Avon Sees Strong Increase in Lodging Tax Sales and Revenue in Early 2022

Avon, like much of Eagle County, has seen an increase in bookings at its local hotels (including the pictured Westin Riverfront Resort and Spa), timeshares and vacation rentals.
Vail Daily Archive

At the beginning of 2022, the municipality of Avon experienced an increase in all of its tax revenues, with the exception of its taxes on cigarettes and tobacco. Not only did the city see a big increase in sales and lodging taxes, but it also collected its first month of short-term rent tax revenue for its community housing fund.

“We’ve seen a perfect storm: increased visitation, increased remote workers, and an increase in the average daily rate for accommodations,” said Chris Romer, president and CEO of the Vail Valley Partnership. “People are paying more for accommodation and there is more of it, which then trickles down to the retail, restaurant and grocery sectors.”

Moreover, it is not only the visits that are increasing. Romer said there are more second home owners spending time or moving to Eagle County, bringing additional volume for local professional services.

Sales tax

Avon collected $1,171,214 in sales tax revenue in January 2022, or 27.22% more than its January 2021 revenue.
Courtesy picture

According to a financial report in the latest City Council packageAvon collected $1,171,214 in sales tax revenue in January, or 27.22% more than its January 2021 revenue.

Almost all of Avon’s industries reported increases, including home and garden, grocery, sporting goods, restaurants and bars, and e-commerce. Only its industries related to services, liquor stores, manufacturing/wholesale, digital media, commercial/industrial equipment and construction services saw declines year over year.

In the report, prepared by Joel McCracken, the city’s chief financial officer, he said retail sales tax on e-commerce has seen a dramatic increase due to the new sales and use tax system. Colorado Department of Revenue, which the city implemented in late 2020. Since its implementation, McCracken reported that more than 100 businesses have registered with the system to remit sales taxes. According to the report, sales tax revenue for the e-commerce sector increased by 9.45% year over year.

Romer said Eagle County is currently experiencing “record or near-record levels of activity in the retail, restaurant and hospitality industries.”

“This is due to increased visits and rate on the accommodation side and I think mainly due to the volume on the restaurant/retail side,” he added.

Lodging tax

In January 2022, Avon recorded an overall 125.03% year-over-year increase in revenue from its 4% lodging tax.
Courtesy picture

While the lodging sectors have seen increased demand, the report says Avon saw an overall increase of 125.03% in revenue from its 4% lodging tax, comparing January 2021 and January 2022. This tax applies to all timeshares, hotels and vacation rentals. In January 2022, the city raised $322,277, with revenue from each accommodation type showing a year-over-year increase.

Vacation rentals accounted for the largest portion of tax revenue, a reversal from 2021 when vacation rentals brought in the least revenue. These revenues increased by more than 400% in January 2022 compared to 2021, generating approximately $131,797 in additional revenue. According to McCracken’s report, this increase was due to 50 new short-term rental licenses that were issued in 2021.

According to Romer, this winter Eagle County had its highest housing occupancy rates since before the Great Recession and the highest average daily rate ever.

“We bottomed out in 2009-2010 and had consistent, sustainable growth through 2020 when the COVID crash hit,” he added. “COVID has caused a bit of a trampoline effect: we fell off the cliff, but we bounced higher and faster than ever and summer booking trends show continued momentum.”

This momentum and steady increase is something all mountain resort communities are seeing now, according to Tom Foley, senior vice president of business intelligence at lodging research firm Inntopia.

“The biggest thing we’ve really seen is this combination of continued pent-up demand and acceptance of COVID-19,” Foley said.

The “significant gains” in lodging tax revenue, he said, are to be expected “just based on the volume and what happened in the last year. But the gains are also consistent compared to a few years ago, which tells us that this is not just a short-term recovery trend, but actually a longer-term trend towards strong consumer behavior on the market.

While pent-up demand and acceptance around COVID-19 are contributing factors, Foley offered a few other avenues for this surge in bookings in mountain resort communities and travel in general.

He said ski season passes becoming “much more affordable this year” is translating to a “bump in business”. Foley specifically referenced Vail Resorts, which has reduced the price of its Epic Passes by 20% this season. The result was a 76% increase in package sales compared to the previous ski season.

This, coupled with pent-up demand and the fact that consumers have saved a lot of money right now post-COVID-19, has contributed “in a big way to the whole travel industry in general, not just to travel to mountain destination,” Foley said.

As Romer mentioned, the room rates themselves are also at an all-time high. According to Foley, this is happening all over the country. Room rates, he said, have increased about 35% year-over-year, year-over-two and year-over-three, over the past 9 months about.

But that trend, Foley said, is “really hard to sustain.”

“I would expect it to calm down; Economics 101 says it should cool down a bit because its capacity for growth just isn’t infinite,” Foley said. “But, the flip side is that mountain travelers have been quite upsetting when trying to guess what they’re going to do based on standard economics.”

These mountain travelers, he added, are “very dedicated, the product is extremely good and they have saved a lot of money which they are willing to spend”.

Short term rental tax

In November, voters approved a new short-term rental tax in Avon. The 2% tax applies to any rental property rented less than 30 days. Only non-commercial residential properties – of which only the Comfort Inn property in Avon does not apply – are taxed.

January 2022 was the first month this short-term rental tax was enforced in the city and it generated $148,282 in revenue. Timeshare accounted for nearly 23,000 of that revenue, hotels just over $47,000 and vacation rentals just over $78,000.

Revenue from this tax will go to the city’s community housing fund, which, according to the wording of the approved tax, will help fund future community housing plans, projects and purchases.

The proposed budget for 2022, which was approved in December by the Avon City Council, proposed that this new tax generate an annual budget of $750,000. The amount generated in January represents 19.77% of this annual budgeted amount.

City Council will review and make changes to its 2022 budget at its second meeting in April.

Look forward

Current visitor and business trends are expected to continue into the upcoming summer season.
Chris Dillmann/Vail Daily Archive

“Our economic rebound is somewhat unique in that it is independent of industry; it’s not a tourism recovery or a financial recovery or a construction recovery,” Romer said.

However, while these industries appear to be doing well based on the metrics, many are still grappling with supply chain issues as well as the lingering impacts of COVID-19 on areas such as labor availability. -work and burnout.

“We’re seeing record or near-record and historically high numbers on most traditional metrics, but employee and business owner burnout and stress are also at record highs,” Romer said. “The lingering impacts of these two things are not lasting.”

Going forward, Romer said companies “cannot realistically continue to increase volume with a reduced workforce.”

Romer said that in a recent Vail Valley Partnership business sentiment survey, 78% of respondents said they were “optimistic about the health of their business and the economy of Eagle County.” However, 82% say they are “pessimistic about their ability to attract and retain the workforce”.

“Our businesses are resilient and the lingering impact is going to be reset – exploring how we take care of our people so we can take care of our customers,” he said, adding that this includes “things like reduced hours, closing one day a week, etc.

Looking ahead to the summer season, activity should remain sustained. Romer said preliminary data shows we will see “similar – if not as strong – growth in attendance.”

Foyer said the increased deployment of vaccines in the United States, as well as the large-scale return of activities and important group events, indicate that the summer season will be strong.

“I don’t know, though, if it’s going to continue to grow at the rate it had last time, just because it was so strong before the pandemic,” he said. “Summer has gotten so strong for so long and has the highest occupancy rates of any season in the mountains for a few years, at least from an individual day’s perspective.”

There is some uncertainty around some macroeconomic variables, however, Romer said, listing inflation, gas prices and geopolitics, including the war in Ukraine.

“We’ve been remarkably resilient to this sort of thing historically,” he added.

Foyer also spoke about this type of uncertainty, saying that it can sometimes take away business, but it can also increase stress, which can lead consumers to look to vacations and leisure as a way to relieve this stress.

“The question is how do they end up playing against each other in a dynamic way: a downward force of economics and an upward force of desire to get out and get away and escape what happening in the world?” said Hearth. “It’s really hard to say for sure what’s going on and people have to remember to be nimble and keep an eye on the market.”


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