CHAPEL HILL -- There's good news and bad news for Orange County's tourism industry.

First the good news: Visitor spending was up 7 percent last year.

Now the bad news: That was last year.

Spending by domestic U.S. travelers totaled $147.55 million in Orange County during 2007, according to the Chapel Hill/Orange County Visitors Bureau. That was 7.2 percent higher than in 2006 and ranked Orange County 24th among the state's 100 counties in travel expenditures.

The figures come from the recently released "2007 Economic Impact of Travel On North Carolina Counties" study prepared for the state Division of Tourism, Film and Sports Development by the Travel Industry Association of America.

The problem is by the time the 2007 numbers came out, local hotels and businesses that depend on out-of-town dollars were already worrying about 2008.

"It was about in April we started getting concerned," said Laurie Paolicelli, executive director of the Chapel Hill/Orange County Visitors Bureau. People were canceling reservations. Travelers visiting Chapel Hill were choosing hotel rooms in Durham and Wake counties.

May was the first May in at least five years when Chapel Hill and Orange County hotels were not full for UNC graduation weekend, Paolicelli said.

The trend was true across the area.

"Hotels are in a down market right now," said Bill Spencer, president of the Triangle Area Motel Hotel Association. "There is definitely a downturn across the board. Some hotels may be seeing 5 percent drops."

Locally, Paolicelli blamed the economy but also the recent addition of a lot more hotel rooms.

In the last two years the number of rooms in Orange County has jumped 15 percent. At the same time, Durham and Wake counties have added 1,250 new rooms.

For much of the past, local hoteliers

didn't have to work hard for travelers' business. Chapel Hill sold itself. Parents came to see children graduate. Alumni came to relive the glory days, and others with no connection to the area came to check out the Chapel Hill mystique.

"For a long time we rested on those laurels," she said.

Now, Paolicelli says, local industry leaders are asking whether the university draw alone can sustain Chapel Hill and Orange County tourism.

"And what we're learning is no, it can't," she said. "We have to look at how we're positioning our community."

One hotel that bucked the trend was The Siena on East Franklin Street.

General manager Anthony Carey said the hotel anticipated the downturn, adding another sales manager and aggressively going after the expected smaller number of travelers.

It worked, he said. Business for the first six months of the year is up 8 percent, or about 1,000 rooms, over the same time last year.

But Carey said he is seeing more competition on the restaurant end of things. The American Tobacco campus in Durham and new fine dining spots in Raleigh have taken away business from The Siena's Il Palio.

"Everybody wants to try out the new luxury kid on the block," he said.

The visitors bureau is exploring several ideas to drum up more visitor and convention business, and once those visitors are here, to get them spending more time here.

• Paolicelli wants to bring back the downtown trolley to take visitors on tours of campus, downtown Chapel Hill and Carrboro and even Hillsborough.

  The trolley would be different from the one that used to run downtown. For one, it would be electric. Paolicelli and others will visit a company called EV America in Chattanooga to learn more about it.

  A model they are looking at would cost $300,000. If they go for it, she anticipates a grant covering most of the cost, with a 20 percent local match.

• Paolicielli is working with Ernie Dollar, executive director of the Preservation Society of Chapel Hill, to promote walking tours of Orange County historical sites. The idea is to put short videos online to encourage travelers to go out and explore on their own..
• Paolicelli also wants to tap the gay and lesbian market. She and Orange County Commissioner Mike Nelson will attend the International Conference on Gay and Lesbian Tourism this Oct. 5-8 in Vancouver to promote the Chapel Hill/Orange County area as a place to visit and hold meetings.

"It saved Palm Springs' tourism industry, and Sonny Bono was very supportive of it," she said.