A&P Taxes Indicate Rebound Strong, Not Complete

The Chancellor Hotel in Fayetteville, the Arlington Hotel & Spa in Hot Springs and the Marriott in Little Rock

The tourism and hospitality industries rebounded strongly in 2021, but local tax collections indicate that a few cities haven’t seen visitors return to pre-pandemic levels.

Cities like Little Rock and Bentonville that depend on conventions and corporate travel are still in recovery mode, while tourist meccas like Eureka Springs and Hot Springs blew past 2019 by double digits.

“We’ve never had so many inquiries,” Steve Arrison, CEO of Visit Hot Springs, said last week. Requests for tourism materials have been “the most we’ve ever had going into the spring and summer.”

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A final 2021 total for the state’s tourism tax — a 2% levy on lodging, campgrounds, boat rentals and the like — was not available by press time last week. It is expected to exceed $20 million for the first time, since the first 11 months of the year brought in almost $19.2 million. That’s 47% more than the same period in 2020 and 9% above the high-water mark for the full calendar year of 2019.

According to Stacy Hurst, secretary of the Arkansas Department of Parks, Heritage & Tourism, 70 of the state’s 75 counties logged increased tourism tax receipts from January to November 2021 when compared with 2020.

Of 14 cities with dedicated Advertising & Promotion Commission taxes on hotels and/or restaurants surveyed by Arkansas Business, 10 reported total A&P tax receipts above 2019 levels. Rogers and El Dorado apply their A&P taxes only to lodging, and receipts in those two cities remained below pre-pandemic levels by double digits.

Even strong restaurant receipts didn’t completely make up for hotel taxes lost to the COVID-19 pandemic in Little Rock and Bentonville.

“A lot of lodging properties that we have have surpassed 2019 revenues. What has not come back is the business and corporate travel,” Yogesh Asudani, director of finance for hotel owner and manager Conway Management Inc. and a member of the Little Rock Advertising & Promotion Commission, told Arkansas Business last week.

Overall, he said, revenue per room for Little Rock hotels was still down 7.5% in 2021 compared with the baseline of 2019. For downtown hotels, revenue per room last year was 29.2% below the 2019 level.

Asudani said he personally and the A&P Commission are optimistic that the slump will end in 2022. Conventions that were canceled due to COVID are being rebooked, he said, and corporate travel is picking back up.

The Rebound

Selected cities ranked by the change in A&P tax receipts for 2021 compared with pre-pandemic 2019

Sources: Various city advertising and promotions commissions or convention and visitors bureaus   

Arrison predicted 2022 would be even stronger in Hot Springs, with its combination of outdoor recreation and year-round gambling at Oaklawn Racing Casino Resort, and in Arkansas as a whole — provided no new crises occur that prevent people from doing the traveling they want to do.

“Arkansas has the perfect product for today’s travelers,” Arrison said. “We’re not these crowded urban areas. … People want to get away from that in the current environment. We check all the boxes, Arkansas does, and I think that bodes well for us.”

Hot Springs A&P tax receipts in December were up 35% year-over-year, Arrison said. Such pent-up demand has exacerbated the continuing labor shortage in the hospitality industry, Arrison said. “That is a great challenge.”

Some restaurants in Hot Springs have shortened their hours and have changed their menus to streamline short-staffed kitchens — and because supplies of some ingredients have been unpredictable.

“You can only imagine what they would be doing with a full staff and no supply-chain problems,” he said.