Tourists Flocking to the U.S. West Give Hotel Bed Tax Revenues a Big Boost

Two years after the pandemic, a handful of U.S. tourism boards are reporting soaring lodging tax collections for fiscal year 2021. 

On this comeback list are destinations in the West that are gateways to national and state parks, such as Montana and southwest Utah, where demand spikes began as early as summer 2020. But drive markets that didn’t shut down during Covid also benefited, like Arkansas, along with pockets of rural destinations across the U.S. 

The double-digit growth in bed taxes currently ranges from 20 percent at the overall state level to 73 percent over 2019 levels for rural destinations that have shared data thus far, including Greater Zion, thus establishing new records. Lodging tax collections have also continued to soar into this first quarter of the year. 

It’s a remarkable turnaround from March 2020, when destination management organizations (DMO) saw their primary source of revenue, the bed tax, vanish along with tourists. And it all points to three consumer trends that show little sign of slowing: leisure travel, outdoor recreation, and rural road trips.

U.S. Lodging Tax Collections ($ Millions)

	FY 2019	FY 2021
Montana	$35	$39.48
Utah	$68	$66.40
Greater Zion	$9.00	$15.00
South Dakota	$28.90	$33.30
Arkansas	$17.80	$20.90
Muskegon, MI	$1.19	$1.25
Nebraska	$6.04	$5.92

“Between Memorial Day and Labor Day, we have some really big jumps in 2021; we were in the summer 23 percent higher than we would have expected,” said Jeremy Sage, economist and interim director of the institute for tourism and recreation research at the University of Montana. 

The volume of visitors coming into the state as well as hotel average daily rates that were up substantially, contributed to this surge, Sage added. With the Canadian border now open, the drive visitation level is likely to go up.

In Wyoming, Jackson Hole’s lodging tax hit well above historical records for every month since October 2020, according to the Jackson Hole Travel and Tourism Board’s annual report. 

The uptick in visitors is so large it’s spreading the lodging to surrounding towns as a result of the town’s proximity to Grand Teton National Park and Yellowstone.

“I think to date, we’ve surpassed by 30 percent the previous high watermark. I certainly think that that is a result of the pandemic, accelerating the collections and also Jackson has an unusually high average daily rate for rooms, $526 a night,” said Kathryn Brackenridge, executive director of Jackson Hole Travel & Tourism Board.

In some cases, such as Utah, the bed tax explosion isn’t even across the state; urban destinations continue to recover slowly as business travel, meetings and events make their way back.

In Arkansas, the state’s two-percent tourism tax, made up mostly by lodging collections, passed the $20 million mark for the first time in 2021. A big part of it is attributed to the state not shutting down during the pandemic, and the fact that it’s a drive market.  

“This was a great time to be known as the natural state,” said Travis Napper, director of tourism for Arkansas. “People were gravitating to those rural areas and we have those in abundance.” 

The rising cost of gas could dampen some of the demand for the spring and summer seasons, however, for outdoorsy and drive destinations. Nearly 60 percent of Americans say they would change their driving habits if gas prices surpass $4, including take fewer road trips, according to AAA survey results released on Thursday.

But the focus for these bed-tax rich DMOs now points to figuring out how to manage the surplus funds, particularly as the negative impacts from overcrowding continue.

More Crowds, More Money, More Problems

It’s a double edged sword when lodging taxes skyrocket but the transient crowd level is such that it is straining and damaging a destination’s resources.

The rapid ruralization of travel is indeed setting the stage for a new kind of overtourism, and DMOs that have succeeded in surpassing 2019 levels in lodging taxes and in visitor numbers, have been attempting to address the issue and find solutions.

“We’re feeling the pressure of increased tourists,” said Gini Pingenot, director of external affairs at Colorado Counties Inc., an organization that works with county commissioners at the government level and advocates for tourism.  

That crowd pressure is impacting, in part, the workforce who can’t afford to live in the communities in which they work whether in restaurants or hospitality, and who are struggling with access to housing and childcare, Pingenot said. 

“But we’re also struggling from just having the infrastructure but tourists expect, such as restrooms at trailheads, parking at trail heads, just the wear and tear on trails themselves — lots of stories of fecal matter quite frankly on trails themselves, you know?”

Colorado’s issues are familiar to Jackson Hole, Wyoming as well where crowds are rising along with record lodging tax revenues and high average daily rates.

“It’s been a steady uptick, at least for the last several years, but it’s almost poured gasoline on it with the pandemic,” said Breckenridge, adding that the impact is visible on the area’s limited roads and infrastructure, given that 97 percent of the surrounding area is protected through the Teton Range and the greater Yellowstone ecosystem. 

The damage is also great on public lands, Breckenridge said, as people continue to camp in dispersed areas where there are less restrictions, leading to the degradation of the environment with human waste and wildfires becoming a big problem. 

The record demand is also affecting the quality of life in Jackson Hole,  “We’re seeing that at restaurants in town — you know, as a local you can’t go out to dinner here in the summertime, at all.” That’s further leading to the burnout of an already limited workforce due to lack of housing.

“There are real limitations to growth,” said Breckenridge, adding that the rise in Jackson Hole visitor numbers has led to lodging growth in surrounding gateway cities, including Idaho Falls, Rock Springs, and West Yellowstone.

In contrast, locals’ sentiment on tourism is dropping. Only 38 percent of Montana residents now agree that “if tourism increases in Montana, the overall quality of life for Montana residents will improve,” according to the latest resident sentiment survey published this month. It’s the biggest drop yet recorded since the survey launched in 1992. It’s also the first time that a majority of residents agree the overcrowding is caused by tourists.  

Jackson Hole’s tourism board launched its first-ever resident sentiment survey just under a couple of weeks ago. The board has contracted the George Washington University’s international institute of tourism studies to help it design a sustainable destination management plan for Teton County and address the overcrowding issues. The survey is part of that effort.

“It’s been well received and it’s exceeded expectations in terms of the response,” said Breckenridge. Over 1,600 responses were received in a week, a strong outcome for a small community of just over 23,000.  Jackson Hole’s tourism board hopes it can get to 5,000 responses by the time the survey wraps up in six weeks.

Colorado is also no stranger to the pressures of increased visitors passing through the state.   

“We have a ton of short term rentals and we struggle with a very transient population, and we have issues with infrastructure such as water and sewer,” Colorado Counties’ Pingenot said. “How do you educate a transient tourism flow of people on a matter like that, when you have people coming for three days? So we gotta make sure that we have solid footing on what we need, to be responsive and supportive of our tourism economy.” 

New Legislation to Allow Spending Flexibility 

Some state tourism offices’ use their lodging tax revenues is restricted by law to marketing purposes, but there is growing recognition that the circumstances now call for change. 

In Washington County, home to Zion National Park, a bill has passed the House this month to amend the room tax to increase the flexibility in spending those newly collected surplus lodging tax funds over more time, plus allocating 10 percent towards destination development.

Colorado advocates are also using legislation as a tool so bed taxes can tackle issues that have emerged from the pressure of crowds.

“Tourism is kind of the lifeblood of a lot of these communities, and the number one economic driver, but it doesn’t come without stresses on infrastructure,” said Colorado Counties’ Pingenot, adding that it’s why Colorado is currently running a bill that would expand the allowable uses of the county lodging tax.

“Part of what we’re trying to do with this bill that’s going through is to allow these lodging taxes to be used to help mitigate and address some of those pressure points,” said Pingenot. 

Jackson Hole’s county tax funds for the past 11 years could only be put towards promoting over shoulder seasons, but that’s changed as well. 

“Recently the Wyoming state statutes expanded their definitions of how lodging tax collections can be spent to include education and visitor services,” said Breckenridge, adding that it’s part of its effort to move toward a conscientious approach to tourism.

Jackson Hole’s tourism board is in the midst of a sustainable destination management planning process — once the George Washington University tourism institute’s recommendations are approved, it will move forward with approvals and determining how the surplus lodging tax funds will apply. This could include the establishment of a destination marketing management organization for Jackson Hole, for instance, Breckenridge said, which doesn’t currently exist.

For now the tourism board, which in great part consists of volunteer elected board members that work to allocate lodging taxes, plans to continue funding educational campaigns on how to responsibly recreate, Breckenridge said.

“Certainly a tourism management approach is not a silver bullet for all the other issues that we encounter here in this community, whether it’s environmental, housing, community wellness and mental health and compensation and cost of living, but it’s important to manage it properly and not erode the guest experience,” said Breckenridge.

 Is This Bed Tax Surge Sustainable?

The surge in lodging taxes for outdoor rural destinations begs the question of whether these recovery years are an anomaly.

“There’s a bit more uncertainty to that, given where we are with inflation, given where we are with this current war and what that might do for gas prices,” said Montana University’s Sage. “Inflation has been pretty low and stable for decades now, so this kind of throws a bit of a wrench in there as far as what we might see.”

Tourism officials who spoke to Skift for this story agreed there is still quite a demand for outdoor spaces.

“You think at some point maybe it would level off, but I would like to think that our leisure has led in this recovery so much, and we know, without Covid being a major interruption hopefully, business and corporate should continue to build back up,” said Arkansas Tourism’s Napper.

Walmart has reopened its corporate offices and more companies appear to be moving to Arkansas as well, which points to more traffic, Napper said, adding that the state doesn’t have an overcrowding problem. 

“We’re introducing some more urban appeal; nowhere in the state is the outdoor and the urban far from each other so it’s a good it’s a good mesh anyway. But we’re definitely not getting away from our outdoors.”