Newport This Week

Lodging Tax Revenue Shows Slow Rebound



It comes as no surprise that recently released state figures of tax revenue show that the lodging and restaurant industry on Aquidneck Island have taken a major hit due to the COVID-19 pandemic. But if there is a silver lining amidst the gloom, it could be that the decrease in tax revenue to the state from Newport over the past year was not as severe as anticipated, while increases in tax revenue from June to July of this summer might offer a glimmer of hope that the local economy is slowly improving.

“The Aquidneck Island area has done as well, if not better than anybody in New England,” said Evan Smith, president and CEO of Discover Newport. “Coastal New England has posted some decent numbers this summer because people wanted to get out of big cities and go to places that have open space and a dedicated public safety campaign.”

Tax collection numbers released on Oct. 2 by the Rhode Island Department of Revenue show that lodging and dining businesses on Aquidneck Island saw an uptick between the months of June and July, but any increases were far outweighed by the significant decreases experienced between July 2019 and July 2020.

When compared to the figures over the past year, both industries continue to struggle due to COVID-19 fears and restrictions. Over the past year, Newport showed decreases of 20.3 percent in hotel taxes and 36.8 percent in meal and beverage taxes. In Middletown, the decreases were 38.6 percent and 39.9 percent, respectively, while in Portsmouth it was 61.1 percent and 26.9 percent.

Although those numbers are staggering, Smith said he was encouraged by the fact that the 20 percent drop in Newport lodging was less than expected.

“We anticipated it being worse, we forecasted it being worse, we budgeted it for being worse,” he said. “One reason I think we exceeded expectations is because we’re in a drive market, and 10 percent of the American population lives within four hours of Newport, and no one is flying right now. Secondly, we saw migration out of big cities to less populated urban areas … So, open space areas did quite well.”

There is a similar trend regarding the collection of meals and beverage taxes, where tax revenue dropped 36.8 percent in Newport, 39.8 percent in Middletown and 26.9 in Portsmouth over the past year.

“We were expecting lodging to go down as much as 60 percent, but restaurants came out where we thought,” Smith said.

When asked his theory on the disparity between the decrease in lodging and meal and beverage taxes, Smith said, “Many people could not get dining reservations … others did not feel comfortable going out to a restaurant. Those two variables are the reason the [numbers] don’t match up.”

The state also released tax numbers comparing revenue collected in June and July of 2020. Although Smith cautioned that the comparison is not “apples to apples,” because “July should be a better month than June,” they show a 150.8 percent increase in hotel taxes in Newport and a 56.3 percent increase in meal and beverage taxes. Similarly, Middletown shows increases of 66.6 and 20.7, and Portsmouth 21.1 and 12.2 percent.

Although the numbers are not yet available, luxury hotels, such as Castle Hill Inn, The Chanler and 41 North, as well as short-term rentals, have fared better than expected this summer, Smith said.

“What happened, I think, is that the 1-percenters couldn’t go to Europe, so people who have a lot of money wanted to come to a small place that has clean air, clean water and good public safety,” he said.

However, he said, each time the state has been put on the restricted list for travel by neighboring New England states, the local lodging industry has been hit hard. “Our hotels get thousands of cancellations [when that happens], resulting in millions of dollars [in losses],” he said.

Shopping numbers are also not available, but anecdotally, there appears to be an increase of customers.

“June, July and August were outstanding months for us,” said Philip Senecal, manager at Bannister’s Wharf Mansion Store. “The type of shoppers we’re getting are from all over. It is certainly less, because we are limited to the number of customers we can have in the store at any one time. But they have been shopping and they’re buying bigger ticket items. People are at home, they’re redecorating, and they’re looking at things and thinking, ‘Now’s the time to replace that lamp.’”

With the cruise crowd absent this fall, Senecal has seen more people making day trips from Massachusetts and Connecticut. As is the case with the lodging and restaurant industry, sales are down significantly as compared to last year, but, he said, “We’re not comparing numbers to last year because we’re in a whole new ballpark. We have set goals for this year and we’re exceeding those. May was good, June got a lot better, and July and August were very strong. We just finished September and we’re a little under in August. I anticipate another good month in October.”

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