Hotel occupancy taxes post modest growth

Indicating a modest improvement in the Northern Marianas tourism industry, hotel room occupancy taxes generated by the CNMI government in the first eight months of the Fiscal Year 2000 jumped 7.5 percent to $4 million from the year ago of the same period’s $3.7 million.

Government finance managers said the development suggests the recovery of the islands’ travel sector although much of the growth in the industry was spurred by the rebound of the Korean market and the entry of tourists from Taiwan.

The launching by Mandarin Airlines of regular nonstop flights between Taipei and Saipan resulted in modest growth on hotel room occupancy and visitor arrivals into the Northern Marianas.

“The increase in our collection of hotel room occupancy tax from October 1999 to May 2000 appear to indicate the beginning of a rebound of the Commonwealth’s tourism industry,” said Mike Sablan, the governor’s special advisor for finance and budget.

He explained that the increase in hotel room occupancy tax is attributed to the 50 percent increase in the number of Korean visitors coming into the Northern Marianas and the entry of CNMI’s newest tourism market — travelers from Taiwan courtesy of Mandarin Airlines.

However, Mr. Sablan pointed out that despite the October 1999-May 2000 growth, levels of revenue generated from the hotel room occupancy tax is still way below the pre-Asian financial crisis level.

Aside from the significant drop in the volume of tourists coming into the CNMI, other factors like the elimination by Continental Micronesia of all its direct flights between Saipan and major cities in Japan aggravated the situation, officials said.

According to Mr. Sablan, hotel room occupancy tax dropped since 1997, the time when major Asian currencies like the Japanese yen, Korean won, Philippine peso, and Thailand Baht weakened against the United States dollar.

In FY 1999, the level of revenue generated by the CNMI government from hotel occupancy tax dipped by $1.7 million to $6 million from year ago’s $7.7 million, representing a quarterly collection of only $1.5 million in a three-month period.
Hotel occupancy tax started spiraling down in 1998 when government collection reached only $7.7 million from the previous year’s $10.8 million. The Commonwealth generated $9.9 million in total revenue from the duty category in 1996.

Hotel owners in the Northern Marianas have consistently complained about declining hotel occupancy, with the lowest in eight years having been recorded in February 2000 at 69.32 percent.

During the same period, large hotels reported 70.62 occupancy rate while small hotels had only 63.33 percent.
Average room rate for large hotels was $90.61, dropping by $3 this year, while their smaller counterparts have an average room rate of $76.93.

While primarily pointing the finger on the economic downturn in major Asian countries, the Hotel Association also blames the government’s apparent apathy on the business community’s concerns.

The dwindling hotel occupancy rate may also be blamed on the declining volume of passengers disembarking at the Saipan International Airport as aircraft traffic on the island continues to see major reduction.

The persistent decline in visitor arrivals, which started slowly picking up only during the second half of 1999, gave birth to gloomy predictions on the developments in the local economy since this is generally intertwined with the economic activities in the neighboring Asian region.

Economic forecasts in Japan has indicated that the yen may sink further to between 150 and 180 against the US dollar. The Japanese yen has weakened from Y118 in August 1998 to Y144 during the same period last year, hitting an eight-year low against the U.S. dollar.