Tourism season worst on record
Photo/Jan Holder
Connie Russell, general manager of the Samoset Resort in Rockport
Connie Russell didn’t need to see the state’s most recent report on declining sales tax to know Maine’s tourism industry took it on the chin this year.
As general manager of one of Maine’s most renowned resorts, the Samoset in Rockport, Russell knew the persistent rain early this summer would put a dent in the number of visitors to the seaside resort and its golf course, a loss that would be next to impossible to make up. The 178-room resort will close later this month, to reopen only for occasional conferences, until late April rolls around.
“We looked at our business model and decided it made more sense to operate as a seasonal establishment,” Russell says, noting the resort closed for a shorter period last winter. “We had a good August and the fall was OK, but it rained into July, and that spring was tough to make up for.”
The Samoset’s situation is not unique, says Greg Dugal, executive director of the Maine Innkeepers Association. Occupancy rates in Maine lodgings are down 8.3%, and revenue per average room is also down — 11.6% year-to-date through September compared with last year, according to Smith Travel Research, an industry analysis firm.
Blame it in equal parts on lousy weather and a sour economy that has curtailed corporate and vacation visits. Hospitality-related sales taxes plummeted 10% to 12% this summer — a drop so steep Mike Allen, director of economic research for Maine Revenue Services, declared it the worst tourism season on record.
“I can’t find one this bad, and I went back and looked to the mid-‘70s,” he says of his record search. “I’ve never seen this kind of drop or sustained like this,” he adds, noting that overall sales taxes have declined 6% to 7%, year over year.
The drop in lodging tax and its tourism-related first cousin, meals tax, does more than imperil Maine’s Vacationland moniker. Sales taxes make up 35% to 40% of Maine’s general fund, providing a consistent flow of revenue to Augusta. In fiscal year 2009’s $2.8 billion budget, sales tax accounts for $974 million.
Far-reaching effects
Depending on how you choose to count day visitors, Maine’s tourism industry generates between $10 billion and $13 billion annually and provides jobs for between 140,000 and 176,000 people, making it Maine’s biggest industry, says Pat Eltman, director of the Maine Office of Tourism. But its performance is fickle — affected by factors as far-ranging as weather and consumer spending, and as uncontrollable as recession-related fear and corporate consciousness. “We call it the AIG effect,” says Dugal, of new concern over the appropriateness of corporate outings in light of the excess of the shamed insurance company.
Dugal says with Maine tourism, weather is typically the biggest indicator of a good season. But not so in 2009.
“I think the economy was more of an issue,” says Dugal, who presides over the 600-member association. His members have reported sales are off by about 10% through September — actually an improvement over the 17% to 18% drop they saw through last winter. But Dugal concurs with Allen that the summer was Maine’s worst in memory.
“You lose July by 13 [percentage] points and August by eight points and there’s no way you’re coming back from that,” he says. Many lodging owners are further squeezed by declining property values that impair their ability to restructure debt or get credit.
Still, the industry did post a modest gain in Maine of 2.5% in revenue per average room in September compared with the same month in 2008. That compares favorably with a national drop of 15.9% and a New England average loss of 10.6%. The northern Maine/Bangor sector of lodgings actually reported a gain of 13.9%, according to Smith Travel Research, a bright spot buoyed by anecdotal reports of booming business in the Greenville and Millinocket areas, says Eltman.
There’s other promising news. Responding to the lousy summer season, Eltman and her staff developed “Shop, Dine & Stay,” a $400,000 marketing campaign to promote Maine destinations in Massachusetts and New York. Launched Nov. 4, the campaign promotes 100 getaway packages through print and TV markets, and on out-of-state billboards on I-95 and I-93.
Perhaps they will generate more tourist visits through the winter, but it’s unlikely the campaign’s effects will be reflected in tax revenue gains for several months. Lawmakers on the state’s revenue forecasting committee have already revised numbers twice recently, projecting shortfalls of $30 million and $200 million in subsequent state budgets. They will meet again Nov. 20 to ready their Dec. 1 report.
Allen wishes he had good news to present.
“It’s an extremely challenging environment for talking about revenues,” he says. “Any business in the state who is a retailer serving consumers has felt the impact.”
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