With Birmingham currently having one of the highest lodging tax rates in the country, talk of raising the tax has become a hot topic.
Raising the tax could bring in more money to invest in sports tourism and other developments focused on drawing more tourists to the Magic City. But at what point does increasing the tax rate start to discourage tourists?
The Alabama Restaurant & Hospitality Association sent a letter to Birmingham City Council President Pro Tempore William Parker proposing a 1.5% increase to the current lodging tax rate as opposed to Parker’s proposed $3 flat rate.
“Collaboration is the key to success in this endeavor,” the group wrote in a letter to Parker.
Currently, Birmingham has one of the highest lodging tax rates in the country at 17.5%. This 17.5% includes a state lodging tax rate of 4%, Birmingham lodging tax rate at 6.5% and Jefferson County’s lodging tax rate at 7%, according to the Alabama Department of Revenue. If a hotel room costs $100, current lodging tax rates would make it total $117.50 before the proposed increase.
The group proposed an 8% lodging tax rate, which would be a 1.5% increase from the current rate of 6.5%.
The group said that a flat rate, like the $3 rate proposed by Councilman Parker, disproportionately affects smaller hotels. They added that a percentage increase over time will raise more money as the occupancy rate and the average daily rate increase for the city.
“The reported higher average tax rate reflects negatively on the city and negatively impacts its business recruitment opportunities,” the group wrote.
The group also proposed that the tax revenue, to be used exclusively for sports, entertainment, tourism recruitment and development and infrastructure improvements, be divided equally into two funds--one to be expended by the city council and the other allocated to the Greater Birmingham Convention and Visitors Bureau.
The industry group also wants to divert some of the money into training hospitality workers. “The restaurant and hospitality industries take more people from poverty to the middle class than any other industry," the group wrote.
The organization proposed 5% be deducted from both funds and allocated to the Alabama Restaurant & Hospitality Alliance Foundation for workforce development. It may also be used for transportation for hotel employees.
“The reason [a lot of people in Birmingham] are not employed is because they don’t have a way to get to work,” said Mindy Hanan, president & CEO of the Alabama Restaurant & Hospitality Association. “We wanted to be able to use also part of the money for workforce development and for transportation needs for the people that work in hotels.”
But how much is too much in lodging taxes?
The average lodging tax for the 50 largest cities in the country is about 13.6 percent, said Hanan.
“Meeting planners have limited resources when they’re choosing to come to a city,” Hanan said. “When they see a 17.5% lodging tax and they can go somewhere else and it’s a lot less and they’re getting more for their dollar.”
Parker’s proposed $3 per night tax was sent to the Parks and Recreation Committee for further consideration after appearing on the council agenda on June 4. The association’s idea is also expected to be considered by the committee.
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