4Q 2008 receipts did not drop nearly as much as in previous fourth quarters, because of the continuing demand for rooms in the aftermath of the storm. Receipts peaked in 3Q 2007.

The next graph shows Galveston hotel receipts divided by the Producer Price Index (PPI) of commodities, which is a more accurate method of adjusting data for inflation than the heavily politicized CPI index.


Galveston hotel receipts graphed on an annual basis show that they have increased 85.80% between 2001 and 2008.

Year Hotel Receipts
2001 $73,478,704
2002 $73,644,796
2003 $74,943,481
2004 $79,439,214
2005 $94,771,032
2006 $106,035,150
2007 $117,506,856
2008 $136,523,888
TOTAL $756,343,121
Source: Texas Comptroller

However, when Galveston annual hotel receipts are divided by the PPI, to adjust for inflation, they show "real" growth of 30.84% between 2001 and 2008.


The number of hotel rooms in Galveston has been growing during this period, including some surprisingly large peaks and troughs in the growth curve. Some rooms were lost due to Hurricane Ike.


Total receipts for Galveston's major hotels in March 2009:

Hotel Receipts
Moody Gardens $1,068,278
Victorian Inn $912,923
San Luis $878,401
Hilton $771,240
Hotel Galvez $704,259
Holiday Inn $575,816
Source: Texas Comptroller

Total receipts per room for Galveston's major hotels in March 2009:

Hotel Receipts Rooms Receipts/Room
Hilton $771,240 150 $5,142
Victorian Inn $912,923 200 $4,565
San Luis $878,401 243 $3,615
Moody Gardens
$1,068,278 303 $3,526
Holiday Inn $575,816 179 $3,217
Hotel Galvez $704,259 228 $3,089
Source: Texas Comptroller


Conclusion:
The hotel business is very important to the Galveston economy contributing over $756 million between 2001-2008. Galveston levies a 9% municipal Hotel Occupancy Tax, in addition to the 6% state HOT, that is critical in promoting tourism to the City. Although some of the $756 million was exempt from HOT levies, the hotel business has generated millions of dollars in HOT for the City over the last eight years.

Fortunately, there is no evidence that Galveston hotels are suffering the declines that are being seen in many areas around the country. Demand from residents displaced from their homes by Hurricane Ike; contractors, consultants, and government workers helping in the cleanup and rebuild; and tourists wishing to visit the Island are keeping occupancy and room rates at relatively healthy levels. This is one local economic indicator that must be tracked very closely as the post-storm rebuild eventually peaks and declines, and the international recession begins to effect the local economy more dramatically.   

Local Hotel Occupancy Tax




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