Lake Geneva, Wisconsin hotels got hammered in 2009, with a drop in room revenue of 45%. Statewide hotel revenue per available room was down 15%
According to the just released 2010 budget, room tax revenue for the city of Lake Geneva was $511K in 2008 and projected to be only $280K for the rest of 2009; a drop of 45%. The Village of Fontana saw a drop in room tax revenue of 33%; $345K in 2008 compared to $230K in 2009.
Statewide the latest figures from the Wisconsin Innkeepers Association show a drop of 15.1% in revenue per available room. The Wisconsin Innkeepers Association is a non-profit trade association consisting of approximately 1,000 hotels, motels, resorts, inns and bed &breakfasts around Wisconsin. The data show southern Wisconsin had a drop of only 9.9%.
The Lake Geneva area has a very high concentration of hotel condominiums. The Wall Street Journal reported that “the condo hotel may go down as the Pets.com of the real-estate bubble.”
Room revenue is unlikely to bounce back quickly. Bill Gross, co-founder and co-CIO of PIMCO, in his September monthly newsletter writes about the “New Normal”:
“It’s time to recognize that things have changed and that they will continue to change for the next – yes, the next 10 years and maybe even the next 20 years. We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.”
Despite the slide in room tax revenue to the City of Lake Geneva, local taxpayers have increased the amount of tax money going to the Lake Geneva Convention and Visitors Bureau (LGCVB). In 2007 taxpayers paid them (with no strings attached) $80K; in 2008 they were paid $90K, and in 2009 they got $95K of taxpayer money. The LGCVB is budgeted to get $95K in 2010. Contrast this with the amount of money going to support the YMCA athletic program, which will receive a slight increase; $45.4K in 2007 vs. $45.8K in 2010.
- Lake Geneva Wisconsin’s new normal
***Special Note from the editor: The photo for this article was selected to portray the slowdown in construction in Lake Geneva, Wisconsin. It was not selected to portray city staff in a bad light . Considering some of the border line psychopaths that are elected to office in LG they do a remarkable job.*****
What is important for the reader to know is that room tax is paid by out of town guests at lodging properties, not by local residents, which is why state room tax law requires at least 70% of collected room tax to be spent on “tourism promotion and development” as defined in the law, and only up to 30% can be kept by the municipality.
Going by the state law, with the projected $280K in room tax, this would mean at least $196K would be spent on tourism promotion and development – more than double the $95K the city is allocating!
This is not a “gift” from the city, as the residents are not paying this tax. For the businesses in Lake Geneva that rely on travelers to spend money with them to keep them in the black financially, it should be a “no brainer” to invest in tourism promotion with the room tax money. It is only a shame that because Lake Geneva was grandfathered in when the law was passed, the city is not investing in attracting tourism dollars at the levels many other communities are.
Property tax and other fee-based income streams are intended to support services for city residents. Room tax revenue collected from travelers is designed to cover expenses in promoting tourism to an area, so that residents did not have to pay additionally for this. Residents already benefit by the tourism revenue generated to their community when an adequate amount is provided for tourism promotion.
It may be worthwhile for Lake Geneva to take a fresh look at how the room tax on travelers (again – not on residents) could be invested more in tourism promotion at a time when “Return on Investment” for area businesses is so critical.
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