Last November, the city raised its hotel bed tax to 5.5%, up from 2%, and earmarked funds from the increase — an estimated $5.3 million in 2023 — for the housing and child care initiatives, said Kara Franker, the CEO of Visit Estes Park, a local tourism group. That beefed-up bed tax now combines with town, county and state sales tax to add a cumulative 14.2% onto the cost of a nightly stay in the city, she said, helping to fund a range of public services alongside the new workforce-related initiatives.
According to Colorado tourism officials, at least 17 municipalities have imposed a new bed tax or modified an existing one over the past year, many of them putting the revenue toward new types of projects.
Similar moves are happening in tourism-heavy areas across the U.S., said John Lambeth, CEO of travel consultancy Civitas, reflecting a more expansive approach that is “more about stewardship of the destination and giving back to the community.”
Jack Johnson, chief advocacy officer for the travel industry group Destinations International, said the disruptions of the pandemic have motivated some communities to consider whether broader social and economic policies “can be tied to travel in tourism, either directly or indirectly, and therefore paid for out of the bed tax.”
The more taxes states and cities levy on hotels, the more of a competitive disadvantage they create for local businesses.
Chip ROgers, CEO of the American Hotel and Lodging Association
Hotel taxes were first adopted in the U.S. by New York City in 1946, became commonplace nationally by the 1970s, and are what guests typically see itemized on their hotel bills today, said Elizabeth Strom, an associate professor at the University of South Florida’s school of public affairs. Public officials have long loved bed taxes because they generate easy-to-raise income from out-of-towners, not local voters.
“Every state either has such a tax at the state level or permits such a tax at the local level, or both,” Strom said.
The newer breed of bed tax experiments, like those in Colorado, are being driven as much by windfalls from rebounding travel demand as by evolving civic attitudes.
Tourism revenues dipped sharply during the pandemic, but in 2023, hotel-generated state and local tax revenue — which includes bed taxes along with the other levies lodging operators contribute to government entities — is expected to reach $46.71 billion nationwide, up 13.6% from 2019, according to a study…
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