Tourism is Taxes

Those that have seen us present on the critical value of Destination Marketing to a community’s vibrancy and success may remember that we take our audiences down a path. Tourism is Jobs. Tourism is the First Date for Economic Development. Tourism (as Mark Twain said) is fatal to prejudice and bigotry. And, that Tourism is Taxes. Lots of Taxes.

Most in the Destination Marketing space are fairly adept at extolling the advantage of the non-resident revenues we attract to our communities…and that includes non-resident taxes for local and State government. Sales Tax, Hotel Room Tax, Food and Beverage Taxes, Rental Car Taxes all contribute to keeping resident taxes lower (or, at least lower than they would be without visitors to our community).

Where most DMO pros miss a significant opportunity to drive home our relevance is in not including Property Tax in the discussion. Likely because these calculations are more difficult and nuanced than the straightforward analysis of other taxes, I’ve only seen a handful of DMOs connect the dots between Property Taxes and government revenues.

I remember a study, done years ago in a Top Ten market, that revealed that hotel operators were paying roughly $1,500 per room in Property Taxes. In a destination with 10,000 rooms, that’s $15 million…far from chump change. In the market that performed the research, the total was $42 million.

Now, to be clear, a DMO cannot (and should never) claim responsibility for all of that revenue. But, here is where the connection can be made: Without a competitively funded DMO, hotel revenues will often underperform. In most locales, Property Taxes are based upon the value of the property on which the hotel sits. If the property is profitable, Property Taxes should be strong and growing. But if occupancy or ADR are down, one could certainly make the case that the hotel is not as profitable and, thus, the land upon which it sits is less valuable. And, if that is the case, the hotel’s Property Tax assessment should decrease, meaning less revenue to local government. Many government officials don’t see the correlation in hotel health and Property Tax revenues…but they should.

And, maybe they will after seeing this story coming out of Des Moines IA (site of this Fall’s return of the Upper Midwest CVB Fall Conference). After the horrible year we’ve just had, even a super-heated destination like Des Moines saw significant decreases in hotel stays. Catch Des Moines CEO Greg Edwards reports hotel occupancy dropped to 34% in March of 2020 and had crept up YTD by only 5 points this March. That has resulted in a 30% reduction in the assessed valuation of his 123 hotels.

The result? Property Taxes to local government there will decrease by at least $8 million. Another reason why DMOs should be watching Property Taxes as well as Sales and Room Taxes.

And, it’s another talking point when trying to reinforce the critical importance of Destination Marketing to a community’s future viability. We can quote Sales and Room Tax numbers til we’re blue in the face. But, Property Tax is how many governments live. Show the connection between Destination Marketing and their primary revenue stream? Our relevance may be increasingly recognized.