FED UP WITH what they see as years of state underfunding of tourism, some local tourism officials and hoteliers want to collect marketing money on their own – by charging a fee to hotel guests.
A provision in the economic development bill sitting on Gov. Charlie Baker’s desk would allow for the creation of Tourism Destination Marketing Districts. These districts would be formed at the initiative of hoteliers and with the backing of municipal officials. They would let hotels in the districts charge a fee of up to 2 percent on overnight stays, with the money going to market the region or make improvements to attract more visitors.
Mary Kay Wydra, president of the Greater Springfield Convention and Visitors Bureau, said these types of districts have become “a tried and true model” in other states as a way to increase the amount of money available for tourism marketing. By adding a fee to hotel stays and putting the money toward marketing, Wydra said, “you’re generating more hotel stays and more tax dollars for local towns and cities and state government.”
State Rep. Mike Finn, a West Springfield Democrat who sponsored an initial version of the bill, said he has been pushing for the idea for two or three legislative sessions, but with COVID-19 decimating the hotel industry, “the timing for trying to do something to help that industry was the perfect storm.”
The concept of Tourism Destination Marketing Districts is similar to the state’s existing Business Improvement Districts, where property owners agree to impose a fee on themselves in order to pay for improvements to the district. For example, there is a downtown Boston BID.
A Tourism Destination Marketing District, as envisioned in the economic development bill, would be created with the support of 62 percent of hotel owners in the district. After a public hearing, the city or town’s governing body would vote, by majority vote, whether to approve the district.
Once a district is formed, every hotel within the district would have to pay a special assessment of up to 2 percent of its room revenue to the district. A committee overseeing the district – a majority of whom would be member hoteliers – would spend the money on marketing, district improvements, and generally taking steps to attract more tourism.
According to economic development consultant Civitas, there are more than 160 tourism districts in the US that raise $350 million annually for tourism marketing. They started in California, but are used throughout the country, from Alaska to Chicago. Wydra said other jurisdictions have gotten creative in how they use the money, from providing shuttles for events to resurfacing a track used for a multi-year track and field event.
Officials with regional tourism agencies have been pushing for the creation of these districts to counter what they see as chronic underfunding of tourism marketing in the state.
According to data compiled by the Greater Boston Convention and Visitors Bureau, the state travel and tourism office gets $4 million a year and regional tourism councils get another $6 million. In contrast, Maine budgets $15 million in state money annually for tourism, Oregon budgets $33 million, New York budgets $70 million, and California a whopping $120 million. Massachusetts collects $513 million annually in lodging taxes but $400 million of that goes to general expenses, unrelated to tourism, and another $103 million goes to the state’s convention centers.
Nearly every year, state tourism officials find themselves fighting proposed budget cuts on Beacon Hill, and state money often does not get released until late in the year. Some tourism officials say creating these districts would be a way to supplement the state dollars with a more reliable funding source.
“Every year in the Commonwealth we have to compete for marketing dollars through the state tourism trust fund grant,” Wydra said. “This would be a way to keep things local.”
Wendy Northcross, CEO of the Cape Cod Chamber of Commerce, said the chamber did a study several years ago that estimated that given the region’s reliance on tourism, it should have a $6 million marketing budget. Instead, it gets a state grant of around half a million annually – a figure that has not increased recently despite growing costs for media ads and marketing.
“On all the things you need to do to have a successful tourism industry, which requires an adequate, robust marketing effort, we’re going in the wrong direction,” Northcross said. “We said how can we take control of our own fate a little more instead of being dependent on a state program that was reducing, not increasing.”
The first barrier for the creation of these districts is getting Baker’s signature. The Republican governor has typically opposed new broad-based taxes and fees and has said the pandemic is not the time to raise taxes. On the other hand, he has supported targeted fees, and he generally supports local control.
Then districts will need buy-in from local hoteliers. Officials involved in the conversations say Springfield and Boston appear to be the farthest along in creating districts. A draft of a plan in Boston and Cambridge outlines a 1.5 percent fee that would be used to execute a COVID-19 recovery plan, implement an international marketing effort, develop a sales and marketing strategy, and create a fund to offer incentives that will attract business – for example, by offering transportation services for conferences.
Martha Sheridan, CEO of the Greater Boston Convention and Visitors Bureau, said there have been dozens of preliminary meetings on the concept and the response from hotels has been “very favorable.”
The interest in creating a district will undoubtedly vary by region and by hotel. Northcross said while her organization supports the concept, she doubts Cape Cod will adopt a tourism district any time soon. The region recently adopted a 2.75 percent water protection fee on overnight stays to pay for wastewater systems, and she thinks there will be little interest in imposing additional costs on visitors. Cape Cod also has around 300 hotels and motels, so getting agreement will be harder than in a big city with a few large chain hotels.
John Murtha is the general manager of the Omni Parker House in Boston and a board member of the Greater Boston Convention and Visitors Bureau. Murtha said he does not yet know whether his hotel would vote to join a district – it depends what the fee is and how the district would be structured.
He worries that the legislation does not specify whether the cost should be passed on to the guest or paid by the hotel. “Not doing so means that some hotels may add it to folios and some may not, and this could leave guests asking the question, why do I have to pay for it but my friend staying across the street didn’t?” Murtha said.
Murtha said he agrees that the state is underfunding tourism marketing, but he would prefer to see additional money come from the occupancy taxes that hotels already collect and remit to the state.
One wild card is the impact of the COVID-19 pandemic. Murtha said some hotel managers and owners “may be reluctant to give up a portion of their room revenue to this effort given the struggles that we are having right now just to stay open.”
Paul Sacco, president and CEO of the Massachusetts Lodging Association, said some hotels will probably delay trying to adopt a district until business picks up. “Personally, I’d be for anything that helps the industry that’s been brought to its knees,” Sacco said.