A look at Revenue Per Available Room creates optimism for tourism in 2015
A message from Executive Director, Jim Epperson
As we wrapped up 2014, we began to set goals for the visitor industry in Southern Indiana.
One barometer we use is hotel performance. Of course, hotel tax revenue is a way to measure the sector’s health. Due to a lag in the time it takes to process payments at the state or county level, the data varies.
Innkeepers’ tax receipts are 8 percent above projected, which means we budgeted conservatively. We purchase hotel performance data from Smith Travel Research; it gives a more accurate picture of performance. Year-to-date through November, our hotels saw a 6.4 percent increase in Revenue Per Available Room (RevPAR). We expect slightly slower growth in 2015 – about 5 percent – despite the loss of one city-wide event, the PGA Tour championship at Valhalla. Still, we budget conservatively and are planning on only a 3 percent increase in tax receipts over 2014.
Why do we use RevPAR? It is a consistent measure of hotel performance. The number of hotel rooms can fluctuate due to new construction or even renovation (rooms may not be available), which can cause fluctuations in the occupancy rate. RevPAR is calculated by multiplying the number of room-nights available by the rate paid for each room sold. Thus, “blips” are smoothed out of the data. For hotel owners and investors, it is a top-line measurement of a return on their capital; for the Bureau, it is a good year-to-year comparison of hotel health.
Attractions and festivals also give us hope for 2015. Though the Falls of the Ohio Interpretive Center will be closed for most of 2015 due to an exciting renovation, we will have a full year with other new attractions (the Big Four Bridge, the Vintage Fire Museum, and Huber Orchard & Winery’s new Starlight Distillery). In addition, we are seeing continuing private-sector investment in our downtowns. We believe a second season for Kentucky Kingdom will be an even bigger draw for families who choose hotels in Southern Indiana due to our lower rates and great amenities.
We are excited about 2015 and look forward to connecting more with you. Together we’ll help build Southern Indiana’s tourism economy.