Colorado’s tourism industry is in a slump. Two years of slowing traffic and flat spending have left visitor-reliant businesses limping. This winter — with a snowpack looking to make the 2025-26 ski season the second worst in 50 years — will certainly add to the tourism industry’s woes.
A few years ago, the state’s destination marketing pros would have been crafting persuasive campaigns to shift the tide. They would have planned flashy videos and banner ads and targeting vacationers with alluring pitches.
But those campaigns are not happening. The Colorado tourism marketing machine is slowing as millions of dollars in new and diverted lodging taxes that once funded destination promotion are now going toward housing, child care, recreational projects, roads and police.
Two laws passed in 2022 and 2025 — House Bill 1117 and House Bill 1247 — allow local communities to increase or divert lodging taxes from traditional tourism marketing.
A recent tally of 39 towns, counties and marketing districts shows more than $256.6 million in lodging taxes have been raised for purposes other than tourism promotion since the first communities increased taxes in 2022. New and redirected lodging and short-term rental taxes collected by the 39 local governments in 2026 are expected to reach $76.9 million, with all of that supporting housing, child care, roads and public safety.
“This means visitors are paying a lot more in taxes for lodging and we are not getting more money to work with to market our destinations,” said Dave Santucci, whose Mission 2 Market consulting firm helps communities grow tourism economies.
Santucci has tracked the lodging tax funding allocations since 2022. He points to a majority of states increasing tourism marketing budgets while the roughly $20 million annual budget for the Colorado Tourism Office has largely remained flat since 2016. And advertising costs have climbed as much as 40% in the last five years.
“The point of destination marketing organizations is to spread out traffic and create resiliency. The funding that goes into DMOs comes back in multiples of return on investment,” Santucci said. “That marketing is tied to economic development and a community’s ability to attract and retain residents. We are setting ourselves up for trouble ahead by raising our prices and cutting our marketing.”
Declining visitation in this snow-starved winter
Colorado seems to be leading the nation in declining skier traffic in this snow-deprived season. Hotel occupancy tracked by DestiMetrics — which follows lodging bookings in 17 Western mountain communities in seven states — shows Colorado and Utah enduring the brunt of the declining traffic. The latest DestiMetrics report pins winter occupancy in Colorado and Utah down 6.7% compared with this time last year, with the other five states seeing an occupancy decline of 0.5% so far this season.
Short-term rentals in Colorado mountain towns are leading a national decline in ski vacation bookings, according to a January report from AirDNA, a Denver-based firm that tracks trends in short-term rental data. While STR bookings at all ski destinations are down about 5%, Colorado resort markets are down anywhere from5% in Vail to 35% in Telluride.
“As the remainder of the season unfolds and destinations wrestle with the impacts of changing climate and weather patterns, I suspect that new playbooks are being written on how these destinations can adapt and flourish if this season’s scenario returns,” Tom Foley, the data-crunching tourism economist with DestiMetrics owner Inntopia, said in a statement outlining the season’s booking trends. “Along with the seemingly interminable economic uncertainty, we are also reminded that snow, our ace in the hole, can be frustratingly fickle and unreliable.”
Of course, funding for housing, public safety, infrastructure and child care is critical as municipalities and counties face deficits with uncertain federal funding. The state is asking more of counties, too, with new laws around jails, human services, Medicaid and other local services that do not include increased support from the state.
That is forcing many local governments to squeeze tourists for more revenue. Most of the time, those local governments easily sway voters to increase taxes on visitors. But not always. Last year voters in Cañon City, Chaffee County, Manitou Springs, Vail and Telluride rejected tax increases on lodging and activities to help cover budget declines.
“The state will not allow counties to go out and raise funds in any way other than property taxes,” Chaffee County Commissioner P.T. Wood said at the beginning of a commissioners’ meeting Feb. 17 as the three elected leaders joined several other counties in sending a letter to the state urging more support for implementing new laws. “We are really handcuffed and our populations continue to grow and our demands for services continue to grow and the state continues to restrict our abilities to increase revenues while they demand more from us.”
Local governments scrambling to grow revenues
Wood was one of several county commissioners earlier this month urging lawmakers to pass legislation that would have allowed local communities to create a new tax on homes that are left vacant for portions of the year.
The lawmakers killed that legislation after vehement opposition from tourism businesses, homebuilders, county treasurers and investment groups.
The idea behind the vacancy tax was to give local governments a new tool to fund affordable housing. Five years ago, that the measure likely would have sped through the committee bound for the entire chamber.
But the lodging industry has unified in the past five years as local governments crack down on short-term rentals and impose new restrictions and taxes on homes rented to visitors. That unity means proposals for new taxes are facing the stiffest opposition ever.
In about four hours of testimony before the House Finance Committee on Monday, a parade of real estate brokers, county treasurers, homebuilders and business leaders argued against a vacancy tax. The hearing mirrored several other committee hearings in recent years where lawmakers considered legislation to increase regulations and taxes on vacation homes.
“This is sort of a result of the tentacles spreading out across the state, with property owners and advocates talking with county commissioners, business owners and people in the community, just spreading awareness about the role the lodging industry plays in this economy and how vital that it is,” said Julia Koster, the head of the nascent but surging Colorado Short Term Rental Association, or COSTRA, which counts thousands of members and helped organize the formidable opposition to the vacancy tax.
Koster sees a more than five-year effort to galvanize lodging businesses and property owners finally finding its footing. She points to a shifting tide in the defeat of legislation in 2024 that would have quadrupled property taxes on short-term rentals and then last fall, voters rejecting increased lodging taxes in Chaffee County and Vail.
“People are listening and they are recognizing the data and hearing the voices of the business community outside the STR industry,” Koster said. “People are seeing that if you target the lodging and tourism industries, there will be downstream impacts on all sorts of other industries.”
And those impacts are becoming evident as visitation wanes without attempts to reengage with vacationers.
“Everyone I’ve talked to in tourism, their budgets are cut and way down. You have to spend money to bring visitors here, and if the DMOs can’t do it, the lodging industry and tourism businesses are going to have to step up,” Koster said. “But we are shooting ourselves in the foot by raising our rates and turning more people away. If we keep raising the cost of a Colorado vacation, we will keep losing visitors.”
Too close to a tipping point?
Travel spending in Colorado is flat and not keeping pace with inflation, increasing only 0.5% in 2024 to $28.4 billion. Wages earned from travel spending increased 7.1%, indicating tourist-reliant businesses are spending more on workers while collecting less.
The state’s annual tourism studies from 2024 show local communities and the state collecting about $1.9 billion in taxes paid by tourists, a 1.3% increase from 2023. About 40.5% of that revenue comes from sales taxes paid by visitors and more than 15% — close to $290 million — comes from lodging taxes.
No one in the tourism industry is blasting lodging taxes. Those tourism trumpeters work closely with their communities and they know residents can grow weary of too many visitors. They also know vast swaths of local economies rely on those visitors.
It’s a delicate dynamic, said Cynthia Eichler, president of the Colorado Association of Destination Marketing Organizations, which represents more than 25 towns and regions around the state.
“When the tourism bucket is filling, a lot of other buckets are filling too,” Eichler said.
There is a growing concern that increased lodging taxes — some communities levy a lodging tax higher than 20% of the cost of the rental — as well as hotel owners increasing rates to compensate for waning traffic could be pricing Colorado out of the vacation market.
“We need to be mindful and think about that. We do not want to be a luxury vacation state filled with communities purely reliant on wealthy visitors,” Eichler said.
“We need a more holistic approach to bringing people to our state and to our individual communities,” she said. “We live in these amazing communities and we have wonderful lifestyles that we enjoy so much. We want to be mindful about how we approach our visitors. We do not want to get too close to the tipping point where we lose our appeal.”