Early economic indicators show Richmond saw a small uptick in overall economic activity during September, when the city hosted the UCI Road World Championships, but a decrease in hotel occupancy and flat restaurant sales.
“My assessment is, this was not a financial home run for the city of Richmond,” said Edward Millner, a professor of economics at Virginia Commonwealth University, after reviewing the data. “It was a great event and it was great PR for the region, but it was not a financial bonanza for the restaurants and hotels.”
Sales tax receipts in Richmond increased 5.32 percent from September 2014, according to sales tax data released by the state this month.
That’s better than the state as a whole, which saw a 4.37 percent increase from September 2014 to September 2015, and all of the surrounding counties except Henrico, which saw a 5.98 percent increase during the period.
But indicators specific to the hospitality industry offer a somewhat bleaker picture: City hotel occupancy rates in September decreased 7.2 percent compared with the previous year, and restaurant sales essentially were stagnant, decreasing less than 1 percent.
The region as a whole appears to have fared better. Henrico, the only other locality in the region to assess a meals tax, saw receipts increase during September.
And the Richmond-Petersburg hotel market as a whole saw a 1.2 percent increase in hotel occupancy during the month, with the biggest gains in Chesterfield and Hanover counties.
Because of the way the data are collected, it’s impossible to segregate activity during the 10-day bike races but, taken together, the numbers offer a preliminary look at how the region fared during the event.
The races were put on with large contributions from localities around the region, with the largest share coming from Richmond.
In a report released this month, city officials said they spent $1.7 million in overtime for police and other employees and an additional $5.77 million on infrastructure that they described as “related to but not exclusive to the event” — mostly road and sidewalk improvements along the race courses.
Before the races, organizers estimated visitor spending would have a $192.2 million economic impact on the area, including $3.8 million in tax revenue for local governments.
The Richmond 2015 committee, which put on the races, has estimated the championships drew 645,000 spectators over the course of the event. They said the number counts fans each day they attended the races.
Richmond 2015 said it plans to provide a more detailed estimate as part of its own report on the impact of the race, which is being prepared by Chmura Economics & Analytics, the same company that provided the pre-race economic impact estimates. Richmond 2015 plans to release the document next month, said Tim Miller, the group’s chief operating officer.
Miller said one possible bright spot not included in the routine financial reports is that many of the spectators along the route seemed to be from outside the area.
“All of these people have now discovered the Richmond region and discovered how cool it is and want to come back,” he said.
Miller said the most surprising number to him was the decrease in hotel occupancy in Richmond.
Richmond hotels saw their overall occupancy rate drop from 67.8 percent in September 2014 to 62.9 percent this year, according to a report for Richmond Region Tourism by the market analyst STR.
Fewer rooms were filled, but city hotels still reported an increase in revenue per available room of 8.6 percent, because room rates increased from an average of $116 a night to $136.
Still, the result is counterintuitive given the estimated crowd, and hoteliers and race organizers floated different possible explanations for what might explain the drop.
“A lot of them raised their rates higher than we recommended,” Miller said. “Part of why you see a dip in Richmond is because a lot of people were turned off by some of the tactics.”
Mike Watkins, president of the Richmond Region Hospitality Association, disagreed.
“I don’t think the rates were a factor at all,” he said. “Were there one or two hotels that maybe had some tall rates? Initially, yes. But I think the people that were coming for the races were coming for the races.”
He said the races simply did not deliver the number of visitors organizers initially anticipated. But, he quickly added, that’s not to say it wasn’t a good event that netted the region good international exposure.
Hanover saw the biggest gains during September, which also included a NASCAR race weekend at Richmond International Raceway. Both prices and occupancy levels increased, resulting in revenue per available room jumping 38 percent.
The other big winner was Chesterfield, the only locality in the metro area that opted not to participate in the races. Hotels there saw an 8.6 percent gain in overall occupancy and a corresponding increase in prices that resulted in an 18.7 percent increase in revenue per available room.
That’s higher than the regionwide increase in revenue per available room of 12.2 percent.
Jack Berry, the chief executive of Richmond Region Tourism, took an optimistic view of the numbers, saying they continue a positive year-over-year increase in tourist activity, matching the organization’s expectations going into the event.
He also hinted at a ripple effect: The tourism authority, he said, has been able to use the race to market the region to other event organizers.
While hotel occupancy rates came as a surprise to some, meals tax receipts in the city seem to confirm what restaurant owners said anecdotally throughout the races: An abysmal opening weekend eventually gave way to a busy closing weekend.
The result was more-or-less flat sales compared with the previous September.
Johnny Giavos, who has eight restaurants in the area, said the race hurt his business in heart of the city and helped his business outside the race area.
Perly’s on East Grace Street downtown, he said, would have gone out of business as a result of the event if it were a standalone business without revenue from other properties to fall back on.
“I loved the bike race,” Giavos said. “I thought it was good for Richmond.”
He continued: “Did it hurt businesses in Richmond? Yes. Did it help businesses outside of Richmond? Yes.”
Henrico posted a year-over-year increase in restaurant sales, with a roughly $74,000 increase in tax receipts.
Miller, with Richmond 2015, suggested a given restaurant’s success during the races directly correlated with how it marketed itself during them.
“I think the ones that got creative and made sure to get the word out there somehow are the ones that did well,” he said.
Millner, the VCU economics professor, said the numbers match what he observed as a spectator during the event: “They seem about right,” he said. “Most people were scared to come downtown, but the second they figured out what was happening, they had a great time.”
More analysis to come
In terms of identifying the overall impact of the event, one of the biggest outstanding pieces of data is what percentage of spectators came from outside the area, said Brendan P. Dwyer, the director of research at VCU’s Center for Sport Leadership.
By virtue of the event’s size, the races displaced much of the day-to-day economic activity that would have occurred in the area, Dwyer said.
Some downtown businesses did not ask their employers to come into work during the races, and VCU canceled classes, essentially giving students the week off.
“If people didn’t spend their money in Richmond, they probably spent it in Chesterfield or wherever they live,” he said. “We’re all the same economy, and it reverberates and works its way back into the system.”
If out-of-town dollars in the city made up for the decrease in normal economic activity during the race, the region ultimately will see a net gain, Dwyer said.
Chmura Economics & Analytics surveyed spectators during the race and plans to include the information in its economic impact report, Miller said.
Richmond 2015 hopes to have the research complete in time for its Dec. 18 board meeting.
He said that anecdotally, his impression is that locals stayed away from the race, suggesting that many of the spectators were indeed from outside the region.
Another promising data point, Miller said: The Monday after the race was the busiest day at Richmond International Airport in nearly seven years, with 6,808 passengers boarding planes.
“That’s obviously a good indicator,” he said.