This 2023 Lake Tahoe/Truckee Regional Lodging Trend Report informs tourism industry policymakers and residents about the evolving dynamics within the region. The destination has experienced a variety of changes, including a reduction in overnight visitors, an increase in “untethered” day visitors, the national impact of inflation, and consumer belt-tightening regarding travel. Together, these trends are increasing pressure on the region’s natural resources and human capital by simultaneously increasing impacts and reducing revenues.
The model data is based on government tax records from Placer County, Washoe County, the Town of Truckee, the City of South Lake Tahoe, El Dorado County, and Douglas County. It encompasses data from 2018 through 2023, the most recent available for comparison.
About The Tourism Impact Model
The Tourism Impact Model (TIM) was created by Triple Point Strategic Consulting and SMG Consulting to understand the size and scope of the Lake Tahoe and Truckee region tourism economy and to provide insight to the tourism industry, government policymakers, and the local community to understand the changing dynamics of the tourism economy. The model was developed using government sources data and extensive visitor survey data.. For more information contact Carl Ribaudo at carl@smgonline.net.
Lodging Performance
in 2023
A data review shows the Lake Tahoe tourism economy slowed in 2023 as measured by paid overnight
visitation. Four key metrics illustrate this in terms of year-over-year performance:
- Occupancy was down 3.6 percent,
- Average daily rate (ADR) was up slightly by 0.5 percent,
- Overall taxable room revenue decreased by 3.2 percent, and
- Transient occupancy tax (TOT) collections were down 3.6 percent.
Although many months were down in 2023, September was a noticeable exception and posted strong gains.
November and December were down significantly, suggesting 2024 will not get off to a strong start. In terms
of the individual jurisdictions, performance varied and not all posted losses. Table 1 summarizes the downturn.
Table 1. Lake Tahoe Basin and Truckee Lodging Performance in 2023
Long-Term Lake Tahoe Basin Lodging Performance
The Tahoe Tourism Impact Model captures monthly data from January 2018, allowing for a six-year time series analysis to be updated annually. All visitors are accounted for, including friends and family, campers, vacation homeowners, and day visitors. The focus of this report is paid overnight lodging performance, thus only visitation and properties contributing to TOT are shown below.
Occupancy
Although the overall six-year trend is downward, as shown in Figure 1, a closer look at the data reveals occupancy never recovered to the pre-pandemic level. During 2018-2019, occupancy averaged 42 percent. In contrast, the average from 2021 through 2023 was 37 percent. Lodging supply or total rooms available can influence occupancy, however the Tahoe Basin lodging supply has remained remarkably stable over the six-year period, with South Lake Tahoe’s Measure T having only a modest impact on the total basin supply.
Figure 1: Lake Tahoe Basin Paid Lodging Occupancy
Average Daily Rate
As occupancies have declined, the ADR has increased. Prior to the pandemic, the ADR averaged $154. From 2021, the ADR averaged $227. A close look at Figure 2 shows ADR growth leveling off by the end of 2022. As noted above, the ADR only grew 0.5 percent in 2023.
Figure 2: Lake Tahoe Basin Average Daily Rate
Revenue
The ADR has more than offset occupancy declines. Figure 3 shows Tahoe Basin revenue as measured by revenue per available room (RevPAR). From June 2021, RevPAR has remained consistent, although dipping noticeably in November and December 2023.
Figure 3: Lake Tahoe Basin Revenue per Available Room
Transient Occupancy Tax Revenue
TOT is another barometer of revenue, as overall rates have been constant over the time period. Figure 4 shows the leveling off of occupancy rates and ADR, flattening TOT growth. Figure 5 presents the data on an annual basis, removing seasonal variation.
Figure 4: Lake Tahoe Basin Transient Occupancy Tax Revenue
Figure 5 shows the higher level of TOT revenue generated in 2021 through 2023 and the 3.6 percent year-over-year decrease in 2023.
Figure 5: Annual Lake Tahoe Basin Transient Occupancy Tax Revenue
Transient Occupancy Tax Revenue
Figure 6 demonstrates ADR increases more than compensated for decreasing occupancy prior to and through the pandemic. For the past three years, occupancy and TOT revenue have been flat.
Figure 6: Occupancy and Transient Occupancy Tax
Situation Analysis
The post-Covid boom that the region experienced has waned and other market factors are having an impact. The decline in occupancy indicates reduced demand for Lake Tahoe overnight lodging. This could result from various factors, such as a slowdown in economic growth, inflation, higher interest rates taking a larger bite out of household wallets, unfavorable weather conditions, and/or increased competition from other destinations.
Fewer overnight visitors combined with only a slight increase in the ADR has reduced overall lodging revenue and resulting TOT revenue. As revenues decline, profit margins are squeezed and more businesses will struggle to stay afloat. Employment opportunities are unlikely to expand, and average wage increases will be less likely to keep up with ever-increasing costs of living. Service standards are likely to suffer.
Fewer overnight visitors mean fewer transactions. For businesses that have relied on the volume of transactions, fewer visitors mean less revenue even if they are paying more for lodging. These businesses will be challenged to raise prices and/or shift product and service offerings to earn more revenue per customer.
To remain competitive and sustainable, local leaders, destination marketing organizations, and businesses must carefully analyze and understand the current trends and adjust their strategies accordingly. To sustain Tahoe’s tourism economy with fewer visitors will require higher yields.
Key Takeaways
- Tahoe’s economy is in transition: Higher-spending tourists can benefit the local economy, but volume-based businesses may need to adjust their product offerings as well as marketing and pricing strategies.
- Target market: The shift to fewer visitors who spend more may require targeting new markets and/or existing markets with new messages.
- Focus on the experience: Tahoe needs to improve the overall visitor experience in order to support higher prices.
- Pricing adjustments: Individual lodging properties will have to evaluate their pricing strategies to ensure optimal pricing for maximizing revenue as the market evolves.
- Sustainability: With fewer visitors, the region can more easily implement sustainable practices and minimize tourism’s negative impact on the environment and local communities.
- Federal, state, and local government adaptability: As the tourism economy evolves, government agencies at all levels must adapt new policies to improve the visitor experience.
Shifting from volume-based tourism to fewer visitors spending more can lead to a more sustainable and profitable tourism industry.
For more information on this report or additional strategy and analytic services
Contact Carl Ribaudo at carl@smgonline.net.
