Measuring Prince Rupert’s hotel tax
I’ve been asked quite a bit about the Prince Rupert hotel tax lately.
It’s not a straightforward issue, but it’s one of the main indicators we use to measure our success. It paints a partial picture – obviously excluding areas such as cruise or RV traffic – but it’s an important measure.
Let’s turn back to 2003. It was a benchmark year. There were a number of changes that weakened TPR prior to my taking over that September. There were also a few external factors that would have a lasting influence in Prince Rupert. For example, it was the year of the quasi-privatization of BC Ferries, which would have an increasing impact over the ensuing years.
At that time the hotel tax was relatively stable and consistent. In 2003 it was $129,000; in 2004 it was $130,000; and, in 2005, it was $130,000.
As of 2005 TPR was crippled by the substantial budget cuts that swept the city-funded organizations. We redoubled our efforts to become even more effective despite dwindling resources.
Then came 2006, which brought the first of two great challenges during this 2003-2012 period. A ferry sank. TPR lobbied hard for provincial relief funding, and as a result almost $1 million was invested in northern BC that summer – much of it here, as the northern hub of BC Ferries. We ended the year flat on hotel tax - $129,000 – which was of course a victory under the circumstances. And the investment that year provided lasting benefit.
In 2007 the hotel tax revenue was up to $170,000, and in 2008 it was $169,000. That’s a testament to the direct return on increased investment in marketing in 2006. Everything was going very well.
Then came the second great challenge. The Financial Crisis of 2007-2008, leading to the 2009 tourism season, has its own Wikipedia entry. It’s called “the worst financial crisis since the Great Depression of the 1930s.” Fortunately we saw it coming. I dedicated a lot of space to the looming crisis in this column in late 2008. At TPR we turned our limited resources to short-haul marketing, reasoning that people would still need vacations but would be looking closer to home to save money.
The tactic worked, though it was of course still a blow. Our hotel tax revenue dropped to $152,000 in 2009, and $147,000 in 2010. However, we believe we were able to mitigate the losses. While we saw a 10 per cent drop in 2009, we have to compare that to a 24 per cent drop in room revenue across northern BC, and a drop of over 30 per cent elsewhere.
Gradually building back out to a larger market, and continued focus on marketing techniques with a lower buy-in and a demonstrable return on investment, allowed us to turn the tide in 2011 despite our limited resources. Revenues rebounded to $160,000. For 2012 our most recent numbers are for September, but at that point we were showing growth over 2011 – not up to 2008 levels yet, but almost. We’re certainly heading in the right direction.
Again, this is a simplified, high-level overview. There are other mitigating factors. For example, an increase in business visitors has helped our recovery over the past couple of years – particularly given that visitation to northern Visitor Centres remains slightly down year-to-date as a result of the lingering effects of 2009.
Could we have done better at combating market challenges if we’d had more resources to invest in marketing? The answer is of course yes. Our funding, aside from the hotel tax and what external funding we’re able to attract on an annual basis, has remained static since 2005. Even with the hotel tax we face a period of change – the Hotel Room Tax Act was a victim of the HST, though it remains in force for at least a temporary period for municipalities. However, all things aside, we’ve been able to influence our visitor numbers very well within our available resources.