HVS 2021 Accommodation Tax Report – United States
As the impacts of the COVID-19 pandemic on the accommodation industry continue, this tenth annual study on the HVS accommodation tax quantifies the impact of the pandemic on revenues over the past year . An analysis of 25 major US markets shows losses totaling approximately $ 1.3 billion in 2020 from historic 2019 levels. HVS projects a loss of $ 1.45 billion in room revenue in 2021 from a baseline scenario without pandemic.
Extract from HVS
As the impacts of the COVID-19 pandemic on the accommodation industry continue, this tenth annual study on the HVS accommodation tax quantifies the impact of the pandemic on revenues over the past year . An analysis of 25 major US markets shows losses totaling approximately $ 1.3 billion in 2020 from historic 2019 levels. HVS projects a loss of $ 1.45 billion in room revenue in 2021 from a baseline scenario without pandemic. HVS also provides historical data on tax rates as well as the collection and distribution of revenue from lodging taxes levied in the 50 states and 150 largest US cities.
Accommodation taxes are an essential source of support for the convention and tourism industries. Accommodation tax revenues fund debt service for the construction of convention centers, arenas and other public meeting facilities. This revenue stream provides a large portion of the funding for Destination Marketing Organizations (“DMOs”) and covers operating deficits at convention center sites. As of March 2020, the US hospitality industry has faced unprecedented challenges and losses resulting from the COVID-19 pandemic. The lack of business, leisure and business travel across the country during the early days of the pandemic drastically reduced accommodation tax revenues.
Despite the rapid deployment of a readily available vaccine, reluctance to vaccinate and more virulent strains of the SARS-CoV-2 coronavirus have created more uncertainty about the pace of the hospitality industry’s economic recovery. This report provides insight into how the COVID-19 pandemic reduced accommodation tax revenue by analyzing available historical data on accommodation tax collections. Using a year of historical data, the HVS quantified the impact of the virus and projected the extent of the pandemic’s ongoing economic fallout, which can last for years. Future editions of the HVS Accommodation Tax Study will follow developments.
Impact of COVID-19 on the hosting industry
The hospitality and tourism industries have proven to be the industries most vulnerable to the COVID-19 pandemic, with percentages of revenue losses far exceeding that of the overall economy. In January 2021, the US Travel Association and Tourism Economics reported approximately $ 500 billion in losses and $ 64 billion in federal, state and local tax losses by the end of 2020.
The hospitality industry has relied on direct relief offered throughout the COVID-19 pandemic, including the March 2020 CARES $ 2 trillion economic aid program, the $ 900 aid program million dollars of December 2020 and the $ 1.9 trillion US bailout of March 2021. The $ 3.5 trillion budget resolution currently underway in the congressional approval process promises further economic stimulus. Full recovery from the initial shock of the COVID-19 pandemic is not expected until 2024, according to the American Hotel & Lodging Association, with state and local tax revenues generated by hotels recovering sooner, albeit in 2023.
Accommodation tax loss forecast
HVS combined data on lodging tax collections with projections of the performance of hotel markets in 25 major US cities. Prior to the onset of the crisis, in fiscal 2019, 25 major US markets generated approximately $ 3.7 billion in tax revenue from accommodation, as shown in the figure below. In total, these markets experienced a decrease in their turnover of -34.66% from 2019 to 2020.
Hosting Tax Revenue in 25 U.S. Markets
The performance of the 25 markets in past economic shocks provides an indication of how the recovery from the COVID-19 pandemic could play out. Urban markets that relied heavily on meetings and groups and individual business travel to generate demand for overnight stays have been more severely depressed by the pandemic than markets that depend on demand for leisure. Long-haul air access and international markets have also been more affected than transport markets.
Given the uncertainty surrounding the pandemic throughout 2020, economists and analysts have relied on the shape and magnitude of past economic shocks to estimate losses from COVID-19. These estimates ranged from less severe (V-shaped recessions similar to the recessions of the 1990s and early 2000s) to more severe (U-shaped recessions like the Great Recession or, at worst, an L-shaped scenario. – in the form of a recession as Japan experienced it in the 1990s). After nadir in 2020, the recovery in occupancy rate, average daily rate (“ADR”) and revenue per available room (“RevPAR”) show patterns of recovery resembling those of a V-shaped recession .
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