|
OneStop | Directories | Search U of M |
 |
|
Q&A About Tourism FundingTourism Taxes
Support is most easily secured when there is a clear relationship between the benefits and the costs. The citizenry is likely to support some form of tourism tax initiative if they perceive tourism as an important part of the existing economic base. Because the financial burden falls mainly on out-of-towners rather than local voters, elected officials are shielded from possible retribution in the voting booth. Business members of the community, however, argue that tourism taxes including lodging, food, and other travel-related taxes hurt local economies by driving away value-minded travelers. Even so, with so many governments facing deficits, visitors recognize that it may be necessary for them to accept some additional taxation. Building community support depends on two things: recognition of a common agenda and a clear understanding of the costs and benefits of tourism to the community. Community members need to know what those costs and benefits are and where additional revenues will go. Recognition of a common agenda means that everyone has an opportunity to voice opinions. This includes not just business folks and politicians, but also residents, school boards, civic associations, state tourism offices, state departments of transportation, and stake-holders of all kinds. The community will need to decide who will take the leadership of the organization. This could be the convention and visitor's bureau, a downtown business organization, the state tourism office, or the cooperative extension specialist in the area. These partners then need to come to an agreement on what role tourism will play so there will be adequate and sustained support for the effort. To facilitate this agreement, which may not be a consensus, data is essential. You will need to obtain information on the numbers of visitors, purchase patterns, patterns of activities and the like. There are a number of sources of useable secondary data at the state and local level. Universities are often able to generate primary data. Private research firms can also supply this information, but are more expensive. The process of developing a common agenda and obtaining data will provide the information about costs and benefits you will need. Support is most easily secured when there is a clear relationship between the benefits and the costs. Revenues that leave the community or region to go into the state general fund make this relationship unclear. Some portion of revenues must be allocated to mitigate direct costs. Patt Manheim
A study at Purdue University indicated that on average, every 1% increase in lodging tax is associated with a .44% drop in the number of rooms rented. Unlike local taxpayers, the lodging industry does not perceive lodging taxes as painless. They know that it costs them business in the long run. A study at Purdue University indicated that on average, every 1% increase in lodging tax is associated with a 0.44% drop in the number of rooms rented. The impact of a 10% tax, which is about the national average, was found to reduce the number of rooms rented by 10 times that of a 1% tax, or a total of 4.4%. This total amount translates into a drop in occupancy rate of about 3.1% due to room taxes.
Patt Manheim
Obviously, the lodging industry will object to taxes collected from them being used to support outside development. To counter this objection you need to point out how part of the money is being used in the tax area, particularly if these uses will have a multiplier effect. Stephen J. Hiemstra
While it is true that the lodging industry has been the most often tapped, it is certainly not the only industry sector to be used to raise additional revenues. Interestingly, one focus of this group's effort is to "persuade politicians that a larger portion of tourism tax revenues should be reinvested in tourism." They state that if gasoline taxes went to repair roads, or airline ticket and departure taxes went to improve airports, the travel industry would understand the imposition of travel fees. This is why it is so important to develop a common agenda among the major actors within the community and a clear relationship between the revenues collected and the costs they mitigate. Patt Manheim
Stephen J. Hiemstra
Lodging operators and tourism leaders should have their own interest group to work closely with lodging tax managers in developing plans for the use of lodging tax funds. Stephen J. Hiemstra
If there is a perception that managers (for example, CVB boards, city councils, county administrators, Chambers of Commerce, tourist boards) are not allocating lodging tax monies in the most appropriate ways, actions should be taken to influence them to change. Here are some things to consider:
Opportunities to use lodging taxes in support of lodging or tourism vary widely from state to state depending on the wording of enabling legislation. In many states, local governments have considerable flexibility in how they use lodging tax monies which may or may not have any relation to the lodging or tourism industry. In other cases, communities are restricted in the ways that these taxes can be spent. Most states allow expenditures for tourism promotion and development. Minnesota is one state where lodging taxes may be spent only for tourism promotion. Where enabling legislation is less restrictive, allocations are made in response to political pressure, political advantage, or interest group activity. Lodging operators and tourism leaders should have their own interest group to work closely with lodging tax managers in developing plans for the use of lodging tax funds. In most cases a cooperative team spirit can achieve more success than can confrontation. In order to develop team spirit, you will need to teach managers about lodging and tourism needs and show how changes in allocation to better support lodging and tourism needs will produce additional benefits to the community or area. Before you begin working with the managers you may need to do research, gather data and statistics, and develop plans. Glenn Kreag Getting Funding
One source of revenue is a local option tourist development tax on temporary lodging sales in your community. A tourist development sales tax, or lodging tax, is charged in addition to your state's sales tax. Where such a tax exists, property managers are required to collect and remit the tax in the same manner as sales taxes are remitted. Revenues generated by the lodging tax can be used to fund your community's promotional campaigns, festivals, attractions, and the like. A second, and perhaps more important, revenue source can be the sale of memberships in your community's tourism organization. In preparing your presentation to local government officials, emphasize that the tax will be paid by visitors to your community and not by their local constituents. Furthermore, note that most people who travel are generally accustomed to paying such a tax. Therefore, passing this tax in your local community simply provides your community the same source of revenue that other communities have long since received. In essence, the passing of a lodging tax will allow your community to recoup income lost to your community when residents pay the lodging tax on their trips to other locations. A second, and perhaps more important, revenue source can be the sale of memberships in your community's tourism organization. The four groups from which you can solicit membership sales are:
Emphasize the investment aspect of memberships. Benefits from memberships can take the form of after-hours mixers for member networking, exposure through your organization's publications and visitors guides, and sales leads and referrals for your organization. Membership sales are not only an important source of revenue to fund your tourism organization, but also provide an organizational structure to create a broader base of community cooperation and support for tourism development. John Crotts
The Endowment offers some grant categories that may be of direct relevance to rural tourism development. The Endowment supports dance, expansion arts, folk arts, literary, media arts, music, opera, musical theater, and visual arts organizations and events throughout the United States. It also supports a variety of art museum exhibitions and services. These organizations and events are often tourist attractions in their own right or are a significant part of a destination's attractiveness to tourists. In addition, the Endowment supports state, regional, and local arts agencies that, in turn, award grants and provide services to artists and art organizations. Most Endowment grants are awarded to arts organizations in order to preserve and enhance their ability to present quality arts events, not to create or sustain tourist attractions. However, the Endowment does offer some grant categories that may be of direct relevance to rural tourism development. For example, the Expansion Arts and Folk Arts programs both support arts that express the heritage of the groups that have given birth to them. Many of these groups and their traditions are a vital part of the special identity of small towns and rural communities. The Design Arts program promotes excellence in disciplines such as architecture, landscape architecture, planning and design, historic preservation, and graphic design. Projects in these disciplines can have direct tourism implications. In addition to its Project Grants for Organizations, the Design Arts program also offers Planning Grants for Rural and Small Communities as well as Project Grants for Design Education and for Arts Facilities Design. The Local Arts Agencies program supports local arts agencies throughout the nation. Their activities frequently include cultural planning, a process that involves representatives of many community interests, including economic development and tourism. In addition to providing support for artists and arts organizations, local arts agencies work closely with their Chambers of Commerce and convention and visitors bureaus. State arts agencies often cooperate with state tourism offices to produce calendars of events, provide photographs or text about significant arts events, and host visiting tourism officials. State folk arts coordinators are an additional resource for the preservation of local culture. NEA can be reached at: The Nancy Hanks Center Anthony Tighe
If your community does not have people staying in motels, hotels, resorts, and campgrounds it is because you do not have any of these facilities available. Such opportunity focuses on making your community more attractive for longer-stay visits. If you make an inventory of your potential resources, you may discover opportunities for developing special historic sites, natural resource areas (park-recreation areas), local crafts, entertainment, and festivals. When these are in place you can promote these attractions to the prime travel market areas before they leave home. If tourists are planning to travel cross-country, mainly on interstate highways, they may plan to stay overnight near those communities that have interesting things to see and do. Just putting up a billboard won't do it. There must be something worth the visitors' while to make them want to stop during their through trip. Until people spend some time in your area, you will not benefit from their expenditures sufficiently to benefit from taxes that in turn support public services. Clare Gunn
There are some visitors who are traveling through your community. However, they must stay somewhere and hopefully your community will capture its share. If your community does not have people staying in motels, hotels, resorts, and campgrounds it is because you do not have any of these facilities available. Your first and most important project would be to encourage the development of overnight accommodations and other visitor-related enterprises. All of the public services used by visitors to the community are used by local people as well. Most will need to be provided through property tax. The enterprises catering to visitors will pay taxes as will other businesses and home-owners. When my brother and his family comes from the Quad Cities to visit, I will have to provide for his public services through my property taxes, and when we are visitors to the Quad Cities, he will return the favor. Keep in mind the visitors to your community contribute their share to your property tax when they rent motel rooms or eat at restaurants. However, they send no one to your schools and this is the largest share of property taxes in most states. Don Schink
The developers of privately-owned attractions need to look for their funding from traditional lending sources. Funding for attraction development takes a different route than funding for promotion. In fact, there are alternate routes depending on whether the attraction is publicly or privately owned. The developers of privately-owned attractions need to look for their funding from traditional lending sources. Banks, with or without the assistance of federal or state loan guarantee programs, are the main source of funds. Community development loans, industrial revenue bonds, and other programs are possible with community support. Publicly-owned attractions and facilities can be financed in many ways. In addition to traditional sources, there are revenue bonds, state and federal grants, loans for park and trail development, and local taxes. Some communities have used room tax revenues for facility development. Don Schink
A professional staff will be the most important part of your organization because it provides the organization with continuity and keeps Chamber activities going. More resources should be devoted to having a good professional staff than to programs. A professional staff will be the most important part of your organization because it provides the organization with continuity and keeps Chamber activities going. Forty to fifty percent is a ballpark figure for overhead. In a volunteer organization you will need to provide funds for travel. People may volunteer their time, but should not be expected to pay for everything else as well. How much should go to marketing and tourism will depend on several factors. You need to plan carefully and know what your product is and who your market is. You need to decide how you can best reach your market and tell them about your community. Periodically you should do some research to find out how successful your efforts are. Start with a plan and allocate accordingly. Every state has an organization of Chamber of Commerce executives who would be willing to help you as you chart out your future. They can probably show you some model budgets to guide you as you search for that allocation scheme that fits. Tim Campbell
Promoting tourism for your community is important. However, training your local citizens about how to treat visitors is equally important. Funds should be set aside each year for education and training. Balance administration and staff costs with advertising and promotion expenses. If the largest share of your budget goes to support staff salaries, then tourism advertising and promotion may suffer. However, in some communities, it is more productive to use staff for marketing and spend less for advertising. A community must develop the marketing mix that works best. Every community deserves a share in the fastest-growing industry, tourism. Those who spend their budget dollars wisely and work hardest should gain the largest rewards. Leo Berg Return to Main Document |
|||
Tourism Center
|
Tourism Center · University
of Minnesota Extension · College of Food, Agricultural and Natural
Resource Sciences · University
of Minnesota Twin Cities Campus |
