Avon sees sharp increase in sales, accommodation tax revenues at start of 2022

At the start of 2022, the town of Avon experienced an increase in all its tax revenues, with the exception of its cigarette and tobacco taxes. Not only did the town see a sharp spike in sales and accommodations taxes, but it also collected its first month of short-term rental tax revenue for its community housing fund.

“We’ve seen a perfect storm: increased visitation, increased number of remote workers, and an increase in average daily rate from lodging,” said Chris Romer, the president and CEO of the Vail Valley Partnership. “Folks are paying more for lodging and there are more of them, which then trickles down to the retail, restaurant and grocery sectors.”

Plus, it’s not just visitation that’s up. Romer said that there are more second homeowners either spending time or relocating to Eagle County, which brings in additional volume for local professional services.

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Sales tax

According to a financial report in the most recent Town Council packet, Avon collected $1,171,214 in sales tax revenue this January — 27.22% higher than its revenue in January 2021.

Nearly every industry in Avon reported an increase including home and garden, grocery, sporting goods, restaurants and bars and e-commerce. Only its service-related, liquor stores, manufacturing/wholesale, digital media, commercial/industrial equipment and construction services industries saw a decrease year-over-year.

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In the report, prepared by Joel McCracken, the town finance manager, he reported that the e-commerce retail sales tax has seen a dramatic increase due to the new Sales & Use Tax System from the Colorado Department of Revenue, which the town implemented in late 2020. Since implemented, McCracken reported that over 100 businesses have registered in the system to remit sales taxes. Sales tax revenues for the e-commerce sector increased by 9.45% year-over-year, according to the report.

Romer said that Eagle County is currently experiencing “record or near-record levels of business across the retail, restaurant and lodging sectors.”

“This is being driven by the increase in visitation and rate on the lodging side and I think primarily due to the volume on the restaurant/retail side,” he added.

Accommodations tax

As the lodging sectors have seen an increased demand, the report dictates that Avon saw an overall 125.03% increase in revenues from its 4% accommodations tax, comparing January 2021 and January 2022. This tax applies to all timeshares, hotels and vacation rentals. In January 2022, the town collected $322,277, with revenues from each accommodation type showing an increase year over year.

Vacation rentals comprised the largest portion of revenues from the tax, a reversal from 2021 where vacation rentals brought in the least amount of revenue. This revenue increased over 400% in January 2022 compared to 2021, bringing in around $131,797 more in revenue. According to McCracken’s report, this increase was due to 50 new short-term rental licenses that were issued in 2021.

According to Romer, this winter, Eagle County had its highest lodging occupancy rates since before the Great Recession, and the highest average daily rate of all time.

“We bottomed out in 2009-10 and have grown consistently and sustainably until 2020 when the COVID crash came,” he added. “COVID caused a bit of a trampoline effect: we fell off the cliff, but bounced back higher and faster than we’ve ever seen and the trends for summer bookings show continued momentum.”

This momentum and steady increase is something that all mountain resort communities are seeing right now, according to Tom Foley, the senior vice president of business intelligence at lodging research firm Inntopia.

“The biggest thing that we’ve really seen is this combination of continued pent-up demand and acceptance of COVID-19,” Foley said.

The “significant gains” in lodging tax revenues, he said, are to be expected “just based on volume and what took place last year. But the gains are also consistent versus a couple years ago, which tells us that this is not just a short-term recovery trend, but actually a longer-term trend toward strong consumer behavior in the market.”

While pent-up demand and acceptance around COVID-19 are contributing factors, Foley offered a few other possibilities for this increase in booking in mountain resort communities, and in travel in general.

He said that skiing season passes becoming “a lot more affordable this year” translates to a “bump in business.” Foley specifically referenced Vail Resorts, which decreased the price for its Epic Passes by 20% this season. The result of which was a 76% increase in pass sales from the previous ski season.

This paired with the pent-up demand and the fact that consumers have a lot of money saved up right now following COVID-19, has contributed “in a big way across the travel sector in general, not just the mountain destination travel,” Foley said.

As Romer mentioned, room rates themselves are also at an all-time high. According to Foley, this is happening across the country. Room rates, he said have been growing at about 35% year over year, year over two years and year over three years, for the last 9 months or so.

But this trend, Foley said, is “really hard to sustain.”

“I would expect that it’s going to settle down; economics 101 says it ought to settle down a little bit because it simply is not infinite in its ability to grow,” Foley said. “But, the other side of the coin is that mountain travelers have been pretty contrarian when you try and guess what they’re going to do based on standard economic principals.”

These mountain travelers, he added are “very devoted, the product is extremely good, and they’ve got a lot of money saved that they’re willing to spend.”

Short-term rental tax

In November, voters approved a new short-term rental tax in Avon. The 2% tax is to any rental property that is rented for less than 30 days. Only residential, non-commercial properties — of which only the Comfort Inn property in Avon doesn’t apply — are taxed.

January 2022, was the first month that this short-term rental tax was applied in town and it generated $148,282 in revenue. Timeshares comprised nearly 23,000 of this revenue, hotels just over $47,000 and vacation rentals just over $78,000.

Revenues from this tax will go toward the town’s community housing fund, which per the language in the approved tax, will help fund future community housing plans, projects and purchases.

The proposed 2022 budget, which was approved in December by Avon Town Council, proposed that this new tax would generate an annual budget of $750,000. The amount generated in January represents 19.77% of this annual budgeted amount.

The Town Council will be reviewing and making amendments to its 2022 budget at its second meeting in April.

Looking ahead

“Our economic rebound is somewhat unique in that is it industry agnostic; it’s not a tourism recovery or a financial recovery or a construction recovery,” Romer said.

However, while these industries seem to be doing well based on metrics, many are still battling supply chain challenges as well as the lingering impacts of COVID-19 on areas such as workforce availability and burnout.

“We’re seeing record or near-record and historically high numbers on most traditional metrics, yet employee and business owner burnout and stress is also at all time highs,” Romer said. “The lingering impacts of these two things are not sustainable.”

Moving forward, Romer said that businesses “cannot realistically continue to grow the volume with a reduced workforce.”

Romer said that in a recent business sentiment study from the Vail Valley Partnership, 78% of respondents said they were “optimistic about their business health and the Eagle County economy.” However, 82% said they were “pessimistic about their ability to attract and retain workforce.”

“Our businesses are resilient, and the lingering impact is going to be reset – exploring how we take care of our employees so we can take care of our guests,” he said, adding that this includes “things such as reduced hours, closing one day a week, etc.”

Looking ahead to the summer season, business is expected to stay strong. Romer said that preliminary data shows that we’ll see “similar — if not quite as strong — of growth in visitation.”

Foyer said that the increased vaccine rollout in the U.S., as well as the full-scale return of significant group activity and events, indicate that the summer season will be strong.

“I don’t know, however, if it’s going to continue growing at the pace that it has in the last, simply because it was so strong pre-pandemic,” he said. “Summer has been growing so strong for so long and has the highest occupancy rates of any season in the mountains and has for the last couple of years, at least from an individual day point of view.”

There is, however, some uncertainty around some macroeconomic variables, Romer said, listing inflation, gas prices and geopolitics including the war in Ukraine.

“We’ve been remarkably resilient to these types of things historically,” he added.

Foyer also spoke to this type of uncertainty saying that it can sometimes suppress business, but that it can also heighten stress, which can cause consumers to look at vacation and recreation as a way to relieve said stress.

“The question is, how do they end up playing against each other dynamically: a downwards force from economics and an upward force from a desire to get out and get away and escape what’s going on in the world?” Foyer said. “It really is difficult to really say with certainty what’s happening and people need to remember to be nimble and keep an eye on the marketplace.“