Hospitality Tax Collections Jump in 2022

Hospitality tax collections in Arkansas jumped in 2022, signaling a continued recovery from the COVID-19 pandemic that devastated the state’s tourist industry three years ago.

In several cities, hotel tax collections soared, indicating that visitors weren’t just eating and drinking in the state’s restaurants but that they were also spending the night in Arkansas’ hotels and motels. Of 17 cities with dedicated Advertising & Promotion Commission taxes on lodging or restaurants surveyed by Arkansas Business, 15 reported total hospitality tax receipts above 2021 levels, most by double digits.

But there’s another reason for the increase in HMR — hotel, motel, restaurant — tax collections: inflation. “The U.S. hotel industry reported average daily rate (ADR) and revenue per available room (RevPAR) that were the highest for any year on record” in 2022, according to STR, a provider of hospitality data. The occupancy rate of 62.7% nationwide, however, remained 4.9% below pre-pandemic levels, STR said. 

“Total revenues and profits surpassed 2019 levels due to strong demand, tremendous pricing power influenced by inflation and increased revenues from other departments,” Raquel Ortiz, STR’s director of financial performance, said earlier this month. 

“Labor costs grew at a compound monthly rate of 3.7% as hotels maximized their staffing hours and paid out more to contract workers,” Ortiz said.

For example, in Little Rock, where last year’s hotel tax collections rose 31.8% compared with 2021, occupancy was flat, said Gina Gemberling, president and CEO of the Little Rock Convention & Visitors Bureau. Hotel occupancy in the city averaged 55.8% in 2022, compared with 55.9% in 2021, according to the LRCVB’s annual report.

“We benchmark by hotel occupancy and by revenue,” she said. Analyzing average daily rates and revenue per available room, “both of those had significantly increased in 2022,” Gemberling said.

“But when you take the cost of doing business off the top of that, … it’s not what it might appear to be.” And that is because of increased costs. 

Despite the push tax collections received from higher costs, the increase in visitors is real. In Bentonville, Walmart Inc. resumed an annual in-person employee meeting in June after a two-year pandemic hiatus. Also in June, the retail giant resumed its annual in-person Open Call event, in which entrepreneurs pitch their products, an event that had been held virtually for two years because of COVID-19.

Bentonville’s hospitality tax collections rose 30.1% in 2022, compared with the previous year, with hotel tax collections increasing by 64.4%. From March 2022, “we had record-breaking months,” said Kalene Griffith, president and CEO of Visit Bentonville.

Bentonville and northwest Arkansas in general are known for their bicycling trails. “COVID created this outdoor initiative, where more people are wanting to do more things outdoors,” Griffith said, and her city benefited from that. 

Little Rock’s Statehouse Convention Center drew 268,740 visitors in 2022, compared with 113,777 in 2021 and almost reaching the pre-pandemic total of 273,893 in 2019. Those visitors attended an increased number of events at the Convention Center, 122 in 2022, compared with 85 in 2021.

The return of a full schedule of live performances increased attendance at the Robinson Center to 191,334 last year, compared with 80,523 in 2021. The center hosted 239 events last year, compared with 185 in 2021.

“For Robinson Center, so many live events came back,” Gemberling said. “A lot of those touring shows, they’ve been unable to produce their shows for a couple of years, so live events came back really, really strong.”

“Our Convention Center, as far as conventions, had a really good year as well this past year,” she said, because so many groups held off on meeting until 2022.

Although the full-year total for the state’s 2% tourism tax — levied on lodging, campgrounds and attractions — wasn’t available as of press time, the total through November had already set a record: $22.6 million. That’s compared with $20.5 million in 2021, $13.6 million in the pandemic year of 2020 and $17.6 million in pre-pandemic 2019. 

In Hot Springs, where total HMR taxes rose 14.1% last year, compared with 2021, “the leisure business picked up because people in Dallas, Memphis — they were looking for places like Hot Springs,” said Steve Arrison, CEO of Visit Hot Springs. “So when they started to travel, they came here first and they continued to come and with that, the return of our meetings business. We had 73 more meetings in the convention center alone, not counting hotels, … in ’22 than we did in ’21. That’s a substantial amount of meetings. That’s like 180 more event days,” he said. “And the majority of those people were staying somewhere in the city.

“The leisure business picked up as soon as COVID started to slack off,” Arrison said. “Then the meeting business returned, and the leisure business is continuing to come. And the meeting business, we’ll have another record year here in ’23.”

Arrison cited additional and improved product offerings in Hot Springs tourism, including the opening in 2021 of the $100 million expansion of Oaklawn Racing Casino Resort and the $20 million renovation of the Clarion Resort on Lake Hamilton and its rebranding as a DoubleTree by Hilton. 

“We’ve been on a roll since COVID started to go away and it’s just continuing,” he said.