Resort Hoteliers Expected June Room Tax Decline

OCEAN CITY – Some say that room tax revenue tells a more accurate story when attempting to gauge the resort’s level of success for the summer, and if that’s true, things are looking slightly below average for a second straight month.

Room tax revenue for Ocean City fell 6 percent in June compared to last year, and with a similar decline in May, revenue figures seem to be heading down a path much like 2003, when the town’s only month of room tax revenue profit was August (a mere $2,031 better than the previous year). See page 38B for a chart of room tax as well as food tax numbers.

Some hoteliers in town say that they expected the number to be larger than 6 percent, as they continue to offer creative promotions and discounted rooms, all the while booking fewer rooms, sometimes, at the last possible minute.

Others in the hotel industry are quick to point out that competing resorts are reluctantly reporting losses up to 30 percent at this point in the season, and by that comparison, Ocean City is holding its own.

However, there are obvious indications that things are not as they used to be in the hotel industry in Ocean City.

“I come into town off of the Route 50 Bridge and drive up the coast every day and look at the vacancy signs,” said Jon Tremellen, general manager of the Princess Royale. “I saw one ‘no vacancy’ sign this week and for this time of year, when it’s supposed to be prime time, it’s unheard of.”

Room tax revenue for the month of June totaled just over $2 million, which was down $139,075 from 2008. 

Last year, the raise in tax from 5 percent to 6 percent could have had a hand in skewing the numbers a bit, as every month last year, from May to August was a record number, but the town considered last year to be anything but a record breaker.

Still, hoteliers are hoping to see strong numbers from the room tax revenue figures in July and August, and despite two down months, are hopeful things will turn around.

“I really think that you’ll see better numbers in July and August,” said Carousel Managing Partner Michael James. “Some hotels have fared better than others, but I think as a town we are doing better than a lot of other places.”

The Fenwick Inn in uptown Ocean City has been enjoying a bit of recent success with its seven nights for $700 promotion, an idea to which could encourage visitors to break this summer’s trend of staying less nights and in turn, spending less money. A call to the Fenwick Inn for comment was not returned.

“That is a great promotion for this town, and I know that they have enjoyed success with it so far,” said Tremellen. “To show you how bad it’s gotten in some places, there is a place in Myrtle Beach that for the month of August, if you check in on a Sunday and stay four days maximum, you can basically pay what you feel your stay was worth at the end of it.”

Others in the industry continue to point to the lagging economy, a drop in corporate conventions and meetings, poor weather in June, and a number of other factors, including the proliferation of condominium rentals.

“It’s definitely played a big role in not only our business, but on the room tax revenue figures as well,” said Tremellen. “Some of the rental companies and certainly those who do it on their own don’t charge the rental tax on condos.”

There are vast numbers of listings on a vacation rental by owner website called www.vrbo.com that showcases countless numbers of units for rent, and many do not figure in the tax that would factor into the room tax revenue figures.

When contacting several of the major rental companies in Ocean City, a handful admitted to not charging the fee either.

“When I drive home at night at 7:30 in late July and I see no line outside of the Bonfire or Phillips or even the Embers, that tells me that people are getting food at the grocery stores and eating in,” said Tremellen.

The lack of business in the prime months could cause more hotels to shut their doors for a bit longer period of time this upcoming off-season as Tremellen is considering shutting down the Princess Bayside to the public for 40 days in the winter, which would be a first in more than 13 years.

“I’m pleasantly surprised with the June numbers despite the decline, but if July and August don’t pick up, I think we are going to see a lot more places that will be shutting down this winter than what we’ve seen in the past,” he said.

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