Will new hotels overwhelm Asheville’s carrying capacity?

A wad of money from Charlotte strolls over to Asheville. After taking a quick look around, it parks itself in the center of downtown, then puffs up and bursts apart, sending greenbacks fluttering everywhere.

Some of that money lands in restaurants; some goes to experiences like guided tours and outdoor excursions. A few bills drift over to a local retail outlet, exchanged for a coffee mug or hand-woven bag.

The owners of those businesses then take their share of the money down to the grocery store to buy food. They also use it to pay their employees, who might buy food, a new coat or even a TV. The beneficiaries of all those transactions do the same, and around and around it goes.

From a conventional economic perspective, that is tourism in a nutshell: money coming from outside the city and spreading itself around. Asheville is the “product,” tourists are the customers, and other areas are also jockeying for those dollars.

“These are our competitors,” says Bob Patel, leaning over a sheet of tourism statistics for nearby destinations. “Asheville is competing with other cities.”

Originally from India, Patel now chairs the Buncombe County Tourism Development Authority’s board; he also owns four hotels in Asheville. He acquired the first one in 1982, before downtown revitalization. He’d previously owned a hotel in Pensacola, Florida, and before that, he worked as a structural engineer.

Patel points to Charleston’s entry on the sheet in front of him, saying his goal is to beat them. And according to the data he’s assembled, we’re close, trailing slightly in hotel room occupancy rate and actually ahead in the average price of those rooms.

The way he sees it, each visitor coming here represents money leaving some other city’s economy and slipping into Asheville’s, and vice versa.

“So we’re trying to steal the other city’s lunch here,” says Patel. “A pie is only so big.”

To him, the more tourists the better. So from that perspective, the fact that there are five hotels under construction around town and at least seven more being considered should be good news for all. More lodging, the thinking goes, equals more tourists, which equals more money — assuming, that is, that those hotel rooms are occupied.

But Tom Tveidt, an independent economic analyst and former director of research for the Asheville Area Chamber of Commerce, says it’s hard to predict how this round of substantial investment will fare.

“A concern whenever there’s a big burst in any industry is, ‘How sustainable is this?’” he notes, adding, “Obviously, no one knows.”

And downtown business owner Franzi Charen, who’s also the director of the Asheville Grown Business Alliance, worries that the increased demand for goods and services stemming from those additional bodies on the street might attract more corporate chains that could drive out local indie businesses.

Interdependence

Asheville currently has about 7,200 hotel and motel rooms that are subject to the 4 percent occupancy tax levied on room sales. And if all of those current hotel projects came to fruition (which is by no means guaranteed), it would add at least 1,115 more, boosting the total number by 15 to 20 percent, notes Patel. Demand, meanwhile, is increasing by about 4 percent per year. So if all of them popped up out of the ground fully formed today and demand continued to grow at the same rate, it could take four or five years for the scales to re-balance.

Effective marketing, however, could potentially speed things up, and that’s where the Convention and Visitors Bureau comes in. While hotels, restaurants and other services advertise themselves individually, the bureau promotes Asheville as a whole.

Marla Tambellini, the organization’s deputy director and vice president of marketing, says Asheville has a brand, and her organization is charged with crafting and promoting that brand. To do this, the bureau, an arm of the Chamber of Commerce, uses various tools, including marketing strategies, a geographic focus, a primary target audience (experiential travelers ages 25-54), media and communications strategies, extensive data analysis, and actively pursuing conferences and business conventions.

The bureau’s marketing strategy for 2014-15 plays up the range of experiences available here, rather than focusing on any single one.

“What we’ve found is it’s really the collection of our assets that’s appealing to people,” Tambellini explains. “It’s the mountains, it’s food, it’s music, it’s Biltmore.”

Downtown Asheville, she notes, has gradually become a significant part of that array as well, as local restaurants and other businesses have flourished to the point that some now qualify as attractions themselves.

And it’s a symbiotic relationship, notes Charen.

“We probably have 90 percent walk-by traffic,” she says. “They just pop their heads in and they buy something. We’re very dependent on the tourism industry. We don’t try to build our business or gear it that way, but because of our location downtown, because downtown is such a tourist attraction, it’s what ends up happening.”

In 2012, for example, 3.1 million overnight visitors to Buncombe County spent an average of $129 per person per day, more than half of it on food and beverages or retail shopping, according to an economic impact analysis by Tourism Economics, a global consulting firm.

Still, Charen fears that too many visitors might end up undermining the very culture that drew them here to begin with. But she believes that such measures as incentives and subsidies for independent businesses, and limits on things like store size, could help prevent this. Charen also questions the wisdom of investing too much in an industry that’s prone to significant peaks and valleys.

Self-sufficient

Tveidt, though, says the local tourism industry isn’t really all that unstable. Recalling the concern in the wake of 9/11 that tourism would drop off, he says, “The irony of it is, we actually did better after 9/11, because people were afraid to get on planes. This is a drive market.”

In addition, he maintains, the city’s investment in the tourism industry is not all that significant: It’s the hotel investors who are taking the risk. Asheville’s appeal, notes Tveidt, isn’t based on some big theme park or natural wonder that the city needs to sink money into. The things that draw visitors here are either inherent, such as the mountains and the heritage, or develop on their own in the natural course of things, as Asheville’s culture and local businesses have.

“It’s kind of self-sufficient, and it’s a lot of small businesses,” he says. “So it’s dynamic, and it’s able to change direction pretty easily.”

Besides, the money used to market and develop tourism comes directly out of tourism revenue, in the form of the occupancy tax. And the state legislation that enacted the tax spells out how that money can be spent: Three-quarters is used for marketing, and the rest goes to the Tourism Product Development Fund.

Businesses can apply for grants and loans from this fund for projects that have the potential to attract more overnight visitors to the area. Highland Brewing Co., RiverLink and the Asheville Art Museum have all received grants for projects that are set to break ground this year. Between 2010 and 2013, the U.S. Cellular Center received a series of grants totaling over $4 million to renovate the convention space in the former Asheville Civic Center. The Riverfront Destination Development Project, meanwhile, was awarded $1.8 million.

“It’s one of the few industries where the things they do for their customers benefit the residents as well,” says Tveidt. “Obviously, they want clean streets, they want safe streets, they want lots of nice restaurants, they want diverse entertainment. … They’re not doing it for us, but we can profit from it as well.”

Darwinian evolution

Tourism, Tveidt maintains, creates a dynamic economy that can quickly respond to market conditions: A trendy new restaurant may open even as two others are closing.

Charen agrees. Like an ecosystem rich in biodiversity and intricate species relationships, an economy fed by tourism creates a business environment that’s always improving itself through trial and error, encouraging creative entrepreneurs to take chances.

“When you have a lot of businesses opening and a lot of businesses closing, you really home in on what works,” says Charen. “There’s a lot of people trying stuff: You’re trying a little hot dog stand, I’m trying a burger thing, and somebody else is trying a butcher shop. And maybe only the butcher shop works.”

Entrepreneurs can take risks and discover niche markets — and if they fail they can try again until they hit the sweet spot, as Charen did herself.

“This is my fourth business,” she reveals, gesturing around her Lexington Avenue boutique, Hip Replacements. “I had two that essentially, on paper, failed and two that, on paper, succeeded. But Asheville was kind enough to me to be able to keep trying.

“For me, it wasn’t necessarily such a bad thing — 20/20 hindsight — that two businesses closed. It helped me nurture my skills to, in the end, come out with two successful businesses.”

And thanks to that same dynamic, Hip Replacements, she says, would be nearly unrecognizable to someone who knew it 20 years ago, having evolved along with its environment and customer base.

Kim Murray, co-owner of The Lobster Trap, notes that hotels aren’t the only local establishments anticipating growth in tourism. In response to high demand last year (at one point, people had to wait up to four hours for a table), Murray decided to add 22 seats to her restaurant.

Fellow downtown restaurateur Peter Pollay, co-owner of Posana, has also expanded his seating by 20 percent.

Other establishments, such as the Corner Kitchen, Rocky’s Hot Chicken Shack and Bouchon, are opening entirely new venues, says Jane Anderson, executive director of the nonprofit Asheville Independent Restaurants.

Where’s the money?

Between 2009 and 2012, the tourism industry created over 280 jobs per year, and as of the latter year, one in seven jobs in Buncombe County was in that sector, according to the Tourism Economics report.

There is a catch, however: “It’s not a well-paying industry, for the most part,” says Tveidt. “It’s a lot of low-skilled service workers. You’ll find that if you compare this area to other similar-sized or larger communities, our wages are never that strong, and it’s primarily due to the mix of industries. And one of those big industries is tourism, so that’s always going to be a bit of a drag.”

Just Economics, another local nonprofit, advocates for a sustainable economy in Western North Carolina and has a certification program for employers that pay a living wage.

“Does tourism typically breed low-pay jobs? Yes,” says Executive Director Vicki Meath. “Does it have to? No.”

Of the 350 living-wage-certified businesses in Buncombe County, notes Meath, none are hotels. But that doesn’t necessarily mean that no local hotel pays a living wage: It could just be that they haven’t sought certification.

According to the Convention and Visitors Bureau’s monthly indexes, nearly every pertinent metric is on the rise. Hotel occupancy, airport passengers, revenue per available room, publicity reach — it’s all going up.

About the only numbers that have dropped are those related to traditional, guided tourist experiences and services. Fewer people have come through the Asheville and Pack Square Park visitor centers or booked group tours. Requests for travel guides, meanwhile, have taken the biggest hit, declining by about 25 percent.

Asheville’s online presence is showing the fastest growth, with more than 200 percent greater online publicity value this fiscal year, and 400 percent growth in estimated reach, based on the cost of comparable paid advertising and the nature of the information. It’s a different market now, says Tambellini: Tourists are starting to favor casual exploration over the traditional brochure-and-tour-guide experience.

The goal, she notes, is to stay at over 60 percent hotel room occupancy. Over the past year, the city averaged about 70 percent, the indexes show, with a high of 86 percent in October and a low of 54 percent in February.

Tambellini expects those numbers to drop once the new hotels are built, but she sees such declines as just one part of a larger cycle. Bring one pie to a party and they eat the whole thing. Bring two pies the next year, and maybe they eat one whole pie and half of the other one. But it’s apparent that this party has pie to spare, so the following year more people show up, both pies are eaten and the cycle repeats. In other words, even if the occupancy rate drops, total visitation should continue to rise until the market stabilizes again.

“There are weekends where it’s very difficult to find a room in Asheville,” Tambellini points out, “particularly once you get into the summer months and October. So that scenario becomes very favorable for hotel growth.”

Charen, however, imagines all these new hotel rooms filled with tourists, some of whom like it here so much that they decide to buy a second home in Asheville. And soon enough, they begin to yearn for things familiar from their hometown — perhaps a Starbucks around the corner or a Gap down the street — and the ball gets rolling.

Tension builds as the newcomers try to impose their vision of what Asheville should and shouldn’t be, while some locals resist. Maybe the culture remains strong and doesn’t change. Or maybe it does.

“If I was purely interested in profit, as a business,” says Charen, “I would say these hotels that are popping up downtown are great, because they’re going to bring in more people. But I’m more concerned with what Asheville’s going to look like 20 years down the road.”

To view the complete Tourism Economics report, go to ashevillecvb.com/economic-impact-2/.