of 1 to 3 percent of the room rate, based on a hotel’s proximity to the downtown core, said Steve Hammond, president and CEO of the Sacramento Convention & Visitors Bureau. The city’s previously existing occupancy tax plus the district tax will range from 13 to 15 percent total, a rate that Hammond calls “very competitive” with other cities throughout Cali- fornia. The funds from the increased TMD tax are slated for online marketing and promotion, familiarization tours for planners, and education programs for local hospitality and lodging managers on service enhancements and marketing strategies in the meetings industry. It’s the first increase to Sacramento’s TMD tax in more
than a decade, according to Hammond. At the time it was first implemented, in 2001, it was only the second such assessment levied in the state. “Since that time, 65 new tourism BIDs [Business Improvement Districts] have been established, and there are about 10 more in some phase of planning,” Hammond said. “As you can see from these num- bers, assessments have become very commonplace. During this challenging economy, our hotels have agreed to a modest increase to ensure that the Sacramento Convention & Visi- tors Bureau has the resources to continue to deliver the types of services that meeting planners and visitors have come to expect from Sacramento.”
WHERE YOUR OCCUPANCY TAX REALLY GOES A common misconception among planners is that general occupancy taxes stay within a city or destination to fund local tourism and hospital- ity projects, said Visit Spokane’s Staples. Instead, states and cities often use these revenues to boost transportation and airport budgets; or they’re put into a large general fund that Staples calls a
“big, black hole.” “Planners just don’t understand [occupancy taxes],” she said, “because they are just looking at their budget and their bottom line, and they always complain.”
Of the 15 percent or so collected in occupancy tax, the city or state may give back “1 or 2 percent”
to convention bureaus for marketing purposes, Staples said, and a CVB will set aside some of that money to incentivize new business. While Spokane uses part of its allocation from occupancy-tax revenues to fund grants for member projects and initiatives such as new signage and to pay for transporta- tion costs to bring planners in for fam trips, Staples said, the revenue isn’t reliable enough for large or sustained projects such as a convention-center expansion. “Those taxes that we get back from the state are always, in the eyes of the legisla- ture, volatile. They can always be cut back,” Staples said. “To them, it’s ‘found money,’ and they don’t get what we do.” Without those funds, however, Visit Spokane wouldn’t be able to provide additional wayfinding services for attendees, host the Visit Spokane website, and offer brochures, among other complimentary services that planners have come to expect from the CVB. “[Planners] forget that it’s free to you,” Staples said, adding that it’s difficult for them to understand what revenues fund particular services, because every state has its own unique policy on the use of room taxes. In Sacramento’s case, revenue from the main room tax
San Diego CVB’s Joe Terzi expects a different industry funding model in the near future.
— called the transient occupancy tax — is forwarded to the city’s general fund, and then allocated to the CVB for a vari- ety of convention services, to local special-event organizers, to the Sacramento Community Theater, and to the city’s police and fire departments, Hammond said, to “ensure that Sacramento continues its high-level execution of clean and safe programs for our visitors.” The San Diego CVB fares even worse. “Tran- sient occupancy taxes were put in place for mar- keting. They were actually to promote tourism to cities, states, and communities — and then they morphed into something else,” Terzi said. “They morphed into opportunities for general funds. Right now, our 10.5[-percent] transient occupancy tax goes all to the city, right into the general fund, and none of it is spent on tourism promotion. It’s the same in a lot of cities, where there have been economic challenges.”