Chatt Cvb 1 15 09

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Update on economic trends of Chattanooga, Tennessee\'s travel & tourism trends, hotel performance, and tourism outlook for 2009. Dr. Steve Morse, economist, University of Tennessee

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Chatt Cvb 1 15 09

  1. 1. Chattanooga & Hamilton County  Economic Tourism Trends Economic Tourism Trends The Road Ahead Stephen C. Morse, Ph.D. Director & Economist  Tourism Institute TiIi University of Tennessee Knoxville, TN
  2. 2. 3 Topics Today 1. Trends in Chattanooga Tourists  Spending S di 2. Hotel Trends in Chattanooga (Occ.  Hotel Trends in Chattanooga (Occ. Rates, ADR, RevPAR) 3. Factors Affecting 2009 Travel Demand 2
  3. 3. Topic No. 1 Topic No. 1 Hamilton Co.  economic &  tourist  tourist spending  p g trends 3
  4. 4. Top 10 Tennessee Counties for Tourist  Spending in 2007 Spending in 2007 1) Davidson Co. $3,991    million (Nashville) 2) Shelby Co. $3,064    million (Memphis) 3) Sevier Co. $1,502    million (Gatlinburg, PF) 4) Knox Co.    $796   million (Knoxville) 5) Hamilton Co. $710   million (Chattanooga) 6) Blount Co.             $276    million (Maryville, Townsend) 7) Sullivan Co. $270   million (Kingsport) 8) Williamson Co.     $251   million (Franklin, Brentwood) 9) Rutherford Co.      $237 million (Murfreesboro) 10)Washington Co.    $188   million (Johnson City) 4 Source:  TIA & TN Dept. of Tourist Development
  5. 5. Hamilton Co. Tourist Spending  Continues to Grow, 2002 ‐ Continues to Grow 2002 2007 $800.0 688 3 710.4 $ Millions $ Millions 688.3 647.3 $700.0 601.3 533.7 562.8 $600.0 $500.0 $400.0 $300.0 $200.0 $200 0 $100.0 $0.0 $0 0 2002 2003 2004 2005 2006 2007 5 Source:  TN Dept. of Tourist Development & TIA
  6. 6. Tourism Growth Percent change tourist spending 2007  Percent change tourist spending 2007 – 2006 Bledsoe Co. 4.2% Hamilton Co.  Hamilton Co. 3.2% SE TN Region 3.1% Bradley Co. 2.6% Marion Co. 2.1% McMinn Co. 1.6% 0.0% 2.0% 4.0% 6 Source:  TIA & TN Dept. of Tourist Development
  7. 7. Topic No. 2 Topic No. 2 T di Trends in  Hamilton Co.  Hotel &  Attractions  A i Demand 7
  8. 8. Hotel Tax Revenues – Hamilton Co.,  2007 & 2008 $600,000 $600 000 2008 $500,000 $500 000 $400,000 $400 000 2007 $300,000 $300 000 2008 2007 $200,000 $200 000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8 Source:  Chattanooga CVB
  9. 9. Hotel Tax Revenues, Hamilton Co.,  2004 ‐ 2008 $5,000,000 $ Millions $ Millions 4,425,756 4,486,733 3,885,941 , 3 885 941 3,975,056 , $4,000,000 $4 000 000 3,574,659 $3,000,000 $2,000,000 2004 2005 2006 2007 2008 Source:  Chattanooga CVB 9
  10. 10. Monthly Hotel Occupancy Rates for  Chattanooga City, 2006  2008 (Nov) Chattanooga City, 2006 – 2008 (Nov) 80% 2007 2007 70% 2008 60% 50% 2008 40% Source:  Smith Travel Research Source: Smith Travel Research 30% Aug Sep Oct Nov 10Dec Jan Feb Mar Apr May Jun Jul
  11. 11. Percent Change Occupancy Rate,  Chattanooga City, 2007 – 2008 (Nov) Chattanooga City, 2007  2008 (Nov) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0% ‐3.1% 3 1% ‐5% ‐4.2% ‐6.0% ‐4.7% 7 6% ‐7.6% ‐10% ‐9.4% ‐9.6% ‐9.7% ‐13.2% ‐15% ‐15.8% 15 8% ‐16.1% 16 1% Source:  Smith Travel Research ‐20% 11
  12. 12. Avg. Daily Rate (ADR), Chattanooga  City, 2007 – 2008 (Nov)  Good News! City 2007 – 2008 (Nov) Good News! $95 2008 $90 $85 $ $80 $75 2007 2007 2008 $70 Source:  Smith Travel Research $65 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 12Dec
  13. 13. Percent Change ADR,  Chattanooga City, 2007  2008 (Nov) Chattanooga City, 2007 – 2008 (Nov) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15% Source:  Smith Travel Research 11.6% 10% 9.5% 9.0% 8.9% 8.3% 7.3% 4.8% 4 8% 5% 3.8% 3.2% 3.1%2.9% 0% 13
  14. 14. Revenue Per Available Room (RevPAR),  Chattanooga City, 2007 – 2008 (Nov) Chattanooga City 2007 – 2008 (Nov) $70 2007 2008 $60 $50 2007 $40 2008 $30 Source:  Smith Travel Research $20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 14 Dec
  15. 15. Monthly Gross Sales Attractions,  Amusements, Theaters, Hamilton Co.  Amusements, Theaters, Hamilton Co. 2007 ‐ 2008 (June) $6 $ Millions $5 2007 $ $4 2007 2008 $3 2008 Source:  TN Dept. of Revenue Source: TN Dept. of Revenue $2 Oct Nov 15Dec Jan Feb Mar Apr May Jun Jul Aug Sep
  16. 16. Topic No. 3 Topic No. 3 Economic  Factors  Influencing  Influencing Hamilton  Co.  Tourism in  2009 16
  17. 17. Airline Survival in 2009 1) Decrease Costs &  eliminate empty seats: li i t t t Less flights per destination Smaller airplanes – l ll l less  seats 2) Increase Revenues Higher airfares for less seats  Hi h if fl t available Other non‐seat revenue  Other non‐seat revenue (bag & meal charges) 17
  18. 18. Airlines have decreased seat capacity  in many markets in many markets • Let’s compare airline seat capacity for: Let s compare airline seat capacity for: March 2008 Vs. March 2009 h Source:  Official Airline Guide, Federal Aviation Adm., U.S. Dept.  of Transportation, March 2007 ‐ March 2008 p , 18
  19. 19. Tennessee – Percent Changes in Airline  Seat Capacity,  Seat Capacity, March 2008  vs.  March 2009 Chattanooga + 2.9%   ( + 1,069 seats) Knoxville ‐ 2.9%    ( ‐ 3,023 seats) Memphis ‐ 7 0% ( 18 442 seats) 7.0%    ( ‐ 18,442 seats) Nashville ‐ 9.5%    ( ‐ 17,338 seats) ( ) Tri‐City (Kingsport) ‐11.4% (‐ 837 seats) Source:  Official Airline Guide, Federal Aviation Adm., U.S. Dept. of Transportation,  March 2007 ‐ March 2008 19
  20. 20. Other Southeast Airports– Percent  Changes in Airline Seat Capacity,  Changes in Airline Seat Capacity, March 2008  vs.  March 2009 Chattanooga + 2.9%  Huntsville/Decatur ‐ 5.6%  Birmingham ‐ 12 0% 12.0% Atlanta ‐ 4.3%  Source:  Official Airline Guide, Federal Aviation Adm., U.S. Dept. of Transportation,  March 2007 ‐ March 2008 20
  21. 21. Today’s Economic Health • Lowest in 22 years • Declining 9 months in a row Consumer  Confidence • Slowing since 2007 • Credit harder to get Credit harder to get Consumer  Consumer Spending • Sl Slowest  growth since 1986 t th i 1986 • 3rd Qtr. 2008 Gross Domestic Product  US.  Economic  negative  first time in 12 years negative – first time in 12 years Growth 21 Source:  U.S. Dept. of Commerce
  22. 22. Top 10 Ways Tourists Reduced Travel  Spending in 2008 1) Take shorter trips (miles) 58% 2) Look for discounts 38% 3) Less on paid attractions 35% 4) Buy less souvenirs 33% 5) L Less expensive lodging i ldi 27% 6) Less nights away home 25% 7) More meals in room More meals in room 18% 8) Drive different vehicle 10% 9) Split costs with others Split costs with others 9% 10) More fast food 8% 22 Source:  Jerry Henry and Associates
  23. 23. 3 Factors Influencing Chattanooga  Tourist Spending in 2009 Tourist Spending in 2009 Gas Prices &  Availability Economic  E i Uncertainty &  Housing &  Business  Credit Crisis Profits Tourist  Spending 23
  24. 24. V O L K S W A G E N Business Travel Boost for Chattanooga Bi T l B t f Ch tt Will employ 2,000  workers at plant site workers at plant site Expected to generate  Expected to generate another 20,000    additional workers  with suppliers  and  with suppliers and affiliates 24
  25. 25. Research shows that businesses that  Research shows that businesses that maintain market share and increase  sales after a recession are those that: l f i h h Increased or maintained media  advertising and marketing  expenditures during a recession expenditures during a recession Source: Harvard Business Review, Jan – Feb, 1980; Strategic Planning Institute, 1982;  McGraw‐Hill Research, Laboratory of Advertising Performance Report, 1986 
  26. 26. Market & advertise more in a  recession… Primary goals in  Primary goals in recession: Maintain  Market Share Market Share Retain & Build  Retain & Build Brand Loyalty With Value &  With Value & Service
  27. 27. Resist deep discounting during  a recession i Difficult to increase prices  later after recession Chattanooga ADRs are holding  – Took hotel industry 3 yrs to  yy recover back to pre‐9/11 rate levels Consumer feel “ripped off”  from a previous low reference  price
  28. 28. Deep discounting will not motivate a  significant amount of additional  travelers in 2009 travelers in 2009 • Most of the time, deep discounting Most of the time, deep discounting  only reduces revenue from those  tourists already deciding to travel i l d d idi l
  29. 29. How much volume would your business  need to increase, to offset a 5% price  need to increase to offset a 5% price decrease? (keep profits same)  35% 25% 25% 15% Assumes a  Assumes a contribution  5% profit margin (price cost)/price  (price‐cost)/price ‐5% of 25% ‐5% Price decrease Volume increase  needed to break  dd b k even 29
  30. 30. Forecast for 2009 Tourism Economy “Dog tired” sluggish  economy y $ 3 plus gas prices  next summer Soft travel spending:  p poor first half 09, fair  second half 09 New federal stimulus  package could stimulate  travel Volkswagen makes 09  30 & 10 looks brighter
  31. 31. Thank you for inviting me Questions? Comments? Questions?  Comments? Stephen C. Morse, Ph.D. Director & Economist  Tourism Institute University of Tennessee Knoxville, TN PH: (865) 974‐6249 Email: smorse@utk.edu l kd

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