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Lodger’s tax receipts up 8.96 percent

Despite record high unemployment and a local economy showing few signs of substantive recovery, the Town Tourism Committee reported Monday that lodger’s tax receipts (an indicator of the number of visitors to the area) had a record year, up 8.96 percent from 2009 receipts.

The news of the 2010 receipts was announced, along with a report showing that December’s lodger’s tax receipts were up 13.25 percent from the same month last year.

In that same announcement, the TTC stated that 2010 receipts showed an 18.98 percent increase over 2008 receipts.

The TTC’s report stands in stark contrast with sales tax receipts that, while not declining at the rate shown in the previous year, are still down from 2009 receipts.

As of November 2009, sales tax collections had decreased by an average of 8.34 percent per month (across 11 months) and year-to-date collections were down 7.03 percent. In comparison, month-to-month average declines in 2010 (as of November) were just 2.43 percent, with year-to-date collections down 2.56 percent.

Lodger’s tax receipts, on the other hand, have shown a steady increase over the past two years, suggesting a corollary increase in the number of visitors staying in the area.

December’s increase represents an additional $4,700.35 in lodger’s tax revenues. In total, 2010’s increase represents an additional $31,572.37 in revenue over 2009 receipts and $61,238.09 over 2008 receipts.

This is good news for the TTC, which is funded entirely by lodger’s tax receipts. Surplus funds help to further fund TTC activities, namely, promoting Pagosa Country as a tourist destination. In theory, additional promotion would further increase tourism.

Several questions could be raised regarding the almost perfect winning streak achieved by the TTC over the past two years, however.

First and foremost would be to ask how much of the increases logged over the past two years are due to the opening of the luxury hotel at The Springs Resort? With rooms running over $500 a night at the newest hotel, receipts from stays at that hotel would certainly inflate lodger’s tax receipts (the hotel opened early summer 2009).

Flat or slightly decreased lodger’s tax receipts in 2011 would suggest that the luxury hotel at The Springs Resort was a likely factor in increased receipts. The converse would not be true, however: a continued increase in lodger’s tax receipts would not necessarily negate the effect of The Springs Resort’s hotel on lodger’s tax revenue collections.

In short, the question is: are there really more visitors coming to the area or is more money being collected due to pricey rooms at a luxury hotel?

Unfortunately, Colorado statute prohibits the release of tax data from individual businesses.

The next question to be asked is if anything like critical mass would be achieved in regards to lodger’s tax receipts. Short of a surge in inflation (which has hovered between .1 and .3 percent nationally over the past two years), would the local lodging industry reach a point where significant increases were no longer possible? Obviously, there is a finite potential for lodger’s tax revenues; at which point is critical mass reached where sustained increases are no longer possible?

Finally, with increased revenues funding further promotion of the area, are those promotional efforts subject to the law of diminishing returns? That is, is there a point where increased investment in tourism promotion results in decreased numbers of visitors to the area (provided The Springs Resort has not skewed lodger’s tax numbers)?

The TTC, for its part, seems to have created a hedge against the law of diminishing returns by investing surplus capital in other, tourist-related projects. Most notable is the TTC’s ongoing Wayfinding and Signage capital improvement project. The first example of that project is highly visible, with a large sign having been installed at the southwest corner of U.S. 160 and Hot Springs Boulevard.

The TTC has stated that more signs will be installed over the next few years, with two more signs to be installed this summer.

Less visible, but highly controversial, was the purchase last month of a ski lift, ostensibly to be installed on the northwest face of Reservoir Hill. The TTC is currently developing a business plan to see if installation of the ski lift — with estimated costs of around $300,000 — would be an economically feasible project.

The ski lift scheme is part of a larger plan devised by the TTC to increase use of the hill. Late last year, the TTC (in conjunction with the Town of Pagosa Springs Parks and Recreation Department) made improvements to sledding and snowboarding runs on the hill (including the addition of a large berm for stopping descents) and expanded parking at the area.

With lodger’s tax receipts showing sustained growth over the last two years, 2011 will be an interesting year. With three new events planned for this year — The Great Golden Retriever Roundup slated for June, the Nashville Songwriter’s Symposium set for July, and the Colorado Entrepreneurship MarketPlace event set for October — the area could see a significant influx of new visitors in the year to come. Whether or not those events contribute to another year of growth in lodger’s tax receipts, however, won’t be known for months to come.

Whether or not the area can continue to grow its tourism industry will be one of the more important questions of 2011.