The Portland City Council voted unanimously Wednesday to approve a small addition to the city’s tax on stays at hotels and vacation rentals in an effort to help the lodging industry recover from the coronavirus pandemic and to rehabilitate Portland’s image.
A 3% tax -- up from 2% -- will be levied on hotel and vacation rental stays occurring after June 30 to fund Portland’s Tourism Improvement District, which is managed by Travel Portland and supports marketing campaigns to promote the city’s lodging and convention industries. With the additional tax, guests staying in Portland could be assessed a total of 16% in taxes on hotel stays through various local and state lodging taxes.
The City Council also voted to make the 2% base tax for the Tourism Improvement District permanent, but will review whether the new 1% tax is still necessary in 2026 and every five years after. Guests staying in a $150 hotel room would pay an added $1.50 nightly surcharge once the new tax goes into effect.
Travel Portland, a nonprofit that promotes the city’s tourism industry, lobbied for the new tax, contending that the money would help the tourism industry recover from the pandemic and reputational damage the city suffered during last summer’s protests.
The group hopes the new tax could generate $3.1 million in the first year, if the tourism industry begins to rebound this summer.
Travel Portland, which cut its staff by 40% last April as tourism and hotel revenue plummeted, relies on the Tourism Improvement District tax for more than 40% of its budget.
Hotel operators are required to pay the tax to the Tourism Improvement District, but generally pass the cost on to guests through taxes on hotel stays.
The tourism industry has been one of the hardest hit during the pandemic.
Hotel occupancy in Portland plummeted from nearly 75% in 2019 to 34% in 2020. More than 160,000 group room nights were cancelled last year in Portland as large events and conventions were banned due to the pandemic, according to data from Travel Portland.
Since the start of the pandemic, Oregon’s leisure and hospitality industry has shed 37% of its jobs, according to the Bureau of Labor Statistics.
But the pandemic might not be the only challenge facing Portland’s tourism industry as it tries to recover.
Portland drew national media attention last summer as demonstrators and local and federal law enforcement officials clashed in nightly protests downtown, giving the city a reputation for upheaval.
In an Oct. 1 survey of 1,250 people nationwide conducted by consumer research company Engine Insights, 69% of respondents said they had generally seen Portland mentioned negatively in the media and 37% said they considered the city an unappealing vacation destination.
Jeff Miller, president and CEO of Travel Portland, told the City Council last week that the new tax would be instrumental in kickstarting the tourism industry’s recovery from the pandemic and helping to repair that reputational damage.
Miller said the Tourism Improvement District has played a key role in spurring Portland’s tourism industry through its marketing and outreach since it was established in 2012. Travel Portland estimates that out-of-town visitors spent $5.6 billion at local businesses in 2019, up from $3.9 billion in 2011.
But Bakulesh Patel, president and CEO of Wilsonville-based BHG Hotels, told the City Council he was concerned that there was no formal process to receive input from hotel operators across the city about the new tax and said he felt the money had historically benefited downtown Portland over hotels in other parts of the city.
“We believe there is not enough transparency on how this fund is spent,” Patel said. “There needs to be more transparency.”
The City Council requested Wednesday that Travel Portland present an update in six months on where the funds from the new tax are going and how the money is helping minority-owned hotels and those outside of downtown.
Portland has a strong incentive to see its tourism industry recover quickly.
Five percent of the overall transient lodging taxes assessed on hotel and vacation rentals go to the City of Portland’s general fund. The city received $30.8 million in general fund money from hotel room taxes in the 2019-20 fiscal year, but expects those revenues to be down 75% this fiscal year.
“It’s important to all of us in this community that travel and tourism and hospitality does recover as quickly and safely as possible,” said Portland Mayor Ted Wheeler.
-- Jamie Goldberg | jgoldberg@oregonian.com | @jamiebgoldberg
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