Landmark Hotel-Tax Study Reveals the Substantial Tax Revenues Generated by Hotels

HIL ANDERSON, SENIOR EDITOR
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Washington, DC – A landmark study on the economic benefits generated by hotels in the Phoenix area has been posted on the Destination & Travel Foundation (DTF) website. The DTF is the charitable and educational arm of the world’s two largest associations of destination marketing organizations: the U.S. Travel Association and Destination Marketing Association International (DMAI).

$166 Million in Sales and Property Taxes
The study, “How the Visitor Industry Contributes to the Local Economy: An Analysis of Phoenix Hotels’ Property and Visitor-Related Taxes,”  concludes that hotels in Phoenix yielded $166 million in sales and property taxes in 2008, an average of approximately $6,300 per room, according to the Greater Phoenix Convention & Visitors Bureau (GPCVB).

The numbers glow with a positive light that could convince leaders of cash-strapped communities to see hotel projects as a worthwhile investment. “This is the sort of hard data that taxpayers and elected officials can relate to, especially in challenging economic times,” said Karen Williams, the DTF chair and executive vice president of the Louisville Convention & Visitors Bureau.

A Blueprint for Communicating Benefits of Travel
The DTF added the report to its website in early December as part of its Destination Excellence program. The program is intended for use by other destination marketing organizations and hotels in communicating the rewards that come from backing the travel industry. The GPCVB parlayed the findings into a successful marketing campaign that illustrated the contribution business travel and general tourism have on the region’s economy. “The research and public relations campaign is a blueprint other destination marketing organizations can use to illustrate the economic impact of the visitor industry,” Williams said.

The Phoenix data was extrapolated from information provided by 41 Phoenix hotels representing about 45% of the city’s room inventory. The report did not include the newly-opened 1,000-room, Sheraton Downtown Phoenix.

The hoteliers were asked to report their hotel occupancy taxes, food-and-beverage taxes, property taxes and other sales-activity taxes such as retail, utilities and audio-visual services. Taxes paid by hotel employees were not factored into the report, nor was off-property spending by guests.

Taxes Generated Far Outweigh Services
The hotel-tax study found that:

  • Of the hotel taxes remitted, 52.8% was in the form of hotel occupancy taxes; 27.3% in property taxes; and 19.8% from other sales.
  • The property taxes generated an average of $1,710 per room. That is approximately 8% over the $1,579 in property taxes paid by the median household in Phoenix in 2006.
  • State sales taxes totaled $46 million. A “considerable portion” of the revenues are returned to the city under Arizona law.
  • School districts in the Phoenix area received more than $20 million from the combined hotel and property taxes.
  • The taxes generated by hotels are far above the level of services actually used by out-of-town visitors.
  • The majority of the hotels that did not respond to the survey were considered lower-end, with limited services available.

The study, which was reviewed by hotel analysts Warnick + Company, offers destination marketers specific data they can use to state their case for tourism investment, in addition to the familiar ripple effect that each tourist has on a city’s economy.

Study Engenders Advocacy, Moore Points Out
“Perhaps the greatest power of a study like this is its ability to engender advocacy for DMOs at a time when we most need it,” said Steve Moore, president and CEO of the Greater Phoenix Convention & Visitors Bureau. “For people within our industry, this data is educational. For people outside our industry, it can be enlightening as to just how hotels are a fabric to one’s community needs.” The 25-page study is available online at www.destinationtravel.org.

Reach Karen Williams at (502) 584-2121 or kwilliams@gotolouisville.com; Steve Moore at (602) 254-6500 or smmore@visitphoenix.com