Using the Catalyst Report to Defend Your Hotel Tax Funding

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<span>Using the Catalyst Report to Defend Your Hotel Tax Funding </span>
Bottom Line:

Using the findings from DI’s recent research projects can help you argue that hotel taxes should be invested in destination promotion to drive larger returns from other taxes. It is from those other taxes that government programs need to be paid from. 

The purpose of commissioning the recently released research report, Destination Promotion: A Catalyst for Community Vitality, and last year’s research report, the Canadian Visitor Based Assessment Study, was to provide empirical evidence to support our policy positions and make our arguments more compelling and persuasive.  

We sought research that would 1) validate our assertions about the impact of destination promotion, 2) demonstrate a deep understanding of the related issues at hand, and 3) lend authority to our advocacy on behalf of destination organizations. As a result, over the next two years, we will dive deep into various aspects of the report to connect this evidence to the policy arguments we make. So, let us start that work with one of my favorite little pieces of information in the report - the composition of federal, province/state, and local taxes generated by tourism. 

In the report, Destination Promotion: A Catalyst for Community Vitality, the research firm Tourism Economics analyzed the tax impacts of tourism across the ten destinations included in the study. Their key findings are summarized as follows (pages 56 & 57):

  • On average, USD $1million of visitor spending within a destination generates USD $191,000 in total tax revenues.
  • State and local taxes constitute 63% of the taxes generated by tourism, where on average, every USD $1million of visitor spending within a destination generates USD $120,000 of province/state and local tax revenues.
  • 89% of the tax impact on the province/state and local level is on taxes and fees other than the bed taxes. 

What this means, per the Catalyst report, is “tax revenues generated by visitors either directly or indirectly support government services. As such, some core government services are paid for through destination activities. In most cases, this means improved infrastructure, providing greater accessibility and supply logistics that are, in turn, important in attracting investment in other sectors.” (Page 56)

The report states it another way in the executive summary where it says, “government services and community programs are impacted by tax revenues supported by visitor spending and the advocacy role played by destination organizations that are attentive to the long-term needs of the destination.” (Page 5)  

The Canadian Visitor Based Assessment Study echoes this when it says “Visitor spending reduces the tax burden from residents for a community benefit – VBAs (Visitor Based Assessment) are used to attract visitors whose spending generates government revenues from other taxes, thereby helping to support health care, education, social services, and other public programs. (Page 28)

Think about it. Eleven cents ($0.11) of every dollar a visitor pays in taxes goes to hotel taxes. Eighty-nine cents ($0.89) go to other taxes. In other words, the big money is in other taxes!

You need to tell your government leaders and policy makers that using hotel taxes (or any other visitor-based assessment) for anything other than destination promotion or development is a bad idea. The smart program is to invest the hotel tax in destination promotion to drive the big money into those other taxes. It is from those taxes that government programs must be paid for. It just makes sense. 

About the Author

Jack Johnson

Chief Advocacy Officer
Destinations International

Jack manages the overall public policy operations at Destinations International including member advocacy education and training, development of destination tools and best practices, coalition work with peer organizations, industry research and related public affairs activities. Jack is a 2021 Smart Meetings Magazine’s Catalyst Award winner and one of Successful Meetings’ 25 Most Influential People in the Meetings Industry in 2018.

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