Should Lodging Taxes Continue to be invested in Tourism Promotion and Development?
I asked my AI assistant to help breakdown the main reasons we want lodging tax to support the tourism community – (lets face it, its faster and likely clearer and more complete than if I wrote it):
Spending tourism tax revenue on tourism promotion is valuable because it drives economic growth by attracting visitors, boosting local businesses, and generating further tax revenue, ultimately supporting the community and its infrastructure.
Here’s a more detailed breakdown:
Economic Benefits:
- Increased Visitor Spending:Tourism promotion efforts, funded by tourism taxes, aim to attract more tourists, leading to increased spending on accommodations, food, activities, and shopping, stimulating local economies.
- Job Creation:The tourism industry directly and indirectly supports numerous jobs, from hotel staff and restaurant workers to tour guides and craftspeople.
- Tax Revenue Generation:Tourist spending generates various tax revenues (sales tax, lodging tax, etc.), which can be used to fund essential public services like schools, infrastructure, and emergency services.
- Multiplier Effect:Tourist spending has a “multiplier effect,” meaning that money spent by tourists circulates through the local economy multiple times, creating further economic activity.
- Enhanced Community Amenities:Tourism revenue can be used to improve community amenities and infrastructure, making the destination more attractive to both tourists and residents.
- Diversification of the Economy:Tourism can help diversify local economies, reducing reliance on a single industry and making them more resilient to economic downturns.
Example of the Multiplier Effect:
- A tourist spends money on a hotel room, which creates jobs for hotel staff.
- The hotel staff spends their wages on groceries, which creates jobs for grocery store employees.
- The grocery store employees spend their wages on entertainment, which creates jobs for entertainment industry employees, and so on.
Some non-AI thoughts: A healthy tourism presence can also increase the quality of life of local residents:
- Tourism allows more local business to be established and thrive than the local population could support on its own (more food and shopping options for locals)
- Property becomes more valuable
- creates wealth for property owners*
- usually gets built out and maintained in a more visually appealing manner
- increases value of neighboring properties
- provides more local tax revenue
- Attracts higher quality residents (when compared with a community in a downward depression cycle)
- Creates more job opportunities for local residents (even if they are entry level jobs they still help prepare people for better jobs elsewhere)
- Creates a better quality of life
- Creates more optimism and better mental health
AI continues with…
Challenges and Considerations:
- Over-Tourism: While tourism can bring economic benefits, it can also lead to negative impacts like overcrowding, increased pressure on infrastructure, and environmental damage.
- Sustainable Tourism: It’s important to manage tourism sustainably, ensuring that the benefits are shared equitably and that the environment is protected.
- Competition: The tourism industry is highly competitive, and destinations need to actively market themselves to attract visitors.
- Intelligent Taxation: Governments should ensure that tourism taxes are designed in a way that promotes tourism growth rather than discouraging it.
- Transparency and Accountability: It’s important that tourism tax revenue is used transparently and responsibly, and that the public is kept informed about how the money is being spent.
I’d like to add that many tourism jobs are not going to supply a living wages year round. As such, this is not a complete solution for economic vitality. Yet, it still helps in many ways. It provides entry level job opportunities for those entering the work force, jobs for students, and those whom part time employment and flexible income opportunities are a good fit.
Another Big Benefit of Tourism
A healthy tourism industry can be a boon to small scenic rural areas, by creating “3rd places”. 3d places are spots for residents to hang out socially outside of work and home. This can help encourage more new residents that bring working wage jobs with them – whether that is a small manufacturing business that supports only a few high paid workers or remote workers.
A long running tug of war over these funds
Cash strapped local governments have been eyeing tourism tax dollars as a way to plug holes in their budgets. Threatening to siphon funds that support local tourism. This means that they are taking support away from local businesses. (example in Bend, OR)
A good case can be made that tourism travelers use the city infrastructure and thus these funds should be used to help maintain the streets, sewers, public safety and other expenses.
Especially when the tourism impact is lopsided, such as when tourism is associated with:
- high crime
- high traffic, congestion, deterioration of roadways
- high impact on maintaining a public attraction
From that perspective it makes sense. However, the dangers is that for most communities, tourism has a very positive impact economically, with benefits that also include supporting many small local businesses.
Generally speaking, I believe that local governments are better served by supporting tourism and the small businesses and jobs that go with it. They will generate revenue on increasing property taxes, community investment, income taxes and payroll taxes. Don’t use tourism tax as a quick fix for a budget shortfall.
Using this money for other purposes will have a slow deflating effect on your local economy. Perhaps you won’t see it in a year, or even a few years, but it will catch up to you in declining tourism revenue. Which will mean declining tourism tax dollars and you’ll end up in the same boat – not enough tax revenue to maintain your budget, yet this time, your tourism industry and infrastructure will be in a hole – one that will be really hard to dig yourself out of.
Best Use for Tourism Tax Dollars
Protect your tax revenue by supporting local tourism marketing and investment.
Be smart about howe money is spent. It doesn’t all need to be spent on marketing. Use some for special projects that help support tourism as a whole. Sometimes using funds on capital investments that boost tourism attractions can be better than spending the money on advertising. A facelift for main street? A large play fountain? An outdoor art display at a traffic circle in a high traffic area? W#hat is going to boost tourism value in the community?
Multi faceted projects that support locals and tourism are win-win projects. Just don’t get too far off the focus on tourism.
A well managed tourism program will create a stronger and healthier local economy. Healthy businesses mean they can afford to reinvest in their community, in their property and their attractions.
Your communities will look nicer, have more jobs and more revenue.
Sustainable vibrant communities result in happier residents.
Chris LaVoie MBA
Executive Director
McKenzie Community Partnership
a Community Development Corporation
Tourism Development | Tourism Tax Dollars
*Additional notes on creating wealth for property owners.
Ideally, the average person will own their property and rising property values will create personal wealth through equity – both as the property is paid off (assuming a mortgage is used to buy the home) and through increasing property values.
In fact, real estate has been a primary wealth building tool for decades. It should not be just for the wealthy. The equity provides wealth that can be tapped into through equity lines of credit, refinancing or selling property. The equity can be used to help provide retirement income. It can be used to help with family emergencies or help loved one’s get their own first home, get educated or start a business.
In our local community, I’ve often heard of people complaining that if their town is revitalized, the rising property will result in higher property taxes – which they do not want. I do understand that those on fixed incomes have problems as costs increase.
What I think is often mixed is that with general inflation, property values have consistently been increasing over the larger arc of time. In Oregon, and many other places, property values for tax purposes are below market rate and your taxes are capped on how much they can increase every year. Here is Oregon its 3%. So no matter what your property taxes are going up 3% anyway.
That being true fact, why wouldn’t you want values to continue to go up so that you and your neighbors have some wealth to help provide a buffer them from life emergencies?