By Jonathan Spiers
(RBIZ) – Reflecting a rebound in regional tourism and lodging since COVID’s arrival in early 2020, the latest tax revenue numbers for hotels and motels in metro Richmond have surpassed pre-pandemic levels.
According to data from the Greater Richmond Convention Center Authority, revenues from lodging occupancy taxes in Richmond and in Chesterfield, Hanover and Henrico counties totaled $30.8 million in the 2022 fiscal year that ended June 30.
The total exceeds a previous record set in FY19, when occupancy tax revenues among the four localities reached $30 million. It’s also a 70 percent jump from FY21, when annual revenues reached a pandemic-era low of $18.1 million.
The numbers were presented to the GRCC authority’s finance committee and announced in a release from Richmond Region Tourism. The nonprofit attributed the numbers to increased bookings at the convention center and continued efforts to support and promote sports tourism in the region.
“It’s really thanks to all the tourism efforts, and we’re starting to see some business travel again, which is helpful,” said Brandon Hinton, a deputy county manager for Henrico who chairs the authority’s finance committee.
“Sports tourism’s been tremendous and been kept up with, and frankly we’re seeing the fruits of it,” Hinton said last week. “The convention center, we had a really great finish to the fiscal year as far as events go there.”
According to the release, GRCC’s event bookings jumped 227 percent from FY21 to FY22, and attendance increased 163 percent. The rise in attendance was attributed to such events as the International Conference on Missions, the USA Field Hockey 2022 National Indoor Conference and GalaxyCon. Attendance is expected to rise another 30 percent this fiscal year, the release said.
The revenue numbers are welcome news for the authority as it continues to pay debt service on bonds used to fund GRCC, which was built in 1986 and expanded to 700,000 square feet in 2003. Ten years remain on those annual payments, which are scheduled to end in 2032.
The authority was formed by the four localities and is structured so that Richmond, where the center is located, pays 50 percent of all debt service costs, Henrico 35 percent, Chesterfield 13 percent, and Hanover 2 percent.
Despite the loss of events and other pandemic impacts that followed COVID’s arrival in March 2020, the region’s occupancy tax collections during that time were enough to pay all of the authority’s debt and operating obligations, Hinton said.
“Of course, with significantly declined activity at the convention center, operating costs were also down. So, we have to give credit to the two operators for navigating difficult times as well,” Hinton said. GRCC has been managed since 2001 by Philadelphia-based Spectra, which was acquired last year by Los Angeles-based Oak View Group.
The authority’s debt service payment, in principal and interest, totaled $8.2 million last fiscal year. The payment goes up to $9.5 million this fiscal year and is scheduled to hover around the $9.6 million mark through 2032.
While Richmond pays the largest share of debt service costs among the four localities, a breakdown of occupancy tax revenues by locality shows that Henrico led the pack in tax remittance last fiscal year with $14.9 million, above its FY19 total of $14.1 million.
Richmond was next with $7.9 million, below its FY19 total of $9 million, making the city the only locality to not exceed its pre-pandemic number. Despite that, the city saw the biggest year-over-year growth, exceeding 100 percent growth over FY19, Hinton said.
“They’re coming back, but they haven’t quite caught up to pre-COVID levels. I think business travel is a big reason why,” he said.
Chesterfield brought in $6.6 million, up from $5.7 million in FY19. And Hanover brought in $1.4 million, edging its FY19 total of $1.2 million.
The higher numbers show a recovery in regional tourism and lodging as well as a strengthening in the authority’s ability to pay off the bond debt. Earlier this year, bond rating agencies Fitch and Standard & Poor’s both affirmed the authority’s “AA-” rating on its 2015 hotel tax revenue refunding bonds series, and revised the authority’s rating outlook from negative to stable.
“It means our coverage for our debt ratios are through the roof,” he said. “Because our hotel-motel tax revenues are coming in the way they are, we don’t see them stopping. It’s only going to go up from here, unless we have some sort of substantial change in COVID.”
In its ratings report published in March, S&P said of its findings for the authority: “The outlook revision reflects our view of a strong ongoing recovery in pledged hotel tax revenue as recreational activity has largely returned within the region. We expect revenue will support its strong or better debt service coverage in the near term, even if there is retraction as new COVID-19 variants spread.”
Renovations to the convention center completed during the pandemic were credited with helping with the increased bookings. Over $2 billion was spent on sprucing-up and maintenance work such as new LED lighting, parking deck repairs, repainting and added digital signage.
The renovations were funded through the authority’s capital improvement program, which in turn is funded using a portion of the lodging taxes, GRCC General Manager Michael Meyers said.
“The Authority is very mindful of what it takes to make sure the facility is well maintained so it continues to be a venue event organizers want to come back to again and again,” Meyers said in an email. “We were able to draw on that funding to complete these projects even though we had a slowdown with lodging taxes during the pandemic.”
Hinton noted new hotels in the pipeline that would add to the region’s lodging capacity. More than 10 hotels are currently planned or under construction in the area, according to Richmond Region Tourism, representing more than 1,200 additional rooms in development.
Also on the horizon is a long-sought convention center hotel that’s included in Richmond’s adopted City Center plan. Officials have said the new hotel is needed to supplement capacity around GRCC, which is currently served by the 400-room Richmond Marriott and 249-room Hilton Richmond Downtown.
Further contributing to the numbers are sports tourism efforts that include Chesterfield’s investments in and around its River City Sportsplex, and ballfield enhancements and other improvements at Henrico’s Dorey and Glover parks. Hinton also pointed to Henrico’s forthcoming indoor sports facility, scheduled to open at Virginia Center Commons in fall 2023.
“We’re all investing heavily in sports infrastructure,” Hinton said. “Not just to solidify where we are today, but to take us to the next level in the future.”