New Research from Sonoma State Professor Calls into Question Measure B's Revenue Estimates

A new study by Dr. Robert Eyler, a Professor of Economics and Director of the Center for Regional Economic Analysis at Sonoma State University projects if occupancy rates do not rise and remain stable as leading hospitality research organizations like Smith Travel Research (STR) predict, Measure B won't be able to reach its intended target of $2.7 million and will very likely fall short, could even decrease the amount of funds raised, and its effects could spill over to the entire Sonoma county because many event planners would avoid the county all together because of perceived increased costs of hosting events in the county.

Because of the recent fires and COVID shelter in place orders, the leading hospitality forecasting company, STR, sees a lower year occupancy in 2021 and 2022, so Measure B's effect could be muted and not generate as much revenue as the proponents are saying it will, $2.7 million.

The forecast done by STR for Sonoma County Tourism, estimates lower occupancy rates in 2021 and 2022 than 2019 (we should think of 2019 as the baseline level of revenue given 2020 was a year of high volatility in overnight stays due to COVID-19). The STR forecast is for occupancy rates to be down approximately 19 percentage points in 2020 and 8 percentage points in 2021.

Dr. Eyler's study also goes on to state when consumers observe costs due to per-dollar taxes going up, they consume fewer units of the good or service holding all else constant.

Study Conclusion The study concludes by increasing the TOT rate in the defined area, policy makers are assuming demand is set to rise from 2019 levels. If demand is stable or contracts from 2019 levels as a baseline, the following effects are estimated to take place in the defined area and also spill over into Sonoma County overall:

  • Hotel revenues fall;

  • Job losses take place and other business’ revenues fall;

  • Tax revenues from other transactions fall from levels sustained before the tax increase;

  • The defined area gains more tax revenues, where the net gain or loss to Sonoma County depends on how the quantity of hotel rooms demand changes based on the price increase;

  • One of three general scenarios are estimated to take place:

  • If the quantity demand rises beyond 2019 levels, all parties gain;

  • If the quantity demand falls between 0 and 4.2% for each percentage increase in consumer cost of staying overnight, hoteliers lose, there are negative economic impacts, and there is a net gain in tax revenues;

  • If quantity demand falls more than 4.2% for each percentage increase in consumer cost, there is a net loss to government revenue, shifting tax gains to the new TOT rate from other tax revenues countywide.

About Dr. Robert Eyler - Linkedin | Sonoma State

Dr. Robert Eyler acts as both an Associate Vice President of Government and Regional Relations as well as Professor of Economics and Director of the Center for Regional Economic Analysis.

In 2016, he was named Dean of the School of Extended and International Education at Sonoma State University. The former Sonoma State Economics Department Chair has served as interim Dean for the past year and was selected for the permanent position after a national search.

Eyler started teaching at Sonoma State in 1995 and has served as Chair of the Economics Department (2004-2011) and director of the Executive MBA program (2009-2013). He holds a Ph.D. from UC Davis and a B.A. in Economics from CSU, Chico.

The author of two books and several academic articles concerning economics, Eyler is often quoted in the media as an expert in local and national economic trends. He also provides economic impact analyses for both private firms and public entities to help guide public policy at the local and state level. He has been a visiting scholar at the University of Bologna and Stanford University.

Dr. Eyler serves on the board of directors of both Redwood Credit Union and Marin County Workforce Investment Board, as well as the Economic Forensics and Analytics, for the California Chamber of Commerce.

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