Economic Impact Analysis: Hotel Roanoke and Conference Center

Economic Impact Analysis: Hotel Roanoke and Conference Center

Economic Impact of the
Hotel Roanoke
and Conference Center
Prepared by the
April 2015
The economic impact analysis provided in this report was generated using an
economic impact model (IMPLAN) calibrated for a specific study area using
standard regional data sets. The results are to be interpreted as a best estimate
of economic impact based on the assumptions and /or data provided by the
client.
The Roanoke Valley t Alleghany Regional Commission does not guarantee the
accuracy of data or assumptions supplied by the client or of any other source,
nor does it advocate or guarantee the success of any particular policy change,
course of action, or any decision that may be ultimately based on the
information in this report
The Roanoke Valley t Alleghany Regional Commission is not responsible for any
errors, omissions, the accuracy of data /inputs supplied by its client(s), or for the
ultimate use of this data including any decisions made or the effects of any
decisions made based on the information in this report.
The Commission staff would like to thank the Hotel Roanoke Conference Center
Commission, the staff of the Hotel Roanoke & Conference Center, , the Virginia
Tech Foundation, Virginia Tech, the City of Roanoke, Downtown Roanoke Inc,
and the Roanoke Regional Partnership for their assistance with this report.
IMPAN is a trademark of IMPLAN Group, LLC, IMPLAN System, 16740 Birkdale
Commons Parkway, Suite 206, Huntersville, NC 28078 www.IMPLAN.com
Version 6. April 16, 2015
Economic Impact of the Hotel Roanoke and Conference Center Page 1
Executive Summary
The Roanoke Valley-Alleghany Regional Commission examined the economic impact of the
Hotel Roanoke and Conference Center from its renovation and re-opening in 1995 through
2014. An additional component of the study was to document changes in downtown Roanoke
for the same period. The downtown has undergone revitalization through modest growth and
investment, and the Hotel Roanoke and Conference Center has been a visible indicator and
component of this growth over the past 20 years.
x The total impact of the Hotel Roanoke and Conference Center was estimated to be
about $616 million over the past 19 years, including:
o $78 million from initial renovation and construction
o $30.5 million from capital improvements to the Hotel and Conference Center
o $351 million from Hotel sales
o $86 million from Conference Center sales
o $61 million from visitation
x Direct spending by the Hotel, Conference Center and visitors equates to over $395
million of regional impact, while indirect and induced spending by vendors, employees
and households adds an additional $220 million.
x In 2014, the estimated impact of the Hotel and Conference Center was $40 million.
x Over $36 million of the 19 year impact has been in the form of taxes paid by the Hotel
and Conference Center.
x The Hotel Roanoke and Conference Center has directly employed between 250 and 300
people each year over the past twenty years. In 2014, the Hotel and Conference Center
had payroll and benefits of nearly $9 million.
x The Hotel and Conference Center has helped support about 77 additional jobs through
indirect and induced spending each year since its reopening in 1995.
x It is estimated that visitors drawn by conferences and the Hotel have generated over
$61 million in regional impact since 1995. These visitors have helped support about 40
jobs per year in the regional economy.
Downtown Roanoke has seen similar positive growth for the same period. New restaurants,
employment growth and downtown residential growth have occurred as a result of
investment in downtown. It is estimated that the entire impact of revitalization in the
downtown area has likely exceeded $750 million over the past two decades.
Economic Impact of the Hotel Roanoke and Conference Center Page 2
Introduction
In 2013, the Hotel Roanoke Conference Center Commission requested that the staff of the
Roanoke Valley t Alleghany Regional Commission determine the economic contribution of the
Hotel Roanoke and Conference Center to the region from the renovation in 1995 through 2014.
There are several aspects of this study which measure the impact of the daily Hotel and
Conference Center operations, the renovation and capital improvements to facilities, as well as
the impact of visitors to the region that utilize the hotel and conference facilities.
The Hotel and Conference Center is an important part of the downtown Roanoke economy and
growth in Downtown can be quantified over the last 20 years by examining various metrics.
Methodology
The study area for this analysis is the Roanoke Metropolitan Statistical Area (MSA) which
includes the Counties of Botetourt, Craig, Franklin and Roanoke and the Cities of Roanoke and
Salem. While the Hotel and Conference Center has a wider impact, the focus of this study was
the metropolitan area.
Staff of the Roanoke Valley t Alleghany Regional Commission (RVARC) obtained detailed
financial information from the Hotel management on the operations, capital expenditures, and
revenues of the facility. In some cases, data for early years was estimated based on revenues.
In a separate analysis, staff utilized various publically available data to document the growth of
downtown Roanoke over the last 20 years. These data included, building permits, Virginia
Employment Commission records, INFOSYS Inc. databases, US Census data, primary sources,
and newspaper and magazine articles.
Staff utilized specialized software called IMPLAN which was developed by IMPLAN Group LLC.
This software is designed to model complex economic interactions to measure the financial
impact of specified activities or events. The impact estimates should be considered
conservative since the economic model was designed to account for competing hotel business,
which is often not considered in these types of studies.
Additional details and on the methodology and assumptions are mentioned in each sub-section.
Economic Impact of the Hotel Roanoke and Conference Center Page 3
How does IMPLAN Work?
At the heart of the IMPLAN model is a national input-output dollar flow table called the Social
Accounting Matrix (SAM). Unlike other static input-output models, which just measure the
purchasing relationships between industry and household sectors, SAM also measures the
economic relationships between government, industry, and household sectors.
The model uses actual economic and employment data to model 440 industries to determine
how industry dollars are spent to produce commodities. National level and county level
production data sets are then combined to produce a series of multipliers.
Multipliers measure the amount of total economic activity that results from an industry or
household spending money in the local economy. IMPLAN uses the national and county-level
data multipliers to estimate economic impacts of various activities. Once all input data has been
entered into the model, IMPLAN then generates a series of summary output tables to show the
direct, indirect, and induced economic impacts.
x Direct impacts are those that result from the direct infusion of money in the economy
as a result of an economic event. These impacts consist of permanent jobs, wages, and
output of economic events.
x Indirect impacts are the jobs, wages, and output created by businesses, which provide
goods and services essential to an economic activity (construction, tourism, etc.).
Indirect impacts represent a cumulative total of several cycles of spending that work
their way through the local economic supply chain until all remaining money from the
initial stimulus leaks from the study area economy. For example, a series of restaurants
making purchases of goods from local suppliers as a result of participant spending on
meals would be an example of a portion of indirect impacts as defined in this analysis.
x Induced impacts are those impacts that result from household spending by those
impacted by the direct and indirect phases of economic activities. The spending of
wages earned by employees working for industries impacted by economic events
represents the largest portion of induced impacts. This spending creates induced
employment, especially in the service sectors.
The summary output tables also show the direct, indirect, and induced effects of labor income,
value added, and output.
x Labor income equals employee compensation plus proprietor income. Employee
compensation in the IMPLAN model is the total payroll cost of the employees paid by
the employer. This includes wage and salary, all benefits, and employers paid payroll
taxes (social security, unemployment, etc.) Proprietor Income consists of payments
received by self-employed individuals and unincorporated business owners.
Economic Impact of the Hotel Roanoke and Conference Center Page 4
x Value added ](]vZ]((vvv]v[}o}vZ
cost of any intermediate inputs. Value added is the total income generated by the event
in the local economy. Value added includes employee compensation, taxes, and
operating surplus. Value added is best understood as the contribution made to gross
domestic product or, more simply, as new wealth in the region.
x Output can generally be understood as regional sales activity. Output is more precisely
defined as the value of industry production.
x Employment is estimated by the model as all jobs, including part-time and seasonal
workers. Employment numbers can be changed to full-time equivalency (FTE), but the
ratio varies by industry sector.
What Can IMPLAN Analyses Reveal
An IMPLAN analysis seeks to quantify the economic benefit that expenditures for a project
(construction) or an activity (general tourism or special events) have on a local or regional
economy. For example, expenditures spent on the construction of a building or the purchase of
items on a trip such as lodging and gasoline create additional purchases in various sectors of
the economy. Money spent on landscaping for a newly constructed building or the purchase of
hotel furniture both create numerous opportunities for those receiving the money to make
additional consumer and business purchases. This process creates jobs and expands the
economy. Typically, the total economic impact should measure the increase or decrease of an
activity when new money is injected into an economy or a business closes. The economic
impact is not a measure of the relative size of particular sector or business within the local
economy, but rather a measure of the impact that business has on increasing or decreasing
funds circulating in the local economy.
Economic Impact of the Hotel Roanoke and Conference Center Page 5
Economic Impact of the Hotel Roanoke and Conference Center
Financial data were obtained from the Hotel Roanoke and Conference Center which provided
great detail on revenues and expenditures. Because of this detail, this report also has a
breakdown of Hotel and Conference Center impacts as separate entities. As previously
indicated, some data on room nights and expenditures from 1995-2000 was estimated based
on revenues because of incomplete records.
Economic impacts can be measured based on revenues or expenditures in the IMPLAN
modelling software. The impact of Hotel and Conference Center operations and sales used in
this report is based on revenues. Rather than measuring the full market share of the Hotel
Roanoke and Conference Center sales, an attempt was made to measure the added value of
the facility to the regional economy. All impacts stated are for the Roanoke Metropolitan
Statistical Area (MSA).
Initial Renovation and Conference Center Construction
The Hotel Roanoke and Conference Center was renovated and opened in 1995 with an initial
$40 million investment, which is equal to about $62 million today, when adjusted for inflation.
It is important to note the sources for this funding. A measurable impact occurs when money
from outside the region is injected into the local economy. According to the Hotel Roanoke, the
initial renovation of the Hotel included money from the following sources:
$6 million Federal HUD 108 loan
$7 million Virginia Tech Real Estate Foundation
$1.3 million loan from Doubletree Hotels
$6.5 million loan from a bank consortium
$6 million from local donations and sources
$13 million City of Roanoke financing for Conference Center
According to the Hotel, approximately 75 percent of the original work was awarded to local
firms. Thus, $62 million was used at a 75 local purchasing percentage to model the initial
renovation of the Hotel and the construction of the Conference Center. The entire investment,
including local funds, was included in the IMPLAN analysis at the request of the client.
Economic Impact of the Hotel Roanoke and Conference Center Page 6
In current dollars, the total regional impact of this $62 million renovation was estimated to be
$78 million. Employment related to the renovation did not add ^v_i}}Z}v}uU
helped support existing construction jobs during the renovation work.
Economic Impact of the Hotel Roanoke and Conference Center Page 7
Capital Improvements
The Hotel has averaged about $1.2 million per year in capital improvements, while the
Conference Center has averaged about $350,000 per year in capital improvements. Hotel
management staff indicated that about 65% of capital investments affect the local economy.
Thus, capital improvements had an estimated $11.7 million of total impact in the region from
1996-]v}[}ooX]o]u}uv}}5 jobs per year. There
were no capital improvements in 1995 which was the year the facility was renovated and re-
opened (see Initial Renovation above).
Hotel Sales
Hotel impacts are modeled using revenues. The IMPLAN model uses multipliers and regional
data on the hotel industry to estimate employment, indirect effects, and induced effects. It is
important to note that the Hotel sales do not represent a 100% contribution to the regionally
economy. The intrinsic growth of the larger Hotel sector is documented in the following tables.
Thus, it is easy to see that an inherent demand for Hotel services has caused supply and
revenues to increase over the past 20 years. If the Hotel Roanoke ceased to exist, a portion of
business would be absorbed in the existing and future marketplace. However, the Hotel
Roanoke is in the unique position of generating business from the Conference Center, as well as
Economic Impact of the Hotel Roanoke and Conference Center Page 8
through its reputation and proximity to downtown attractions. About 30% of Hotel guests were
associated with conferences. For this analysis, it was also assumed that an additional 30% of
guests came specifically to the Hotel Roanoke as a destination or to be close to downtown.
Thus a broad assumption is made that the remaining 40% of hotel guests could be absorbed
into the existing market. As a result, 60% of Hotel sales (less capital improvements) were used
to model the economic impact (rather than a figure that represents 100% of their current
market share). Considering this 40% absorption of guests, Hotel sales contributed an estimated
$351 million to the regional economy over the past 19 years. Capital expenditures were
excluded in the sales model.
Conference Center Sales
The Conference Center is a unique facility that draws
a variety of conferences, workshops and visitors to
the region. There are few comparable facilities in the
Roanoke Valley, thus 100% of sales were used to
model the impact. The Conference Center was
estimated to have had an impact of $86.5 million
over the 19 year period, excluding capital
improvements. Capital expenditures were excluded
in the sales model.
Visitor Spending
Economic Impact of the Hotel Roanoke and Conference Center Page 9
Hotel and Conference Center impacts
discussed thus far have not taken into
account visitor spending to the region.
Detailed data on conferences, types of
attendees, and spending patterns was
difficult to identify. The Conference Center
was able to supply some estimates of
conference attendees. It is estimated that
30% of attendees also purchase a room,
thus a 30 /70 percent split was used to
estimate conference overnight and day
guests as follows.
However, some portion of the conference center visitors could likely be absorbed into the
existing conference market. In other words, if the Conference Center ceased to exist, other
venues would pick up some new business. Over the 19 year period, the Hotel booked nearly
1.6 million room nights. We previously assumed 40% of these rooms could be absorbed into the
existing market. However, since there is no comparable conference facility in the region, the
absorption for the conference center business would be much smaller, meaning that demand
for conference services would be higher than supply if the Conference Center did not exist.
Likewise, some portion of overnight guests are also visitors to the region that are not
participating in a conference. Furthermore, some conferences draw overflow guests that stay at
other hotels. In simple terms, there are many factors that can influence the economic model,
and it is difficult to reconcile and estimate these influences without detailed survey data on
visitation. For this analysis we used 100% conference overnight attendees to estimate visitor
(conference and non-conference) spending. However, we assumed that 40% of the day
conference attendees were from the local region, and they were not counted in visitor impacts.
Virginia Tourism Commission spending profile data was used to estimate visitor spending.
Expenditures on meals, admissions, retail, and gas were thought to be reasonable for
conference attendee. Data on a day visitor to the conference was estimated based on federal
per diem rates for Roanoke. Lodging was excluded because it is already accounted for in the
Hotel sales model.
Economic Impact of the Hotel Roanoke and Conference Center Page 10
Thus, each overnight visitor to a hotel is currently estimated to generate $75.90 in non-lodging
expenditures in the Roanoke MSA. Each day visitor is estimated to spend $45. No attempt was
made to deflate current spending to older levels in the 1995-2014 spending estimates.
It is estimated that visitors have generated about $61 million in additional regional impact since
1995. These visitors have helped support about 40 jobs per year in the regional economy.
Hotel Roanoke and Conference Center 2014 Impact
Another analysis for only 2014 shows an estimated impact of about $40 million. Sales,
visitation, and capital improvements are included. The model accounts for some absorption,
thus direct employment is slightly understated.
Economic Impact of the Hotel Roanoke and Conference Center Page 11
Hotel Roanoke and Conference Center Summary
x The total impact of the Hotel Roanoke and Conference Center was estimated to be
about $616 million over the past 19 years (includes initial renovation, capital
improvements, hotel and conference center sales, and visitor spending)
x Direct spending by the Hotel, Conference Center and visitors equates to over $395
million of regional impact, while indirect and induced spending by vendors, employees
and households adds an additional $220 million.
x Over $36 million of this impact has been in the form of local taxes according to Hotel
and Conference Center management.
x The Hotel Roanoke and Conference Center has directly employed between 250 and 300
people each year over the past 19 years.
x The Hotel and Conference Center has helped support about 77 additional jobs through
indirect and induced spending each year since its reopening in 1995.
x In 2014, the estimated impact of the Hotel and Conference Center was $40 million.
When modeled as a whole, the Hotel and Conference Center has had an estimated impact of
$616 million over the past 19 years. Combining an entire 19 years into the model is not ideal,
but it can provide sense of the economic market share and contribution made by the Hotel
Roanoke and Conference Center. The total estimated impact includes the initial renovation and
construction, hotel sales, conference center sales, capital improvements and visitor impacts.
The table above does not reflect 100% of direct jobs because employment in the model reflects
potential absorption to other hotels and other factors. Ideally, the model should be estimating
^v_}v}u]]]}ZP]}vX/Z}ov}ZZ/DW>Eu}o}v}
differentiate between full and part-time jobs. A previous estimate of economic impact after ten
years indicated a $141 million impact according to the Hotel.
The following table lists the employment sectors impacted by the Hotel Roanoke and
Conference Center and visitor spending from 1995-2014. Two sectors represent the Hotel and
Conference Center and the remaining eight represent other major sectors being impacted
through renovations, repairs, services, and visitors.
Economic Impact of the Hotel Roanoke and Conference Center Page 12
Economic Impact of the Hotel Roanoke and Conference Center Page 13
Downtown Roanoke Change and Economic Impact
Since the Hotel and downtown are integrally tied together it seemed important to examine
how changes in downtown could also be measured and modelled. A general renewal of
downtown over the last 20 years had occurred because of significant private and public
investments into downtown. A shift towards downtown residential living and the continued
use of downtown as a regional employment center has led to many positive changes in
downtown. None of these impacts are included in the Hotel Roanoke and Conference Center
models, but are provided for reference and documentation purposes.
Downtown Employment
For most purposes, the traditional downtown service district was used in this study. The one
exception is the measurement of employment by US Census Bureau geography. Employment
data was obtained from the US Census Bureau for 1990 and 2010 by Traffic Analysis Zones
(TAZ). The TAZs are used by transportation planners to estimate traffic conditions by small
geographic areas. In general, the TAZ data reflects about 92% of actual employment because of
how the Census Bureau conducts samples, so the estimated employment would actually be
slightly higher than the numbers reported below. However, the change in employment from
1990 to 2010 in the greater downtown area is still estimated to be 1,800 people.
Economic Impact of the Hotel Roanoke and Conference Center Page 14
Location of Traffic Analysis Zones used to estimate Employment
An increase of 1,800 employees in downtown Roanoke yielded about $327 million of additional
yearly impact over the 1990 employment.
The 1,800 increase in employment was broken down across twelve sectors representative of
downtown employment characteristics. The resulting IMPLAN impacts influence the following
top ten sectors as indicated below. dZovZu}ovP}Zv}v[
represent overall employment or actual employment.
Economic Impact of the Hotel Roanoke and Conference Center Page 15
Downtown Restaurants
/vU}v}vZ}v}l/v}}}^}v}v}}l_Z(o
in documenting the number of restaurants and related employment in downtown. The report
documented that there were 56 restaurants which employed 464 people in 1992. Downtown
Roanoke Inc. currently lists 72 restaurants on their website, which are estimated to employ 900
people based on Virginia Employment Commission data and calculations to estimate the
average employment per downtown restaurant. The 1992 downtown service district area was
used for this analysis.
Economic growth within the restaurant industry is more volatile than the hotel industry. Data
below shows the growth of restaurants in the Cities of Lynchburg, Richmond and Roanoke for
comparison.
Economic Impact of the Hotel Roanoke and Conference Center Page 16
Restaurants in Downtown-2014
Total restaurant employment in downtown Roanoke has increased by an estimated 436 people
which has contributed an additional $450 million to the local economy over the past 22 years.
Taken as a whole, the 73 restaurants downtown employ about 900 people and contribute over
$83 million annually to the regional economy. This growth in restaurants and employment can
be attributed to multiple factors.
Economic Impact of the Hotel Roanoke and Conference Center Page 17
Real Estate Taxation and Valuation
There are approximately 750 parcels in the downtown area. In 2001, the real estate valuation
of these parcels was $411 million. By 2014, the valuation had reached $906 million. A portion of
this real estate is tax exempt, and data prior to 2001 was unavailable. Over the 13 year period,
the increase in real estate valuation has contributed an additional $24 million to the tax base of
the City of Roanoke due to investment and growth. In 2014, the real estate taxes collected from
downtown were over $7 million. The downtown tax district requires 10 cents per $100 of
valuation to be provided to Downtown Roanoke Inc. This additional tax has generated over $6
million during the past 19 years which has been reinvested in Downtown Roanoke Inc. services.
Housing Units
The number of housing units has increased dramatically in the downtown area over the past 20
years. In 1990, there were about 10 units and now there are estimated to be 980 units.
Investments made into these properties are partially reflected in the building permit data
discussed below. In 2010, there were over 1300 residents in downtown. Residents contribute
to the vitality of downtown through the patronage of businesses and restaurants. The actual
contribution of the residents cannot be modeled with a detailed spending profile.
Building Permits and Investment
The City of Roanoke assisted in the compilation of building permit data for 2001-2014. Data
prior to 2001 was not available. There were a total of 410 permits for about 120 parcels in the
downtown area. The total valuation of these permits was $95.7 million. Unfortunately, building
permit data alone cannot be used to model investment because permit valuation typically
underestimates the true value of the investment. For example, the Taubman Museum of Art
cost about $66 million to build, but the permitted value was $9.9 million.
Economic Impact of the Hotel Roanoke and Conference Center Page 18
Downtown Roanoke Inc. compiled data
on downtown investments from 1995-
2000, likely based on building permit
data. The total value of investment was
$42.1 million for this period. Combined
building permit data from 1995-2014
indicate a total investment of $137.8
million. The IMPLAN model estimates a
total impact of $229 million if this level of
investment is used and not adjusted for
inflation.
Using actual investment data from news reports and other sources, a much higher level of
investment can be identified. In June 2014, The Roanoker Magazine had a feature story on
downtown Roanoke that documented much of this investment. Other data was obtained from
Roanoke Times news stories and City of Roanoke building permit records.
Economic Impact of the Hotel Roanoke and Conference Center Page 19
Large Investments in Downtown Roanoke 1995-2014
The 24 largest renovation and construction investments in downtown Roanoke have totaled
$350 million (not adjusted for inflation) which yields a total impact of nearly $582 million.
Combined with smaller investments, it is estimated that the entire impact of revitalization in
the downtown area likely exceeded $750 million over the past two decades.
Economic Impact of the Hotel Roanoke and Conference Center Page 20
Downtown Roanoke Summary
The downtown has undergone revitalization through modest growth and investment, and the
Hotel Roanoke and Conference Center has been a visible indicator and component of this
growth over the past 20 years.
x The 25 largest renovation and construction investments in downtown Roanoke have
totaled $350 million of direct investment which yields a total impact of nearly $582
million. Combined with smaller investments, it is estimated that the entire impact of
revitalization in the downtown area has likely exceeded $750 million over the past two
decades.
x Total restaurant employment in downtown Roanoke has increased by an estimated 436
people which has contributed an additional $450 million to the local economy over the
past 22 years. Taken as a whole, the 73 restaurants downtown employ about 900
people and contribute over $83 million annually to the regional economy.
x Residential units in the downtown area have increased from nearly zero in 1995 to
almost 1000 by 2014. In 2010, over 1300 people were living downtown.
x From 2001-2014 an increase in real estate valuation downtown has contributed and
additional $24 million to the tax base of the City of Roanoke due to investment and
growth. Over $6 million in downtown service district taxes have been distributed for
Downtown Roanoke, Inc services over the past 19 years.

Leave a Reply

Your email address will not be published. Required fields are marked *