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Time to Wake Up the Pillow Tax PDF Print E-mail
Commentary/Politics - Editorials
Tuesday, 28 September 2004 18:00
It’s time for elected officials and city staffers to wake up with regards to funding tourism in the Quad Cities. Nationwide leisure travel has caught up with business travel, which has remained flat for the past two years. Until this community resolves its convention-facility challenges, the leisure market is going to be where new growth emerges.

In the Quad Cities, there’s nearly $3 million a year of taxes collected by cities in the form of a 5- to 7-percent room tax paid by overnight visitors to our area’s hotels. Roughly 25 percent of this “pillow tax” is being used to help fund the Quad Cities Convention & Visitors Bureau, a.k.a. the CVB. In cities such as Las Vegas, nearly 75 percent of the pillow tax goes back to the tourism authority. In Philadelphia, 36 percent of the hotel-motel tax goes to the city’s Tourism Marketing Corporation. Closer to home, in St. Charles, Illinois, nearly 42 percent of the pillow tax was allocated to the CVB.

According to the recent cultural-tourism study commissioned by the CVB, the average annual occupancy rate for hotels and motels in the Quad Cities is around 58 percent. If this level of activity is enough for our hospitality industry, then by all means, leave the model alone. End this discussion now.

But if area hotels, and related hospitality industries such as restaurants, retailers, and transit operators, are interested in growing their profits, then new streams of overnight visitors must come from sources other than the business traveler. Meanwhile, our CVB is one of the most under-funded such agencies in the Midwest. Can it be argued that our hotels get what they pay for?

Perhaps.

If a quarter of the pillow tax helps us garner 58 percent occupancy, then wouldn’t it follow that a higher level of funding for our tourism bureau would result in a higher occupancy rate? There are those that will argue both yes and no.

Yes, our CVB is doing amazing things with the resources it has been granted, and despite the fact that every single overnight guest cannot be attributed to its efforts, one would hate to see what our occupancy rate would drop to without the ongoing promotional efforts, convention recruiting, and hospitality training this community receives.

On the other hand, there are skeptics who will state that since one cannot pinpoint the exact number of room nights (and thus pillow tax) that the CVB is directly responsible for, the Bureau should be happy with the percentage it has and hope it doesn’t recede due to city budget cuts.

It’s no secret that the Quad Cities and the CVB are handcuffed in attracting the very large conventions with blocks of 300 or more room nights because of inadequate hotel and convention accommodations. Maybe this is where the resistance to an increase in funding levels has some traction. Without an enhanced inventory of rooms and meeting space arrangements (e.g., marketing the RiverCenter with the combined rooms from the Radisson and Blackhawk Hotel, which was the original intention of the “Super Block” built years ago) perhaps the CVB is doing the best it is going to be able to do with what it has to offer the convention and meeting markets it competes for with neighbors such as Dubuque.

This may be true for the convention side of business, but the CVB also stands for “visitors.” Fortunately, increasing the volume of visitors to the Quad Cities via its arts, culture, and heritage product is not reliant on such dysfunctional meeting and convention dynamics.

According to National Business Travel Monitor statistics, business travel has been on a decline since 2000, and leisure travel has been on an increase since 2000, trends that began prior to the 9/11 terrorist attacks. According to the draft report by Chicago-based consultant C.H. Johnson, a recent study by the Travel Industry Association of America and Smithsonian magazine showed that 81 percent of 118 million U.S. adults who traveled in the past year are considered historic/cultural travelers. Thirty-one percent traveled to visit a historic site, 24 percent for a museum, 15 percent for an art gallery, and 14 percent for live theatre. And 29 percent of these travelers added extra time spent on their trip because of a cultural activity or event. The Quad Cities economy stands to gain significantly when it establishes a method to capture more of this lucrative leisure-traveler market.

Keep in mind the Quad Cities Arts, Heritage, & Cultural Tourism Plan draft report does not set out to make a case for increasing the percentage of “pillow tax” paid to either the CVB or a proposed Cultural Marketing Resource Center (CMRC). Funding a CMRC for the first two years would come primarily from philanthropic sources, but the study does not recommend a sustainable funding model past the first two years. The report does forecast how the hospitality-industry pie will grow with unified external marketing of our area’s arts and culture, stating that with a $300,000 kick start, increased leisure travel over the next two years will result in a conservative economic impact of more than $4 million. Sadly, the CVB positing a potential increase in funding level from the “pillow tax,” for either itself or a new cultural-tourism initiative, is a proverbial “third rail,” as evidenced by the City of Bettendorf’s recent reneging on its own promised increases that would equal its sister cities’ levels.

It’s good business to consider allocating a portion of the “pillow tax” to increase dollars spent here by leisure travelers. Such an allocation would assist funding a joint marketing effort of our cultural amenities and historic sites. Granted, some local entities such as the John Deere Commons already pursue regional marketing, but very few of their peers have similar resources. With proper front-line familiarization and training of our hotel operators to utilize our arts and culture to increase overnight stays and a concerted effort to document the leisure traveler, this allocation of the “pillow tax” could provide municipalities a rare measurable return on their investment – results measured by increased overnight stays, increased audiences and revenues for our arts and cultural organizations, and increased revenues for our area retailers and food and beverage providers, as well as job retention and perhaps even job growth.

Whether you are a skeptic or an advocate of such a concept, I encourage you to create the debate … with your elected officials, your co-workers, and your family and friends. The Quad Cities have endless stories to tell about great things to do and see here. By telling these stories more often in more places outside of our own backyard, tourism will expand the Quad Cities economy. The QCCVB works hard and is effective in telling our story, but elected officials need to consider that we get what we pay for.
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