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Overbuilding Not to Blame for Colorado Springs Hotel Occupancy Problems, Rather
 Lack of New Tourist Attractions or "Demand Generators" Creating  Loss
 of  Market Share to Other Colorado Locations

By Sarah Colwell, The Gazette, Colorado Springs, Colo.McClatchy-Tribune Business News

Sep. 6, 2006 - - We keep building them, but they aren't coming.

During the past 10 years, hotel rooms have popped up all over El Paso County. Only a fraction of those rooms, however, are being filled, signaling a decline in local tourism, according to a recent study by Fred Crowley, senior economist with the Southern Colorado Economic Forum.

Crowley's report looked at hotel occupancies and room rates in Colorado Springs and throughout the state from 1996 to 2005 gathered from the monthly Rocky Mountain Lodging Report.

The Broadmoor, Cheyenne Mountain Resort and the Cliff House are not incorporated with Colorado Springs statistics.

According to the report, the number of hotel rooms in the Pikes Peak region has increased by 42 percent in the past 10 years, but occupancy rates have increased by only 7.7 percent.

The surge in El Paso County hotel rooms came in 1997 after the county had a record-breaking average annual occupancy rate in 1996 of 75percent, which was nearly 10 percent higher than most of Colorado.

The reason for the high occupancy rate was the presence of Western Pacific Airlines, which offered low-cost airfare out of the Springs, said Terry Sullivan, president of Experience Colorado Springs at Pikes Peak, the convention and visitor bureau. The airline collapsed in bankruptcy in 1998.

This higher-than-average annual occupancy rate enticed developers nationwide to start building hotels throughout the city.

Overbuilding is not to blame for the local occupancy problem, according to Crowley, because El Paso County's share of available hotel room nights has declined compared with the rest of the state since 1994.

Hotel rooms in Denver and throughout the rest of the state were up 70 percent during that same time period, with an occupancy rate of about 50 percent.

Colorado Springs has experienced the greatest relative loss in market share in the past 10 years compared with the rest of the state.

According to Crowley, that is the reason hotel occupancy rates and visitations are down in Colorado Springs.

"Between 1997 and 2000, 4,000 hotel rooms were added without any demand generator being created to fill those rooms." Sullivan said. "And at the same time, losing 1 million passengers a year in our airport," when Western Pacific left Colorado Springs.

The county has not had a new tourist attraction or "demand generator" since 1992, when the Colorado Springs Airport was built, Sullivan said. Denver has recently renovated an aquarium, and expanded a convention center, and it will soon unveil an expansion of its art museum. In Pueblo, the Historic Arkansas Riverwalk was built in 1996 and in 2001 the city built a national Medal of Honor memorial.

In Colorado Springs, plans for anything new have fallen flat. In 2003, a local businessman talked about building a water amusement park, but it never came to fruition. A convention center has been talked about for years, but plans were shelved in 2005.

"We're stuck in the mud," Sullivan said.

"The rest of the state is growing like crazy, to take advantage of tourism," Crowley said. "And you have to ask, is it that we don't have the product mix that visitors are looking for? Or it's the sights to be seen. Maybe everyone that wants to come to Colorado Springs has seen all the sights already?"

The other reason for the decline in occupancy is the economic recession in 2001.

The study showed no relationship between gas prices rising and visitations, although 85 percent of Colorado Springs travelers get here by car. The study also found that hotel occupancy actually rose during the Hayman fire in 2002.

"I know people will think I'm crazy, but the study shows there was no particularly strong relationship but there was no negative impact on tourism because of the Hayman fire," Crowley said.

In June and July 2002, the months of the Hayman fire, local hotel occupancy rate was up as visitors came to the area to witness the destruction of the natural disaster that burned more than 138,000 acres and almost 600 structures, Crowley said.

But despite a steady 10-year decline in occupancy rates, hotels keep popping up. Construction has begun on a 101-room SpringHill Suites and a 97-room TownePlace Suites northeast of Powers and Fountain boulevards that will open by May 2007. Early next year, Missouri-based John Q. Hammons Hotels & Resorts LLC will start construction on the 320-room, 10-story Renaissance Hotel in northern Colorado Springs.

"We are building more units, and I can't believe that anyone would build a new unit unless they thought it was profitable," Crowley said. "So what that means is the newer hotels with all the amenities are taking it away from the smaller more historically oriented type of accommodations in town."

George James, whose family has owned and operated the Dillon Motel in Manitou Springs for 20 years, said his occupancy rate has gone down 10 percent during the past 10 years.

"Back in those days, we were full almost every day. During the summer of 1997 we had 63 consecutive days where we were completely full," James said.

"Colorado Springs would have to increase the number visitors by 5,000 people a day in order to fill all the hotel rooms now. One or two weekends a summer we are mostly booked, but what happens to the other 12 months? The situation that we're in is, more hotel rooms keep coming, but the people are not coming here enough to bring up that occupancy."

With an abundance of hotel rooms and a lack of visitors, hotel room rates started to decline. In the past 10 years, hotel room rates have declined by 11.35 percent when inflation is factored in, according to Crowley's study. Comparatively, Denver's room rates are up 3.44 percent and the rest of Colorado is up about 1 percent

The Dillon Motel has not increased its rates in the past 10 years, James said.

Although reduced rates made the area more attractive to leisure travelers and families on a tight budget, it reduced the amount of sales taxes coming to the city.

A historical look at the bed- and car-tax report, a tax that is charged for hotel rooms and car rentals, shows that since 2001, tax revenues have remained stagnant. A stagnant bed and car tax increases the burden on taxpayers and decreases the local convention and visitors bureau budget.

Tourism is the third-largest economic engine in the area, bringing in $1 billion in outside money to the local economy and generating 14,000 industry-related jobs, according to Experience Colorado Springs.

To solve the local tourism problems, the local visitors bureau has developed a five-year strategic plan. For the plan, the bureau conducted a marketing study to determine whether area attractions meet the needs of the typical tourist visit. The office plans to capitalize on a statewide $19 million advertising campaign by putting an extra $400,000 to the 2007 local tourism budget to get more people to visit the area.


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Copyright (c) 2006, The Gazette, Colorado Springs, Colo.

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