In The News › CVB’s Perry explains hotel ‘assessment’ split

CVB’s Perry explains hotel ‘assessment’ split

A Louisiana House committee this morning approved Senate Bill 242, which authorizes the New Orleans Convention and Visitors Bureau to levy a 1.75 percent assessment on CVB member hotels in Orleans Parish.

The assessment would generate an estimated $13 million to $14 million annually, generally for the purpose of tourism marketing. The bill allows wide latitude in using that revenue to the CVB, a private nonprofit organization, and defines the assessment as an “enforceable obligation of the guest.”

The 1.75 percent levy could occur only after a Greater New Orleans Hotel and Lodging Association referendum in which two-thirds of the votes support the assessment. A hotel operator’s voting power is based on their number of rooms.

New Orleans Convention and Visitor Bureau CEO Stephen Perry discussed the assessment with CityBusiness ahead of this morning’s committee hearing, seeking to distinguish it from a tax by portraying it as a strictly private membership initiative.

Perry addressed discrepancies between the CVB’s description of the assessment in publicity materials and the text of the bill. Its press package notes the revenue would be split with the New Orleans Tourism Marketing Corp., and “built in” accountability measures include sharing an audit and marketing plan with the Greater New Orleans Hotel and Lodging Association.

The revenue sharing and accountability measures do not appear in the text of the bill, nor does a promise to use a portion of the proceeds for French Quarter infrastructure and public service upgrades. The latter appears in a critical position paper the Bureau of Governmental Research released yesterday noting that the French Quarter enhancements were part of information provided by the CVB. Mark Romig, chief executive of the tourism marketing corporation, reiterated the pledge yesterday in the legislative committee hearing.

BGR labels the assessment as a tax “in effect” that would “consume a portion of the city’s tax capacity” and urged lawmakers to table the bill. The group questions whether tourism marketing is the “highest and best use” of the revenue, and notes that the CVB and the New Orleans Tourism Marketing Corp., a city agency, already receive nearly as much of the city’s 13 percent hotel sales tax as the city’s general fund.

The NOTMC receives an additional per-night occupancy charge on top of the sales tax. The CVB receives about $7 million annually in direct state appropriations.

CB: Why is the CVB-Tourism Marketing Corp. revenue split not in the bill?

Perry: That’s not supposed to be in the law. This is a decision we have made as a convention and visitors bureau with our members. This is an agreement we have arranged with the NOTMC.

Here is the process: Once this passes, we will look at it and very likely do a couple things. We will adopt some bylaws and resolutions that go with this in the CVB. We will confect a (cooperative endeavor agreement) with the NOTMC to provide them half.
CB: And the audit and shared marketing plan?

Perry: Those aren’t matters for state law. Those are matters for a nonprofit corporation… The last thing we want to do is reduce flexibility by making them part of state statute. That doesn’t help business be nimble or move, or make market-based decisions. The whole point of this is to provide more flexibility.

CB: Press materials say the assessment cap will be determined by a show of need and diligent business evaluation. Has that been conducted?

Perry: We did that for over two years, trying to understand what the elasticity was, so that it would not have a negative impact on visitation but an incredibly high impact on market share and new occupancy.

CB: Why give greater voting weight to larger hotels if it’s a proportional across-the-board percentage on guest folios? Are all hotels affected proportionally?

Perry: Well let’s just look at the level of investment in the property. You’re saying a 13-room property should have an equal vote with a 1,649-room Hilton, in terms of the impact on the city? … It has a proportional impact in that they will both gain new visitors.
You’re asking as if it’s a negative impact to business, when in fact it’s exactly the opposite. It’s going to virtually double the city’s capacity to bring in new visitors. Yes, small hotels will share those gains just as much as large hotels…

We wanted to go on a referendum basis and, even after the referendum passes, it still doesn’t mean we will do this … We are going to work for about three months after this with hotels of all sizes, of all market niches in the city. If the vast majority of the properties and the rooms in this city choose not to participate, then we will not do it.

CB: Hotels will have to surrender CVB membership if they don’t participate?

Perry: If we choose to do this, then is it fair for hotels to say ‘I’m not going to participate, and I want to reap all the benefits of it and have all the other guys pay for all of my marketing?’ Just ask yourself if that’s a fair business equation.

We don’t believe it is fair for a large percentage of properties to carry the weight of the marketing that will drive tremendous growth and profitability for other properties. We consider this a civic responsibility, and a membership responsibility…

For this to work properly, it has to have the buy in of the hotels. And if the hotels do not want the city to have expanded marketing, expanded brand development, expanded capacity to compete in the marketplace, then they have the ability to absolutely say, “No, we don’t want to do that.”

We exist to work for them. That’s the only reason we exist.

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