The Virginia News Source (VNS) is conducting a series of investigations targeting the Virginia Beach City Council strategic budgetary policies. The series begins with this report and continues with a report on the disparity between residential/commercial real estate assessments and the resultant percentage of real estate taxes paid by residents and by commercial establishments. These long-term strategic budgetary policies have resulted in decisions to spend exorbitant amounts of taxpayers' dollars on tourism-related projects while at the same time continuously increasing citizens' real estate taxes.
In this report, the first of the series, VNS researched data to uncover the true economic value of tourism and has applied the methodology of the Travel Economic Impact Model (TEIM) in the research and analysis.
VNS, using the Freedom of Information Act (FOIA), requested data used by city council to itemize ³the sources of revenue² generated by tourists for hotels, meals and retail for the purpose of calculating the tax revenue generated by tourism in Virginia Beach. City council responded that staff does NOT have specific, itemized tourism-related data. Council cannot certify that the numbers claimed by council and Old Dominion University (ODU) can be identified as coming only or mainly from tourism.
ODU, using data supplied by Virginia Beach city staff, is under contract to provide an annual report entitled, ³Virginia Beach Tourism Impact Study.²
In a second FOIA, VNS asked, ³Has the city implemented the guidelines of the TEIM?² The city has not replied.
Using the industry-accepted methodology, TEIM, to evaluate tourism, VNS applied those techniques to the data used by Virginia Beach. VNS seeks to determine the economic value of tourism in Virginia Beach by identifying the number of overnight guests using paid accommodations and by identifying the proportionate share of tax revenue from tourists from room tax, meal tax and retail tax. Year 2000 and 2003 are used as recent benchmarks.
The Virginia Beach Commissioner of the Revenue (COR) reported that the hotels at the oceanfront account for approximately 57% of lodging tax revenue. Therefore, at least 43% of the total hotel tax revenue is generated from hotels located away from the oceanfront that are used primarily by the business traveler.
The Old Dominion University (ODU) report for year 2000 shows a total of overnight visitors of 2,456,000 and that, of the total, 1,688,000 stayed at hotels (A paid accommodation). The count of 1.7 million visitors includes both tourists at the oceanfront and business travelers who stayed at all hotels throughout Virginia Beach. To further distinguish tourists, VNS calculated 57% of 1.7 million and estimates that just 1 million tourists visited Virginia Beach and stayed in paid accommodations at the oceanfront.
For year 2003, the ODU report shows a total of 2.3 million overnight visitors with 1.5 million staying at hotels. Once again, the 1.5 million figure includes business travel throughout the city. Using 57%, VNS estimates that approximately 0.9 million tourists stayed at the oceanfront during the season of 2003.
In summary, ODU reports that in year 2000, there were 2.5 million visitors in Virginia Beach. VNS, using TEIM calculates that 1 million tourists stayed in paid accommodations at the oceanfront in 2000. For 2003, ODU reports 2.3 million visitors and VNS estimates that 0.9 million tourists stayed at the oceanfront hotels.
The total number of tourists staying at the oceanfront is fundamental to an accurate picture of tourism in Virginia Beach.
Please follow this link to open the tables in a new window.
Total Spending by Tourists
The total amount of money spent by tourists is, obviously, directly related to the number of tourists. For example, the ODU tourism economic impact reports state that tourism spending for 2000 was $630 million and for 2003 was $729 million. In FY 2000, the city claimed tourist spending of $630 million while, in fact, the strict use of tourism data shows spending of just $278 million. For 2003, Commissioner of Revenue documents obtained by VNS show that total spending by tourists for lodging and meals was only $330 million not the $729 million promoted by the Visitor and Convention Bureau. This is a huge overstatement of $399 million or 54%.
Room Tax
VNS agrees with the assumption that almost all who stay in hotels at the oceanfront are tourists. There are a few locals who choose to vacation at a hotel, but for this study the number is insignificant. Therefore the room tax collected at the oceanfront is all tourist paid.
Meal Tax
The meal tax is an important tax revenue to the city. The question here is: How much of the meal tax collected citywide is paid by tourists and how much from locals?
Records show that there are 1404 food establishments citywide. Only 164 are located within the resort area. During year 2000, a total of $563 million was spent citywide in restaurants yielding a total meal tax to the city of $24.3 million. In 2000, council claimed that 49% of the meal tax came from tourist spending or $11.9 million. The Commissioner of the Revenue (COR) reports that the percentage should be 19% rather than 49%. The meal tax yield from tourists should have been reported as $4.8 million rather than $11.9 million. Applying the same analysis to 2003, the citywide meal tax of $34.4 million that yielded meal tax from tourists, claimed by the city, of $14 million, should be reduced to $5.6 million.
A Bureau of Economic Analysis report of September 2004, ³U.S. Travel and Tourism Satellite Accounts for 1998 2003,² corroborates the COR calculation of 19%. The report states that for all ³Food services and drinking places² tourism accounts for 19%.
The meal tax revenue from tourism in Virginia Beach has been consistently exaggerated.
VNS examination of historical data reveals major inconsistencies in financial instruments distributed to the investment community. For example, in FY 2000, the city claimed that on city-wide food sales of $563 million almost 49% of collected tax receipts for city-wide meals was attributable to tourism. City staff initially reduced this to 36.4% in 2003 and further reduced this share to 28% in 2005. Finally, a recent city acknowledgement advised a city council member that just 21% was reported as a benchmark for food expenditures by tourists by the National Restaurant Association.
Retail Tax
The tax revenue from retail spending as reported by ODU is shown in the data tables for the benchmark years 2000 and 2003. VNS applied the same 57% to the amount shown by ODU as an estimate of the amount due to retail sales by overnight tourists at paid accommodations at the oceanfront. That amount is listed in the data tables.
Please follow this link to open the tables in a new window.
Conclusion
Following an exhaustive analysis of tourism-related documents provided by the city of Virginia Beach and ODU reports, VNS concluded that city financial reports have been greatly exaggerated and misrepresented in order to justify nearly $1.2 billion in capital costs for tourism projects.
The ODU reports for 2000 and 2003 claim a significant net tax revenue dollar return for the expenditures of taxpayers money on tourism related projects at the oceanfront. VNS, applying the TEIM methodology, has demonstrated that Virginia Beach incurred a financial loss each of the benchmark years.
TEIM
The Travel Economic Impact Model (TEIM) was developed by the U.S. Travel Data Center to provide annual estimates of the impact of the travel activity of the U.S. residents on national, state and county economies in this country.
The TEIM has the capability of estimating the economic impact of various types of travel, such as business and vacation, by transport mode and type of accommodations used, and other trip and traveler characteristics.
For the purposes of the estimates herein, travel is defined as activities associates with all overnight trips away from home in paid accommodations, and day trips to places 100 miles or more away from the traveler's origin. The TEIM definition includes all overnight trips regardless of distance away from home, but excludes day trips to places less than 100 miles away from home.
Also excluded is the impact of day-trips to places less than 100 miles from home. While these latter trips may be quite numerous, intuitively, they appear to involve little economic impact since lodging expenditures and virtually all common carrier spending are excluded. Meal, entertainment and recreation expenditures on these trips also seem relatively insignificant.
Under the methodology outlined by the industry's professional associations such as the Travel Industry Association of America, only paid occupancy is to be demographically identified under tourist counts. Invited family and friends generally stay with relatives and or friends in 'unpaid' accommodations and should not be integrated with any tourism demographics associated with tourism economic data.
Day visitor do not stay overnight in paid accommodations and those visitors who travel under 100 miles for visits are not considered tourist by industry standards. Additionally, ODU and trade association have reported that revenue from Day visitors is generally negligible. Accordingly, 'Day Visitors' are not believed to spend any significant money and should not be counted as an overnight visitor as has been the historical and improper practice stipulated in news releases by ODU and the City staff.
To that end, visitors who are engaged on business trips and stay at paid accommodations should not be classified as tourists who visit for pleasure and recreation