Hotel-motel taxes are a popular way local governments raise money for their general budgets, self-promotion and tourist-related projects such as stadiums, trails and performing arts centers. Every city in Reporter Newspapers communities has a convention and visitors bureau, one of the ways to take advantage of the endless flow of revenue from taxing outsiders rather than local citizens.

But, two experts say, the money does not come with any strings requiring proof that the promotional efforts are effective, and the assumption that visitors can be taxed without negative impact on the hotel business may be faulty.

Tyler Reinagel, manager of the Office of Research at the Georgia Department of Community Affairs.

“We don’t have any metrics to gauge effectiveness,” such as hotel occupancy rate changes, said Tyler Reinagel, who answers local governments’ questions about the hotel-motel tax in his role as manager of the Office of Research at the Georgia Department of Community Affairs. The state encourages those governments to draw up some kind of measurements, he added. Auditing is also largely up to local jurisdictions, he said, with the state receiving a general spending report.

Dr. Frank Stephenson, chair of the economics department at north Georgia’s Berry College and a fellow at the Georgia Public Policy Foundation, says hotel-motel taxes are politically popular for “tax exporting” — billing outsiders instead of locals. But, he says, there is relatively little research about their economic impact. His own research found that hotel-motel taxes began in major resort destinations such as Hawaii, then spread to smaller cities without international tourist attractions where the economics aren’t the same.

“Hotel taxes have long been viewed as ‘free money’ in the belief that they could be fully shifted to travelers and had little effect on room rentals,” said Stephenson. But he recently published a study whose results, it says, “suggest that hotel taxes are not a free lunch from a tax exporting perspective and that they may impose significant burdens on local hotel operators.”

Dr. Frank Stephenson of Berry College and the Georgia Public Policy Foundation.

The study looked at a different but similar hotel tax in Georgia: a $5-a-night fee that funds transportation improvements. The study found the fee lowered the statewide monthly average hotel rentals by 92,000 rooms — roughly 0.25 percent — and that hotel operators were not able to pass along all of the cost to the bill-paying visitors.

Jim Sprouse, executive director of the Georgia Hotel & Lodging Association, would only comment broadly when asked about the hotel-motel taxes, saying, “Historically, investments in the hospitality industry and hospitality product have yielded a greater number of visitors, increased visitors spending, and more hospitality jobs in Georgia.” He did not respond when asked for specific examples of how the taxes have done that in Buckhead or Perimeter Center.

While promotional efforts can be fuzzy, more cities are opting for a provision in state law that allows them to increase the tax rate and use the money to build certain types of structures. Atlanta notably used hotel-motel tax to help pay for the new Mercedes-Benz Stadium.

Reinagel said that 10 cities around the state adopted the higher, project-oriented taxes in decisions approved by the General Assembly last session, and about eight to 12 cities a year are joining the club. Among them recently were Brookhaven and Dunwoody, which are using the money to build multiuse trails.

In this quarter’s Perimeter Business, the Reporter looks at how the tourism agencies in Brookhaven and Sandy Springs are rearranging the efforts paid for by local hotel-motel taxes to better brand their cities. Brookhaven has started its own convention and visitors bureau, and Sandy Springs has shuttered a “welcome center” while considering constructing a new home for its tourism agency.

14Shares