Hotels hope tax plan doesn’t sleep over

What would improving the Columbia Regional Airport terminal do for tourism and economic development? And would funding a new terminal through bed taxes — normally reserved for marketing and promotion of the area — be an appropriate use of that revenue?

Those questions are being argued at length this spring as the Columbia Hospitality Association fights against city-supported enabling legislation that would, if enacted, allow charter cities from 100,000 to 300,000 in population to seek voter approval allowing bed taxes up to 7 percent.

The Columbia City Council has authorized city staff to work with state legislators and the city’s contract lobbyist to get the enabling legislation on the books. CHA has also hired a lobbyist to represent its views.

Hotel users in Columbia currently pay 4 percent. Cities across Missouri now charge from 3 to 7.50 percent, with the big numbers found in St. Louis and Kansas City, where the total of all taxes is 15.73 percent of the nightly rate. Lodgers in Jefferson City pay 7 percent.

Heather Hargrove, immediate past president of CHA and general manager of the Holiday Inn Executive Center in Columbia, is CHA’s spokeswoman regarding the bed tax increase. She says that the association is fighting the proposal at the earliest possible level.

Even if the state legislation is passed, the city would still have to submit the plan to the voters. Hargrove says CHA’s hope is to nip the tax plan in the bud before it has a chance to even become a seed.

Last year, the Missouri Supreme Court ruled that online travel agencies do not have to pay lodging taxes on the revenue they collect for booking hotels. The amount the hotel receives is subject to the tax but the amount going to the travel agency is not.

Economics and fairness

Hargrove says CHA is basing its objections on two fronts: economic and fairness. “We are still very much in a struggling economy,” she says. A 2008 study by the American Hotel & Lodging Association Educational Foundation (AH&LEF) found a strong link between taxes and economic activity in the hospitality community. The foundation estimates a loss of 5,000 jobs in Missouri for every 1 percent addition to the bed tax throughout the state. Hargrove says CHA is currently working on translating those figures into job-loss estimates specifically for Columbia.

Hargrove says Columbia competes for meetings and conventions with Osage Beach, which has a 3 percent lodging tax, and with other cities having lodging taxes lower than Columbia’s proposed 7 percent. Springfield and St. Charles, for example, are at 5 percent.

Columbia has 34 hotels with a total of 3,500 rooms. Occupancy rate is currently at 48 percent, Hargrove says. Before the current economic crunch, hotels were above 80 percent occupancy.

Funding airport improvements

While supporting airport development and economic growth, CHA also believes it is unfair to single out the lodging industry to shoulder airport improvements that the organization says are mostly undefined.

“There has to be a true feasibility study” of the terminal and its potential impact, Hargrove says. “It’s fundamentally wrong to burden our industry with a $17 million project.”

The $17 million figure comes from a city staff report presented to the Columbia City Council in mid-January. The report indicates that in fiscal 2011, the 4 percent tax brought in just shy of $2 million. Based on that, each additional 1 percent increase in the bed tax would generate $484,827 and total $1,454,487 for 3 percent.

“This is one possible strategy to fund Columbia Regional Airport improvements, contributing to both the tourism economy and to job creation,” the staff report indicated. Three percent would fund the bonds to build the terminal, which would “help accommodate larger planes, more flights and more travelers.”

A city ordinance amendment effective in 2000 raised the bed tax from 2 to 4 percent and established a “tourism fund.” The ordinance specifies that 75 percent of the funds be collected “only for the purpose of promoting conventions and tourism in the city,” and 25 percent “only for planning, promoting, operating and constructing tourist attractions and planning and promoting tourist events which have substantial potential to generate overnight visitation.”

Airport travelers

Newly appointed Columbia Regional Airport manager Don Elliott, a 30-year veteran of the airport, says that the airlines report that 80 percent of the passengers are business travelers. The airport focuses marketing efforts to potential passengers in a “catchment area” bounded roughly by Moberly, Osage Beach, Booneville and Fulton. Elliott says a consultant hired by the city will do further research on the airport and its travelers.

Columbia Convention and Visitors Bureau Director Amy Schneider says the bureau doesn’t have any information on how lodging taxes influence convention and meeting planners. “It depends on what type of group it is,” she says. “Government groups are always going to be price sensitive.” Some groups come to Columbia more for the location and convenience than the cost of the room, she notes.

Comparisons with other cities are difficult to make due to Columbia’s location and status as the home of the University of Missouri Tigers. But a marketing study completed in 2010 for the Billings, Mont., Chamber/Convention and Visitors Bureau found 29.2 percent of hotel lodgers were business travelers and 23.6 percent were convention travelers. Groups accounted for 11.2 percent. Billings has slightly more than 4,000 hotel rooms and air transit issues as well, the study shows.

Elliott believes that the time is right to expand Columbia Regional Airport, as the 50-passenger CRJ200 regional jets that Delta flies between Columbia and Memphis are usually booked. He recommends fliers book flights at least three weeks in advance to obtain seats.

Elliott says passenger enplanements increased 320 percent in the last five years, moving Columbia from 500th in the nation in air traffic to 288. “If we brought in three more airplanes, we would fill up those seats,” he says.

The airport is purchasing a 46-by-24-foot doublewide relocatable building from Columbia Public Schools to create a new baggage claim area and reduce some of the confusion when arriving passengers mingle with those seeking to board. Elliott says the existing baggage claim and holding areas will be consolidated in mid-year.

Concrete runway interchanges are aging and in need of a fix, and $7.6 million in improvements are scheduled this year. Those improvements are 95 percent FAA funded. A $1.8 million wildlife fence is also planned.

Columbia Mayor Bob McDavid pegged necessary improvements at $40 million when the city announced a new, nonstop Delta flight to and from Atlanta beginning June 7.

A community partnership spearheaded by a Chamber of Commerce task force is working to improve air service as a stimulus to economic development. A campaign dubbed “40 in 2020” has a goal of capturing 40 percent of all airline travel for mid-Missourians through Columbia Regional Airport by 2020.