Tourism industry leaders are fuming about the possible economic fallout of a new $5 per night fee on hotel/motel stays.
Approved by the state legislature earlier this month, lawmakers say the fee, which takes effect July 1, will generate between $150 million and $200 million annually to pay for road and bridge improvements.
But industry officials said the financial costs to businesses could outweigh the revenues generated for transportation.
The Georgia Association of Convention & Visitors Bureaus has led the charge in calculating the financial impact on the hospitality and tourism sector, a better than $53 billion industry that employs an estimated 400,000 workers in the state.
A statement from the association reads, in part, “... We are deeply concerned and troubled about the many negative consequences of a $5 per night per room hotel fee on business, leisure, convention and group travel within and to Georgia.”
The fee, a substitute for a similar charge proposed on rental cars but later scrapped, had not been discussed publicly until it was passed by lawmakers as part of an overall $900 million transportation funding bill.
“There was much discussion during the negotiation and crafting of the transportation bill with regard to rental car fees,” said state Sen. Butch Miller, R-Gainesville. “However, during the research we determined that about 40 percent of rental car fees are paid by Georgians. And there was a far lower percentage of hotel/motel fees that will be paid by Georgians. That’s how we ended up switching.”
Miller said that a $5 fee on rental cars would only generate upward of $73 million annually.
The visitors association disputes these numbers and argues that business travel and recruitment efforts, future hotel development and construction prospects, government travel, and the ability to attract conventions and trade shows could be in jeopardy when the new fee takes effect.
“We were surprised and extremely disappointed that the tourism industry ... was not consulted and that no consideration was given on how this fee might impact our industry or our businesses,” the association’s statement continues. “It is deeply troubling that we now have been put at a competitive disadvantage in attracting conventions, trade shows, tour groups, sporting events and leisure travelers to Georgia.”
Lawmakers are counting on hotel occupancy rates to remain stable, or even grow, but the new fee might produce the opposite result, according to the association.
“This tax will negatively ripple through tourism partner businesses — fewer room nights mean fewer people in our restaurants, retail stores, attractions and tours,” the statement continues.
State Rep. Carl Rogers, R-Gainesville, said the transportation funding formula could be adjusted in the coming years based on how things shake out.
“I think that’s always a possibility,” he said, but he defended the fee as a tough choice among many needed to ensure transportation has proper funding going forward.
“At this point, we are in a mode of wait and see what happens next,” said Stacey Dickson, president of the Lake Lanier Convention and Visitors Bureau, adding that lawmakers must still figure out when, how and where to collect the fee.
Still, a few things have become clear in recent days.
“After discussing with some of our hotels, a few of the owners and managers indicated their concern and said that in order to remain competitive, they may have to absorb part of the new tax themselves,” said Deb Gregson, Gainesville’s tourism manager. “This tax caught all of us by surprise.”
The impact of the hotel/motel fee will not be felt equally in all parts of the state.
The big city of Atlanta, for example, is on the hook to a greater degree than, say, Flowery Branch.
But Hall County, with big tourist draws like Lake Lanier, does stand to get hit harder than most places.
The ability to attract trade groups, conferences and conventions could be threatened, local officials said.
A night in a hotel or motel in Gainesville already comes with a 13 percent tax when state and local charges are applied.
So, for example, a $100 room would come to a total of $118 once all the taxes have been added.
“I think it makes the Georgia hotel market less competitive nationally,” said Richard Labriola, general manager of the Hilton Garden Inn on Browns Bridge Road. “You’re getting up to New York City levels.”
Labriola said he used to work in the Big Apple and saw the loss of business in the hospitality industry as taxes surpassed 20 percent and trade groups began looking for alternative places to host conventions.
“I think, overall, while we’re happy that we’re taking steps to address the transportation needs of the state, it may not produce the bang that (lawmakers) are looking for,” Labriola added.
Grier Todd, manager of the Fairfield Inn and Suites on Browns Bridge Road, said he expects some hotels, particularly in Atlanta, to adjust their rates to remain competitive.
“From the hotel side of it, obviously that’s an additional cost to our guests,” he added.
Todd also said new hiring and expansion plans for hotels and motels could be scuttled if occupancy rates slip as a result of the additional fee.
The impact of the fee is greater for cheap rooms.
For example, a $5 fee on a $40 room rate is exponentially greater than the same fee being applied to a $1,000 per night rate at a five-star hotel in downtown Atlanta.
“No property (in Gainesville) is going to have a competitive advantage; however, I think it’s going to impact the extended-stay properties probably more than the other ones,” Todd said.
Rogers said the fee will not apply to hotel/motel stays in excess of 30 days.
While lawmakers are hoping out-of-state tourists will pony up the majority of revenue generated by the fee, local residents could feel the financial toll in a number of ways.
For example, an ice storm in February knocked out power to thousands of Hall County residents, sending families scrambling for hotel/motel rooms that booked up fast. The $5 fee could start to add up for displaced individuals.
“That could have a negative impact, it really could,” Dunagan said. “I just don’t think it was very well thought out.”
There is also confusion about whether the fee will apply to bed and breakfast establishments, as well as lakefront home and mountain cabin rentals.
“Does it apply to all lodging, or just hotels and motels?” asked Tim Evans, vice president of economic development at the Greater Hall Chamber of Commerce.
Rogers said he believed these properties would also be subject to the fee.
“I just don’t understand,” said Mayor Danny Dunagan. “The state has been working very hard to build up tourism … and then they come up with this last-minute $5 tax.”