Walla Walla, Wash.—Premium wine means primo development opportunities for hoteliers, if experience in Northwest wine regions is any indication. In the past five years, available hotel room nights in the Eastern Washington city of Walla Walla rose more than 25%, largely due to the growth of the local wine industry and its reputation for stellar wines.

“When I came here we had a hotel inventory—the number of hotel rooms by 365 days—of about 250,000 room nights. It’s up to 320,000 room nights,” Michael Davidson, executive director of Tourism Walla Walla, told Wines & Vines. Since he arrived in 2005, the landmark Marcus Whitman Hotel has expanded to 127 rooms with the addition of 30 suites, and Comfort Inn and Hampton Inn have both opened locations. Bed and breakfasts have seen a four-fold increase.

While the recession has dampened large-scale commercial development in many parts of the state and the region, Davidson said Walla Walla is holding its own. “There are still more hotels that are on the drawing board; Marriott is looking at building a hotel here in Walla Walla,” Davidson said. “Wine has been one of the driving forces why people are looking to bring new businesses here, and why new restaurants have popped up, and why B&Bs have come.”

It’s a similar story in British Columbia, where the number of rooms in the Okanagan-Similkameen tourism region has risen in the past three years. The boost reflects growing interest in the region’s wines, and in particular, in their quality. The average number of rooms available in a given month increased to 3,574 in the first half of 2010, up from approximately 3,000 for much of the past decade.

Meanwhile in Oregon, the Willamette Valley has seen properties such as Newberg’s 85-room Allison Inn and Spa open to meet demand for top-flight accommodations from wine aficionados.

Journal of Wine Economics
The role of the wine industry in supporting hotel development is borne out by a paper in the current issue of the Journal of Wine Economics, published by the American Association of Wine Economists. Dr. Karl Storchmann, an economics professor at New York University who previously taught at Whitman College in Walla Walla, concluded in a paper titled, “The Economic Impact of the Wine Industry on Hotels and Restaurants: Evidence from Washington State,” that prestige accruing to Walla Walla wineries—particularly through ratings in Wine Spectator magazine—has fuelled a boom in hotel development. (Storchmann previously examined the economic development impacts of the Walla Walla Valley’s cluster of wineries, which now number 118 according to  WinesVinesDATA.

Grounding the paper in economic theory, Storchmann argued that a wine region will attract tourists and tourist dollars in proportion to the prominence and prestige of its wines, rather than simply a rising volume of wine production. He focused on Walla Walla rather than similar clusters in the Seattle area or Benton and Yakima counties because of Walla Walla’s concentration of wineries whose wines have received in excess of 91 points from Wine Spectator, especially since 2000.

“We suppose that wine tourists are attracted by wine quality rather than quantity,” Storchmann wrote. “As a region gets increasingly known for its high quality wine, more wine tourists will stream in and the demand curve for local tourist service will shift outwards, leading to an increasing quantity consumed, higher prices or a combination of both.”

The biggest “local tourist service” is accommodation rather than restaurants, Storchmann discovered. While people need a place to sleep when travelling, they don’t necessarily need to eat out. A study Dave Belin of RRC Associates completed for Tourism Walla Walla examining tourist behavior in 2007 and 2008—the same years that much of Storchmann’s research was done—found that 65% of visitors to the area stayed overnight, with 68% patronizing local hotels. The average stay was 3.2 nights. On the other hand, meals out averaged five, while 36% of visitors “stocked their lodging with food and beverage purchased locally.”

Drawing on economic models, Storchmann estimated that between 30% and 40% of hotel revenues in Walla Walla in 2007 were wine-related, compared to no more than 17% of restaurant revenues. “The local wine industry is becoming increasingly important for the accommodation industry,” Storchmann concluded, adding: “Regional reputation is short-lived and needs to be constantly re-earned. The effect of a positive mention in the national wine press wears out after two years.”

The importance of positive publicity was underlined by Davidson of Tourism Walla Walla. “There’s still a lot of excitement about the region,” he said. “I think if you had a fear for Walla Walla, it would be that somebody starts coming in and creates some really lousy wine.”