CLARIFICATION: A previous version of this story said the Waterford Hotel Group managed the Hartford Marriott Downtown and the Connecticut Convention Center. While the Waterford Hotel Group manages the Marriott, the Connecticut Convention Center is managed by Waterford Venue Services, which — along with the Waterford Hotel Group — is a subsidiary of the Waterford Group, LLC.
A proposal by Gov. Dan Malloy and Connecticut legislators to allow local governments to levy their own hotel tax would beleaguer an industry struggling its way out of the 2009 recession, hotel industry leaders say.
“It is ridiculous,” said Victor Antico, general manager of the Holiday Inn Express in Vernon. “I understand you need to balance the budget, but when we have to balance our budget here, we can’t just come up with new revenues. We have to cut expenses.”
In his second day in office, Malloy said he favored giving cities and towns local tax options beyond the property tax, mentioning a hotel tax or an entertainment tax.
As Malloy’s administration readies the state budget for release Feb. 16, it appears some form of the hotel tax will be in the mix. Ben Barnes, secretary of the Office of Policy and Management, said a 3-percent increase in the hotel tax is likely, raising the overall tax on individual hotel room nights to 15 percent.
The tax would create an additional $15-$20 million per year dedicated for local governments. The other 12 percent of the tax would continue to feed the state’s General Fund at a rate of $60 million annually.
“A hotel tax is relatively easy to do than the other options for local taxes,” Barnes said.
Hotel owners and industry officials see the additional tax as an impediment to increasing occupancy following several down years for the industry. Customers and meeting planners look at the overall cost of a stay when deciding where to stay, they said. And Connecticut’s location means tough competition with Boston and New York for travelers, corporate meetings and conventions.
“We can’t place Connecticut to a competitive disadvantage to the states around us,” said Michael Heaton, vice president of operations for the Waterford Hotel Group, which manages the Hartford Marriott Downtown, among other properties. “The state needs to look at this from the level of an entrepreneur.”
Last year was better than 2009 for Hartford hotels, with revenue per available room rising 4 percent, according to industry analyst Colliers PKF Hospitality Research. Colliers is predicting bigger things for 2011, with revenue per available room rising 6.1 percent.
But hotels in Greater Hartford are still struggling to get over the recession, Antico said. The Crowne Plaza in downtown Hartford filed for bankruptcy in August, and other hotels in the area are at risk of shutting down.
“A hotel tax is going to push a couple of hotels that are on the brink over the edge,” Antico said.
The Malloy Administration hasn’t decided yet what form the hotel tax will take, Barnes said. The state could apply the 3-percent increase across all cities and towns or simply give individual cities and towns the option to levy a tax up to 3 percent.
In 2010, the state House of Representatives approved legislation levying a 3-percent hotel tax increase, but the state Senate never took up the matter. That legislation called for one-third of that increase going toward the individual cities and towns and two-thirds for regional efforts by cities and towns.
State Sen. Eric Coleman, the Bloomfield Decmocrat who is vice chairman of the Planning & Development Committee, had similar legislation in the works for the state Senate, and he says funding is key to getting regional efforts off the ground for a variety of projects and initiatives.
Whatever form it takes, Coleman said the General Assembly several years ago recognized the need for towns and cities to diversify their revenue streams, and a hotel tax will get serious traction in the 2011 legislature. “A hotel tax is doable this session,” he said.
While a hotel tax is often perceived as a tax on out-of-towners that locals benefit from, that isn’t always the case, said Michael Van Parys, president of the Greater Hartford Convention & Visitors Bureau.
Local companies and corporations will bring in their out-of-state employees and customers and put them up in hotels for conventions, meetings and corporate events. Such group business constitutes 35-40 percent of hotel occupancy in Hartford.
“If you look at the entire picture of where the people who stay in these hotels are coming from, the tax is — partially, at least — funded by Connecticut organizations,” Van Parys said.
The tax would be worth it, if some of the money went toward local tourism promotion, Van Parys said. From 1978 to 2005, a portion of the hotel tax was dedicated to funding local tourism promotion and funding state tourism districts. In 2006, all the hotel tax revenue went to the state General Fund, and any tourism promotion money came out of that. In 2010, that figure dropped from $5 million annually to a single dollar.
Barnes said the Malloy Administration is unlikely to develop a hotel tax proposal to include money for local tourism promotion. The governor is committed to increasing the tourism budget funding — as evidenced by his decision to restore the $100,000 dues payment to Discover New England — but wants to continue to dole out money from the General Fund and not have a dedicated funding source such as the hotel tax.
With the 3 percent increase likely to simply go to the general funds of the local cities and towns, Heaton said, the hotel industry would prefer to not have the increase at all. Having a 12 percent tax that is lower than surrounding states is a competitive advantage, and hotels aren’t in a strong enough financial position to handle a tax increase.
“Everyone is being careful with their dollars these days,” Heaton said. “A tax increase during a fragile recovery for the hotel industry is not the best approach.”
