For every three dollars flowing into Yountville’s coffers, roughly two come from the pockets of the thousands of tourists enjoying the hotels and resorts of the posh wine-country town.
At the Bardessono, the Villagio, the Vintage Inn and other lodgings, 12 percent of every guest’s bill winds up in the budget of the Upvalley town of about 3,000 people. During the 12 months that ended June 30, that sum was roughly $6.8 million – $400,000 more than a year earlier, and nearly two-thirds of Yountville’s total revenue for the year, one of the highest such shares in California.
The Napa Valley’s lure of natural beauty, fine dining and world-famous wineries has translated to a steady green river of tourism dollars for local governments. Four of the county’s five cities draw a tenth or more of their revenues from transient occupancy taxes on hotel stays, and two – Yountville and Calistoga – receive more than half their general-fund money from room taxes.
After shrinking during the Great Recession at the end of the 2000s, hotel-driven tax revenue has since resumed its growth, totaling an estimated $46.57 million for the fiscal year that ended in June.
New hotels and expansion of existing ones have helped juice room tax funding in some cases, but a rise in average room rates – a steady march upmarket – has been the main driver of revenue growth, according to Clay Gregory, president of Visit Napa Valley, the marketing arm for local tourist businesses.
For the 2015-16 fiscal year, county hotels averaged a $295.53 nightly rate with 73.2 percent of rooms occupied, according to Gregory. Some of the growth in revenue and occupancy has stemmed from increased visits out of Asia and especially China, which has displaced Great Britain as the top source of tourists from outside North America.
“We are very confident; we know we’re getting a higher percentage of international visitors than in the past and that’s going to continue to grow, certainly from Asia,” he said earlier this month. “It’s much easier for the Chinese to get visas now; it used to take six weeks, which drove many of them to Europe, and now it takes two weeks.”
Hotels under construction or receiving cities’ approval are poised to boost room tax revenues in 2017 and beyond. In Napa, Hampton Inn & Suites accepted its first guests this spring, the Archer hotel is slated to debut downtown next year, and a 145-room expansion of the Meritage resort, to 467 rooms, won city approval last December.
The city’s nearness to both the wine country and San Francisco helps local lodgings attract visitors traveling close to home, leaving the business less dependent on travelers from across the country or ocean, according to Finance Director Roberta Raper.
“Napa is one of those places that’s a destination, even when people don’t have as much disposable income for travel,” she said recently. “While we had a significant hit on TOT in 2009 (during the Great Recession), it came back quickly, and we noticed a lot of people who were taking staycations and going to Napa instead of somewhere else. (Long-distance travel) is an elastic source; when incomes go down, it’s one of the first things that people can cut out.”
Lodgings are a sizable and growing support of Napa’s city finances, accounting for 22 percent of its budget’s general fund in 2015-16. Farther north, in communities without the big-box stores and other tax sources of Napa and American Canyon, tourist dollars are nearly irreplaceable.
Yountville, with the smallest population of the county’s five cities, has drawn more than 60 percent of its revenue from tourism-related sources for the last decade, according to Town Manager Steve Rogers. In addition to profiting from its luxury hotels and resorts, the town receives about 75 percent of its sales-tax revenue from a group of restaurants dominated by The French Laundry, Ad Hoc and other nationally renowned establishments.
The town’s popularity with high-end vacationers, however, can be as much a source of anxiety as assurance, said Rogers, who pointed to its small stock of hotel rooms compared to other Napa Valley cities.
“The last two town budgets, we estimated TOT lower than what was actually generated because we believed it should be plateauing, but (revenue) came in higher,” he said recently. “I don’t know that we can have the same rate of growth, especially when room rates are already so high. To anticipate 5 to 7 percent growth when the average room rate is $500 is aggressive, so we’ve forecasted a leveling.”
Calistoga also ranks among the state’s most tourism-reliant communities, with its $5.6 million room taxes during 2015-16 – up from $3.2 million seven years earlier – accounting for 54 percent of general-fund revenue during 2015-16.
The city boasts arguably the valley’s longest tradition of vacationing – its mineral waters inspired a town name mingling California with Saratoga Springs, the 19th-century Upstate New York spa destination – and City Manager Dylan Feik predicted its lure to tourists is likely to stay evergreen in the near future.
“Calistoga has always been a town with roots in agriculture and tourism from the very beginning, even before incorporation,” he said. “It’s always been part of the fiber of this city before it was a city. Tourism is not going away, any more than agriculture is going away. There are market forces at play, but hospitality is what we do like winemaking is what we do.”
Still, Calistoga and other similarly vacation-oriented towns must account for the vagaries of weather, disasters, and even hotel sales or renovations that can idle dozens of rooms at a time.
“We budget very conservatively so we can adjust. If you have a wet June and you see your (visitor) numbers drop, we will see that reflected in tax collections a few months down the road,” said Feik. “We try to insure our revenue stream so that if there’s any natural disaster or fire at one of our resorts, we (maintain) our TOT collections.”
Economic swings in the past decade provide yet more reason for cautious forecasts.
While unincorporated Napa County has averaged 5.8 percent yearly increases in room-tax funding over the past decade, that number has included swings from growing 14.74 percent in 2007-08 to dropping 12.7 percent as vacation spending plunged in the depths of the recession.
County-based lodgings produced $12.61 million in the past fiscal year, but strict land-use rules – including the Ag Preserve’s requirement of a popular vote to approve most land-use changes for farmland – leave the county without the ability to rapidly expand that source, said Tracy Schulze, the county auditor-controller.
Furthermore, future annexations by cities could nibble further at county revenues, she added, pointing to discussions by St. Helena councilmembers and staff to consider eventually absorbing the site of the Meadowood Napa Valley resort.
“It’s one of our main discretionary funding sources and there’s no way we can expand it, so I think it would be a very difficult thing for the county to absorb if cities took this revenue source from us,” said Schulze. “If it dwindles away, especially large properties like the Meadowood, it’s hard to replace.”
Within its current boundaries, St. Helena, which garnered just over $2 million of room-tax revenue in 2015-16, is awaiting the scheduled debut next month of Las Alcobas Hotel, which is eventually forecast to provide the city $1.2 million a year.
Further additions to the city’s hotel stock, as well as annexing Meadowood, are part of a menu of fundraising steps a city task force has recommended to cope with the fallout from repeated financial missteps that have left St. Helena barely meeting its expenses and unable to pay for improvements to City Hall, the police station and wastewater treatment.
“It’s about the choices a community needs to make to decide which sources it’s willing to accept,” City Manager Jennifer Phillips said of the options, which also include selling city property as well as taxes on sales and real-estate transfers. “(Hotel) revenues are critically important to all cities, but all the more so for St. Helena because we have inadequate revenue to deliver the services people would like, to take care of the backlog of all the things that haven’t been addressed over the years.”
In a valley well-stocked with top-dollar resorts and high-end wineries, the outlier has been American Canyon, a bedroom community filled with housing subdivisions and the county’s only 24-hour Wal-Mart. Taxes collected at the city’s three hotels account for just over 7 percent of its revenue, but city and tourism figures see a niche even for the Napa Valley’s least touristy community – a lower-priced one with hotels aimed at business and other travelers as well as wine-country vacationers.
“Our hotels here are value-based hotels compared to the city of Napa and the Upvalley,” said City Manager Dana Shigley. “… We’re optimistic, because we serve a different market than those farther north and we’re more centrally located.”
“We are farther south in the county, so we also provide a place for tourists who aren’t singularly focused on the valley. They may be going to the valley one day, but that’s not all they do in their trip – they may spend time in city or go do other things. Rates have gone up significantly in last few years and we think there is room for growth because we provide a middle ground.”
In the longer term, the best chance to keep up the pace of hotel visits may be to make local lodgings as attractive during the week as they are on vacation weekends, predicted Gregory, of Visit Napa Valley. The tourism group is steering more of its promotional funding toward major media markets in Southern California, New York, Chicago, Florida and Texas in hopes of drumming up meeting and convention business from corporate, medical, law and other groups, in order to raise occupancy for the slower early days of the week.
Ultimately, said Rogers, the Yountville town manager, tourism is a thread of local life not to be removed easily, and thus to be tended carefully.
“I’m very conscious of the fact that we do not have a (broadly) distributed revenue stream,” he said of his town, the county’s smallest by population. “The favorite thing I like to say to community groups is that this town’s $1.2 million in property tax does not pay for the police and fire contracts with the county.
“Our quality of life – the amenities, the parks, the condition of our streets – all of that is very dependent on our tourism.”