Alexandria City Manager James Parajon presented a sobering economic outlook to the City Council Tuesday night, warning of troubling trends in unemployment, consumption taxes, and consumer confidence despite the city’s recent achievement of crossing $1 billion in visitor spending.
The monthly State of the Economy report, part of a series requested by Mayor Alyia Gaskins and members of the City Council, highlighted deepening concerns about national economic uncertainty and its local impacts as the city prepares for budget discussions.
Parajon’s presentation, along with updates from Visit Alexandria, showed challenges in both consumption tax revenue and the tourism sector, with hotel revenue declining across the region.
“The unemployment rate is rising in the country, and we’re also experiencing that in our local economy,” Parajon told council members. “You’ll also notice that the inflation is near the 2% of the Federal Reserve target, but it’s not really reached the full reflection of the tariff effect.”
Parajon’s report highlighted that unemployment has risen to 4.3% as of August 2025, while inflation stands at 2.9%. He cautioned that inflation figures may not yet reflect the full impact of tariffs on consumer prices.
“Consumers are very much worried about the economy,” Parajon said. “As you see these slides, those red arrows all point to negative trends. We have rising prices. The effect of the tariffs, well, it hasn’t been fully realized. Has a measurable impact on the uncertainty in the markets, including pension markets and some of our savings markets that we all rely on.”
The job market appears stable but stagnant, with job openings holding steady at 7.2 million and a 4.3% rate, while hires remained flat at 5.1 million and a 3.2% rate in August 2025.
Consumer confidence declined across multiple measures from August to September 2025. The Index of Consumer Sentiment decreased 5.3%, the assessment of Current Economic Conditions fell 2.1% and the Index of Consumer Expectations dropped 7.5%.
The ongoing federal government shutdown adds another layer of economic uncertainty affecting the Washington region. Now in its third week, the shutdown has furloughed as many as 750,000 workers as President Donald Trump’s Office of Management and Budget picks winners and losers in federal funding priorities.
Despite strong year-to-date performance, Parajon warned of emerging concerns in consumption tax revenue, a key indicator of local economic activity.
“While we were strong year to year and we continue to be strong, we have a measurable weakening in the recent activity,” Parajon said. “In the last couple of months, we’ve noticed a four-and-a-half percent drop in the consumption taxes. So for the year, we’re still up strongly. But when you look at the kind of short-term trend right now, it is not positive.”
He explained the connection between consumer sentiment and local business health: “If consumer sentiment or consumers are worried about the economy, they spend less. And that starts to have a compounding effect on our businesses locally.”
Alexandria’s residential real estate market continued to show strength in August 2025, according to Multiple Listing Service data.
“Our real estate market, residential side, is remaining strong, which is certainly helpful,” Parajon said. “You notice that from the MLS Multiple Listing Service in August 2025, our real estate sales are up slightly from the previous year. Our median sales price is up slightly. Our market remains strong with the average days on the market at 24.”
Real estate sales increased to 182 transactions, up from 153 the previous year. The median sales price rose 1.4% in August, and properties sold in an average of 24 days, compared to 26 days regionally, with 42% selling within 10 days.
Active listings surged nearly 46% year-over-year, from 218 in August 2024 to 318 in August 2025. Average mortgage rates stood at approximately 6.36%.
Parajon reported successful completion of the city’s 2025 bond issuance, which generated approximately $105 million in proceeds.
The city maintains a Triple A bond rating from both Moody’s and S&P, a gold standard for creditworthiness that Alexandria has held since 1992. The bonds carried a True Interest Cost of 3.496630% and will close Oct. 22, saving approximately $1.6 million in debt service costs over the life of the bonds.
“That is a measure of the quality of our organization and our fiscal responsibility because at 3.49% in this market is substantially overperforming,” Parajon said.
S&P noted in its rating that it believes “the City can maintain better credit characteristics than the U.S. in a stress scenario.”
Kate Ellis, general manager of Hotel Indigo and chairperson of Visit Alexandria, introduced the tourism presentation on behalf of the organization. President and CEO Todd O’Leary was unable to attend.
Vito Fiore, Visit Alexandria’s vice president of marketing and research, presented data showing significant swings in Alexandria’s hotel performance throughout the fiscal year.
“Alexandria hotel revenue per available room for the seven months of the last fiscal year, you’re up four and a half percent. So pretty good $107 revenue per available room,” Fiore said. “We really saw those next three months and in particular March and April a big drop off. So down 12.4% during that period.”
Hotel revenue per available room tracked as follows: $107 from July 2024 to January 2025 (up 4.5%), $117 from February to April 2025 (down 12.4%), and $114 from May to August 2025 (down 6.5%).
“That initial shock following the new administration,” Fiore said, explaining the spring decline.
According to Visit Alexandria’s presentation, the tourism sector faces significant headwinds. National and international tourism trends are mixed, with strong domestic leisure travel sentiment but international travel to the region down 8%, primarily due to a 26% decline in Canadian visitation.
Regional challenges include stalled employment and reduced disposable income from Washington-area visitors, along with uncertainty that has led to decreased government, association, and corporate travel.
Neighboring jurisdictions showed similar declines during the May-August period, with Arlington down 7.8%, Fairfax County down 0.5%, Washington down 9.7% and Prince George’s County down 4.1%.
At the neighborhood level from May to August 2025, Old Town averaged $143 in revenue per available room (down 3.5%), Carlyle $105 (down 7.3%), and the West End $69 (down 18.2%).
Lodging metrics showed occupancy tracking behind 2024 levels since March 2025, with the most significant demand drops occurring Tuesday through Thursday for group and business travel. Revenue per available room fell 5.8% in the second quarter of 2025 in Washington and 7.7% in Northern Virginia.
While traditional hotels struggled, short-term rentals showed strong growth, according to Visit Alexandria’s data.
“Short-term rental performance. We talked about how that is an increasing share of lodging room nights across the country, and Alexandria continues to see growth here,” Fiore said. “Revenue per available room has been up 13% over the past 12 months.”
Nationally, short-term rentals now account for 29% of all lodging room nights, up from 21% in 2019.
Claire Mouledoux, Visit Alexandria’s senior vice president of marketing and communications, outlined the organization’s strategic response to current challenges.
“Visit Alexandria is very focused on the opportunities that there are to drive visitation and visitor spending for our city,” Mouledoux said. “And with that, we are very focused on conversion-oriented marketing. And these are tactics that directly reach audiences that are the most likely to drive business soon.”
The strategy includes nurturing audiences through expanded email programs and retargeting, advanced analytics that connect ad exposure to bookings, and Generative Engine Optimization to tailor the website for AI search platforms.
Visit Alexandria reported a $4-to-$1 return on local tax revenue from its advertising spending.
A new destination marketing campaign will launch in early 2026, focusing on emotion and small business storytelling. The organization is also promoting individual neighborhoods through a new interactive website hub and leveraging key events, including America 250 commemorations.
The organization announced an updated international strategy with investment in the UK market and new partnerships, while working to attract meetings and group business through a new sales team and deployment strategy.
Alexandria’s 2024 visitor profile showed top markets as New York, Philadelphia, Richmond, and Norfolk-Virginia Beach, with an average stay of 3.1 days.
Ellis addressed questions about attracting larger events and retaining annual convention groups, noting that some meetings have outgrown available space in Alexandria over the past 20 years.
“I would definitely say that there are already programs like that that do exist. Some groups come back and they are with us year after year, and that’s always wonderful,” Ellis said. “And we want to make sure that we keep them.”
She highlighted Visit Alexandria’s efforts to promote new experiences across different neighborhoods to keep returning visitors engaged.
“So that’s something that I think Visit Alexandria does a great job of with the member businesses to be able to say, well, have you tried this new restaurant that’s just opened in the West End, or have you tried this new walking tour that we have available or where can we get you in other neighborhoods across the city to make it a new experience?” Ellis said.
