- Real Estate
- Food & Drink
May 14, 2018
In theory, hosting the largest convention in the city’s history should have caused a commensurate surge in tax collected on hotel stays.
But February, when the city hosted the multiday Pheasant Fest, ended with lodging tax down about $11,000 from the same time last year.
Through the first quarter, tax collection is down about $30,000, or 14 percent, year-over-year.
“We can’t figure it out,” said Teri Schmidt, executive director of the Sioux Falls Convention & Visitors Bureau.
There are clues, if not exact answers, though.
“We went back and looked last year, and we had much better weather, and our numbers showed that,” Schmidt said.
Unexpected traveler decisions contributed too.
Take Pheasant Fest. While it drew more than 28,000, Schmidt said tourism officials were shocked by how many visitors came for multiple days but never stayed overnight.
“I know some people that drove home 186 miles from here at night and came back in the morning,” she said. “I asked why, and they said it’s not that far. The weather was good, and they did it.”
The more conservative approach to spending from rural visitors also could be tied to continued challenges in the agriculture market.
“The ag economy definitely affects the tourism economy; there’s no question,” said Jim Hagen, state tourism secretary. “Despite the struggles, we have still seen record growth in tourism in the last couple years. Do I think it would have been higher if the ag sector was doing better? I do.”
And then there’s online shopping. Schmidt uses prom season as an example. The search for a dress that used to lead out-of-towners to an overnight stay in Sioux Falls increasingly happens online, she said.
“We can no longer assume people will come from a long way away to buy a prom dress,” she said. “And that means the shoes and the overnight and then they go do other things, maybe go to a spa or a movie. And all those dollars are gone.”
The lag in visitors this year isn’t just a Sioux Falls issue. When Schmidt analyzed other markets, she found the following occupancy through March 31:
“We would hope to be in the low 60s,” she said. “Then you think about Pheasant Fest. What if we hadn’t had it? How much lower would we have been? Because we know it still generated room nights. So I’m sitting back looking at the trend and going, what if we hadn’t had it?”
Large events like that at the Sioux Falls Convention Center are a near-guarantee the adjacent Sheraton Sioux Falls will fill. Vendors alone will take many of the rooms, general manager Alan Benson said.
But that still didn’t stop the first quarter from disappointing.
“We’re down like 1,000 room nights compared to last year same time, and to try and make that up just doesn’t happen. We didn’t get the business,” he said.
His hotel has added more amenities such as in-room refrigerators and reopened its restaurant for dinner.
“And demand seems to be good enough to keep it open for dinner and be a full-service hotel again because there aren’t many full-service hotels (in the market),” he said.
The slow start follows a year in which visitor spending in Minnehaha County exceeded $1 billion for the second consecutive year — accounting for 27 percent of the visitor spending statewide.
There are some signs a turnaround might be starting, though.
“April was a very good month for us. It was excellent,” Benson said. “May is going to be a struggle. July looks really strong, and it’s really predicated on what kind of group business we have on the books.”
An event like the recent Howard Wood Dakota Relays will leave the Sheraton almost full, for example.
“Saturday morning, they all check out, and I’m down to less than 50 percent occupancy, and I’ve got nothing to draw people unless they’re on their way to Rapid City and pick us as the stopping point,” Benson said.
His sales staff is “aggressively going after” additional group business, he said.
Statewide, it has been an equally hard start to the year, Hagen said.
“There’s no question it was a really tough winter and spring, more so this winter than any I can remember,” he said. “It just seemed like the interstate was closing more often; the brutal temperatures, the snowfall, it really put a damper on hotel occupancy and attendance at some events.”
Key indicators are looking good this spring, though. Visits to the state tourism website are up 104 percent and vacation guide requests are up 40 percent, Hagen said.
“So the interest in our state is really strong,” he said. “Gas prices, even though they’re starting to rise a little bit, in my opinion they aren’t going to have any negative effect. The economy is good. People are feeling way more confident about things. So I think all the pieces are in place for a really strong summer.”
Both the state and city are putting on marketing pushes to lure additional visitors.
The state is drawing on its signature Great Places, Great Faces campaign and using local business owners in advertising.
“We’re having the great faces in this state tell our visitors about our great places,” he said.
One new ad features Chris Hanmer, award-winning chef and owner of CH Patisserie and the newly opened Parlour Ice Cream House.
“For Sioux Falls as a whole, people most often tell me around the country they’re hearing about the culinary scene and how it’s growing,” Hagen said. “They know there’s a growing brewery and winery scene, and that’s intriguing to them.”
The arts also are helping draw visitors, he said.
“SculptureWalk has really blossomed into a national conversation piece,” he said. “That allows us to talk about the Arc of Dreams. And shopping is still a selling point for Sioux Falls. They see it as a destination to shop.”
The Great Plains Zoo & Delbridge Museum increasingly is becoming a regional destination, he added, and sports-related tourism continues to be a draw.
“For Sioux Falls, it’s about continuing to look at a diverse offering that’s family-friendly but also appeals to millennials and the ‘bucket listers.’ There’s an incredibly well-rounded product there, but it’s about always thinking and looking forward at what we can do to create new attractions and new businesses that will appeal to those segments.”
The city has strong potential in its downtown, Schmidt said.
The CVB already is working with a group interested in staying at the new boutique Hotel Phillips, which is scheduled to open late this year.
“The walkability of downtown is a big plus,” she said. “People can experience the ambience of downtown, the art and music and shopping and dining and the river. That’s what people are looking for. They’re looking for experiences. So we’ve got to keep that growing and keep it out there that we’ve got it.”
Hotel stays are down double-digits so far this year. Here’s what could be behind it.