the April 2009 Issue in PDF Format - Trade Show Executive

Trend Watch
With Economy Down, Hotel Taxes Could Go Up
By Hil Anderson, senior editor
Las Vegas, NV – While the end of
the recession is nowhere in sight, an
economy-driven round of hotel tax
increases around the U.S. could have an
impact on the trade show industry that
will linger well after the recovery gets
underway.
The Nevada Legislature took relatively
little time to pass a 3% increase in the
state room tax in March. The boost will
bring in an estimated $200 million per year
from hotels in Las Vegas and Reno.
According to the Las Vegas
Convention and Visitors Authority, the
average room rate before taxes was $104.89
in January. The tax increase, which took
effect March 15, raised the average taxincluded
cost of a room from $114.33 per
night to $117.47 per night. At the same
time, a $300 per night suite jumped from
$327 per night to $336 per night.
At least one-third of the new revenue
will go toward Nevada public schools,
which is a worthy cause many find
difficult to oppose.
However, the vote came the same
week the $980 million expansion of
the Las Vegas Convention Center was
postponed for at least a year because of
the tourism slump and decline in the same
hotel tax revenues.
With a tourism-savvy state such as
Nevada voting to bump up room taxes,
the situation has trade show organizers
worried that other major destination
cities will give in to the same temptation
to make up their budget shortfalls by
drawing on the exhibition market. “While
Chicago has not raised its bed tax, three
other major trade show cities – Las Vegas,
New York and Orlando – have in one way
or another altered their bed tax. I think
they are setting a trend for the smaller
cities,” said Ken McAvoy, senior vice
president of Reed Exhibitions.
McAvoy told Trade Show Executive that
with responsibility for 40 trade shows on
his desk, he has a keen idea of the slim
margin for error the industry is working
under these days and the effect that
tacking even just a few dollars onto a hotel
bill can have on the attendee pool.
“It may be just an extra dollar, but it
is an extra dollar for
the people who have
to pay it,” McAvoy
said. “As things tighten
up, people start
reducing their travel
and entertainment
budgets.”
Ken McAvoy
Taxes Are Forever
While the cyclical tendencies of
economies and business mean that the
global slump will eventually reverse itself,
it is less likely that the political leadership
of a city will give up a revenue stream
that the voters don’t provide. That means
a tax hike passed out of urgency in a
crisis could be set in stone and a fact of
life for show organizers who committed
to events years in advance. “We all know it
is the non-voters who get hurt,” McAvoy
said.
The focus on local politics was evident
in Carson City when the Nevada tax
increase was debated by the state Senate.
Media reports from the capital said the
objections to the increase did not revolve
around the impact on tourism but rather
how the spoils would be divided up
among Nevada’s counties.
Keeping Revenues In-House
Maura Gast, chair for Destination
Marketing Association International
(DMAI) and executive director of the
Irving Convention and Visitors Bureau
in Texas, said CVBs and the exhibition
industry had to continually press their
respective city leaders on the fact that a
robust tourism base is something to be
protected. “Otherwise, they are going to
have to provide the same level of services
to their constituents, but will have to raise
their taxes to do it,” she said.
On the Flip Side, Increased Taxes Can Be
a Benefit
Room taxes are a fact of life in any
significant convention city, and when used
to promote tourism, they can actually
benefit the exhibition industry. The tax
provides dependable funding for capital
improvements to convention centers
Executive Summary
• Nevada boosts hotel tax from
9% to 12%
• Organizers eye intentions of
other cities
• Tax hikes could impact event
travel decisions
• Politicians find it easier to tax
visitors
• On the plus side, taxes
benefit CVBs, convention
districts
and the surrounding areas as well as the
operating expenses of the convention
and visitors bureaus that are the liaisons
between the city and show organizers.
In New York City, for example, a flat
$1.50 tacked onto the daily room rate on
every hotel bill is earmarked for the Jacob
K. Javits Convention Center. Oakland,
CA residents will vote in June on a 3%
hotel tax hike to pay for the local CVB
and cultural festivals and attractions. And
across the bay in San Francisco, a 1.0%
to 1.5% room tax increase was enacted
to be used for tourism marketing and
for improvements within a designated
Tourism Improvement District around the
Moscone Convention Center.
McAvoy said the tourism district
concept was an attractive one because it
places stronger controls on how the room
tax revenue is spent. “We don’t have an
issue with taxes that remain in the custody
of the CVB if it is using them for the
purposes they were intended for,” he said.
Regardless of how it is packaged, an
increase in the hotel tax is still an increase
in the hotel tax, he noted. And when added
to the current costs of attending a show
as well as odds and ends such as future
inflation, pending wage hikes for various
unions and higher travel costs, those few
dollars can add up and potentially convince
an association or independent show
organizer to look elsewhere.
Reach Ken McAvoy at (203) 840-5681
or kmcavoy@reedexpo.com; Maura Gast at
(972) 252-7476 or mgast@irvingtexas.com
24 April 2009 Trade Show Executive www.TradeShowExecutive.com