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Galveston Hotelsby David Stanowski

17 May 2009

Abstract:The hotel business is an important part of the Galvestoneconomy. With the national hotel business mired in a deepslump, how is the local hotel business faring?

Introduction:E-forecasting.com in conjunction with Smith Travel Research

announced thatthe Hotel Industry's Pulse index (HIP) declined at an annualrate of 21.9% in March and 21.4% in April.

HIP is a composite indicator that gages business activity in theU.S. hotel industry in real-time. Simply put, it tracks monthlyoverall business conditions in the industry, like an industryGDP, and points in a timely way to the changes in directionfrom growth to recession or vice versa. The composite

indicator is made with the following components: revenuesfrom consumers staying at hotels and motels adjusted forinflation; room occupancy rate and hotel employment; andother key economic factors that influence hotel businessactivity.Full article: Hotel News Now

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The hotel industry’s occupancy rate fell 14.0% on a year-over-year basis to end the week at 53.6%. The average daily roomrate dropped 9.8% to finish the week at $97.58. Revenue peravailable room for the week decreased 22.4% to finish at$52.32.Full article: Hotel News Now

The following graph shows the hotel occupancy rate from 2001to the present.

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Source: Texas Comptroller

The next graph shows Galveston hotel receipts divided by theProducer Price Index (PPI) of commodities, which is a moreaccurate method of adjusting data for inflation than theheavily politicized CPI index.

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Source: Texas Comptroller

Galveston hotel receipts graphed on an annual basis show thatthey have increased 85.80% between 2001 and 2008.

Source: Texas Comptroller

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Year Hotel Receipts

2001 $73,478,704

2002 $73,644,796

2003 $74,943,4812004 $79,439,214

2005 $94,771,032

2006 $106,035,150

2007 $117,506,856

2008 $136,523,888

TOTAL $756,343,121Source: Texas Comptroller

However, when Galveston annual hotel receipts are divided bythe PPI, to adjust for inflation, they show "real" growth of 30.84% between 2001 and 2008.

Source: Texas Comptroller

The number of hotel rooms in Galveston has been growingduring this period, including some surprisingly large peaks and

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troughs in the growth curve. Some rooms were lost due toHurricane Ike.

Source: Texas Comptroller

Total receipts for Galveston's major hotels in March 2009:

Hotel ReceiptsMoody Gardens $1,068,278

Victorian Inn $912,923

San Luis $878,401

Hilton $771,240

Hotel Galvez $704,259

Holiday Inn $575,816Source: Texas Comptroller

Total receipts per room for Galveston's major hotels in March2009:

Hotel Receipts Rooms Receipts/Room

Hilton $771,240 150 $5,142

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Victorian Inn $912,923 200 $4,565

San Luis $878,401 243 $3,615

Moody Gardens $1,068,278 303 $3,526

Holiday Inn $575,816 179 $3,217

Hotel Galvez $704,259 228 $3,089Source: Texas Comptroller

Conclusion:The hotel business is very important to the Galveston economycontributing over $756 million between 2001-2008. Galvestonlevies a 9% municipal Hotel Occupancy Tax, in addition to the6% state HOT, that is critical in promoting tourism to the City.

Although some of the $756 million was exempt from HOTlevies, the hotel business has generated millions of dollars inHOT for the City over the last eight years.

Fortunately, there is no evidence that Galveston hotels aresuffering the declines that are being seen in many areasaround the country. Demand from residents displaced fromtheir homes by Hurricane Ike; contractors, consultants, andgovernment workers helping in the cleanup and rebuild; and

tourists wishing to visit the Island are keeping occupancy androom rates at relatively healthy levels. This is one localeconomic indicator that must be tracked very closely as thepost-storm rebuild eventually peaks and declines, and theinternational recession begins to effect the local economymore dramatically.

Local Hotel Occupancy Tax

For more information on the Galveston Economy: Click Here

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David Stanowski lives in Galveston, and is a financialanalyst, investor, and the publisher of GalvestonEconomicReport.com ,

TheFinancialHelpCenter.com , andTheRealGalveston.com .

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