In The News › New Orleans hotel tax revenue soars, raising collection questions

New Orleans hotel tax revenue soars, raising collection questions

By Jennifer Larino

NOLA.com | The Times-Picayune

June 15, 2015

Money collected from the New Orleans hotel occupancy tax is on pace to reach a five-year high, totaling more than $43 million so far this fiscal year. Healthy travel growth means tax revenues could continue to rise next year and beyond.

Despite the strong forecast, New Orleans tourism officials say they plan to continue calls for more special taxes to support the local travel economy. But some wonder if this may be the time to prioritize tax collection.

Jeff Anding, director of external affairs for the New Orleans Convention and Visitors Bureau, said the city is benefiting from unprecedented tourism growth, not just from conventions and meetings but also from leisure travelers.

That said, occupancy tax revenues can fall as quickly as they rise, he added. Revenue collected from New Orleans hotels is also split among six entities, including the Convention and Visitors Bureau, dispersing the impact of any revenue increases.

To maintain its tourism momentum, Anding said New Orleans needs to make sure money is in place to keep streets safe and maintain the French Quarter. In October, the city will vote on a quarter-cent sales tax on French Quarter businesses to pay for more police patrols in the historic neighborhood.

This follows a 1.75 percent hotel room charge Louisiana lawmakers approved in 2013 to generate money for tourism marketing and citywide improvements.

In a May 2013 report, the Bureau of Governmental Research was critical of the assessment, arguing such special taxes cut into the city’s tax capacity without considering pressing needs such as sewer and water system upgrades.

Peter Reichard, BGR research director, declined to comment directly on the recent rise of hotel occupancy tax revenues or the upcoming French Quarter tax vote. The organization will release a new report soon examining tax issues, but Reichard said concerns from its report two years ago remain.

“These taxes come up one by one in isolation, and nobody is really considering the big picture and how they fit in,” Reichard said.

Healthy tourism numbers could provide cushion needed to rethink the city’s tax strategy, he said.

All signs point toward rising hotel revenue in years to come. Visitors to New Orleans climbed to 9.52 million last year, closer to the 10.1 million record reached in 2004. The city is gradually adding hotel rooms.

According to figures the Convention and Visitors Bureau provided, hotel occupancy closed 2014 at 73.1 percent, with average daily room rates at $172.67 per room. That compares with 69.2 percent occupancy and a $135.93 average daily rate in 2010.

Anding said the difference has been an uptick in leisure and unplanned group travel to New Orleans. It’s happening not just during the Sugar Bowl and Jazz Fest, but all year long, he said.
Borrowing a social media term, “New Orleans is trending right now,” Anding said.

The 13 percent hotel occupancy sales tax is collected on hotel stays in Orleans Parish. Revenues are split six ways.

The bulk — 8 cents — goes to the Louisiana Sports and Exposition District and the Ernest N. Morial Convention Center. The LSED oversees the Mercedes-Benz Superdome and the Smoothie King Arena.

The City of New Orleans and Orleans Parish School Board each get 1.5 cents for every dollar. The remaining 2 cents are split between the Convention and Visitors Bureau and the Regional Transit Authority.

In addition, a 4 percent tax on hotel stays in Jefferson Parish goes to the Louisiana Sports and Exposition District.

Occupancy tax collections have risen for the past five years, topping $46.8 million in 2014, according to state Department of Revenue figures. Collections for 2015 were nearly $43.08 million as of May 28. The state’s fiscal year ends June 30.

The debate over tax strategy will continue into this fall. For now, organizations that benefit from rising revenue are figuring out ways to put the money to use.

The Louisiana Sports and Exposition District Commission voted at its May meeting to amend its budget to make room for an additional $4 million from its share of the hotel tax.

Superdome General Manager Alan Freeman said the money would be put toward “capital project work,” including structural projects and studies to analyze the stadium’s water and electrical systems.

“It’s work that needs to be done,” Freeman said.

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