Regional Convention & Visitors Bureaus throughout the state are faced with the question of whether or not to increase their room assessment, also known as a "Bed Tax" from 2% up to 5%.
What’s the impetus behind this proposal? And what do our local CVBs plan to do? Here’s what I discovered.
The facts on Bed Tax
If you’ve ever studied your bill after checking out of a hotel in other Michigan cities of a similiar size you’ll notice a 2% fee in addition to sales tax. This is the room assessment, casually referred to as a Bed Tax. This fee is collected by lodging properties with 10 rooms or more, throughout Michigan. The purpose is to create a source of income to be spent on tourism marketing efforts, which in turn benefit the travel and tourism industry.
So, what’s the difference between an assessment and a tax? A very important distinction: A tax is levied on the public as a whole, and therefore must benefit everyone. An assessment is imposed on a specific group, who in turn receive the benefits. In 1984 Michigan Public Act 59 set the room assessment rate at 2%. A figure which has been in place ever since. To change this rate requires an amendment to the legislation. Which is exactly what happened last autumn. This amendment passed into law on December 5, 2010.
Travel Michigan, the State department responsible for the program, issued a referrendum to allow districts the opportunity to increase their rates from 2% up to 5%.
Benefits of a rate increase
I first learned of this proposed increase at a recent meeting of the Grand Traverse Area Hotel Motel Association. Brad Van Dommelen, President of the Traverse City Conventions & Visitors Bureau, spoke to the members about the reason for the proposed increase and what the CVB would like to do with the funds.
Traverse City Convention & Visitors Bureau recommendion is to increase the assessment to the maximum amount allowed of 5%. Their goals for the increase include:
- Enhance their group sales effort to attract more regional and national associations
- Create a year-round marketing effort with ongoing campaigns in major focus cities
- Partner with Travel Michigan to create a national "Pure Michigan" ad specifically promoting Traverse City
By law, the majority of the room assessment must be spent on marketing.
According to Van Dommelen, while some funds go to operational costs, and improving group sales may require additional staff, "the vast majority of the increase will be spent on ad buys."
Five years ago, the TCCVB spent approximately $40,000 on advertising and promotion. Last year this number was $660,000 on ad buys alone. A 3% hike in room assessments would mean a huge increase in purchasing power for the region.
What does this mean for Traverse City travelers
If the proposal passes, guests staying in Traverse City hotels will pay a 5% room assessment, and 6% sales tax, for a total of 11% at the bottom of their bill. TC visitors currently pay 8% total. On a $100 room the increase amounts to less than the cost of a latte. And for these few dollars per room, they can strengthen the marketing initiative that puts diners in restaurants, cars at the pump, tasters in wineries and golfers on the greens. We all know this is a beautiful destination. Perhaps we just need to a louder voice to let everyone else know.
The Grand Traverse Area Hotel Motel Association announced their support of the proposed increase at the February meeting. According to Jonathan Pack, GTAHMA president, "The board is cautious of any assessment increase, but our focus is on national advertising that would show off Traverse City’s many new national awards, like Top Ten Beach Town (awarded by AOL Travel), Top Ten Fall Color Town (awarded by Tripadvisor.com), and Top Ten Wine Town (awarded by USA Today). Without the increase to the maximum amount of 5%, the capital needed to do a national campaign would take a many years, and the recent awards would be relatively old."
Pack’s sentiment was echoed by many of the hoteliers I spoke with at the meeting, and since. When asked about their reactions to the proposal, so far, everyone’s response has been positive.
Bryan Moore of the Courtyard Marriott is in favor of the increase as a means for remaining competitive. "So many small communities have jumped on and increased rates. We don’t want to be lost or left behind."
The travel and tourism industry is a competitive market. There’s a sense that the communities out spending money on advertising are the ones who reap the rewards with more visitor traffic.
Jeannie LaBonte, at the North Shore Inn is also in favor of the increase. "Whatever we can do to bring people up to Traverse City. It’s important."
But in the end, it is up to each and every property in the district.
In order to make the change each lodging property with 10 or more rooms, receives a ballot. The hotels must approve the referrendum by a simple majority. Each property receives one vote per room. The ballots are sent back to Travel Michigan, where they are counted and verified by a separate agency.
The Traverse City CVB began this process early this year. Ballots were due back to Travel Michigan on February 28th. The results of the proposed increase should be known by the middle of March.
If the proposal is approved the new rate will begin on April 1, 2011.
Where do other communities stand
Since I work with many businesses and properties in Benzie County I spoke with Mary Carroll, the Executive Director of the Benzie Area CVB, to find out about their plans.
Mary explained, "we are suppportive of the legislation that allows this to take place. But our board has decided not to increase at this time." She explained their board is comfortable with the current assessment and the ways they are utilized for marketing. Even a two percent increase would double their budget. But they wonder, "if we had 50% more money, does that mean we can bring 50% more visitors to the area?"
The law passed on December 5, 2010 which allows each district the option to increase their room assessment up to 5%. Since that time several communities throughout the state have started this referrendum process, including Holland, Sault Ste. Marie and Marquette, some of which have completed their approvals.
By the end of the month we’ll know if Traverse City will have more funds to spend on marketing.
"We’re a four seasons destination. And we need marketing out there promoting us in all four seasons. Our product is gorgeous. I truly believe this is what we need to move us forward."
— Brad Van Dommelen
For more information on the history of this legislation and Michigan assessment districts click here to check out the Destination Marketing Organization Manual for Michigan Assessment Districts.
Hotels Report a Super Summer. Will it be a Fabulous Fall?
What better gage for summer tourism than the comments of staff at area hotels? I spend much of my time in and out of their lobbies refreshing our Mealtickets displays. This provides a great opportunity to chat with hotel staff about their impressions of the industry, the effectiveness of the Pure Michigan campaign, and their expectations for the upcoming fall season. I thought I’d share what they had to say about the state of Traverse City’s summer tourism.
Whether it’s Weather, or Not
Everyone agrees this summer was one of the warmest and most beautiful summers in recent memory. For some local resorts, it’s the best summer they’ve seen in 10 years, and they haven’t been in business that long. But what effect does the weather have on their occupancy rates? A dramatic effect.
Overall, resorts large and small saw record breaking numbers this summer, and most attribute it to the weather. The summer sun draws visitors to enjoy our beaches and outdoor activities, in part as a retreat from the brutal heat of the larger inland cities.
Rich Maxwell Jr., owner of the Restwood Motel in Traverse City agrees.
"We had one of the best July and August room sales in the last 20 years. We had a modest increase for July and a huge increase for August, (of coarse last August was one of our worst ever). Everyone wants to know WHY well in my humble opinion it was the weather. I think the economy is as bad or worse than last year, but the travelers just wanted to get away from the heat in the big city’s."
What About the Pure Michigan Campaign?
Many of Michigan’s tourism-based organizations have been supportive of the continued funding of Travel Michigan’s Pure Michigan Campaign including the Michigan Lodging and Tourism Association, The Grand Traverse Area Hotel Motel Association and the Michigan Chamber of Commerce. After missing fall and winter ad promotions due to lack of funding the campaign received $20 Million just in time for the summer media buys. My question for local hotel managers was, "did it help?"
According to Nick Trahair, general manager at the AmericInn in Traverse City, it did.
"The summer was a record year. Pure Michigan had a lot to do with driving out of state traffic into our hotel. We saw many more out of state plates compared to years past. We also had a lot of people talk about the area – not knowing what Michigan truly offered as many think of Michigan to be “Detroit” and not everything else it had. Many people who were here this summer talked about returning and our fall bookings are ahead of pace from history."
And he’s not alone. Most hotel managers and staff I spoke with agreed that the Pure Michigan campaign does drive visitors from out of town into our part of the state. Jonathan Pack, general manager at the Cherry Tree Inn, and president of the GTAHMA looks at it this way,
"It’s hard to say the good numbers are from the Pure Michigan ads because we have had such fantastic weather. My honest opinion is that without the Pure Michigan ads, we would be much worse because we wouldn’t see those increases in the markets outside of Detroit."
What’s interesting about this summer, more than year’s past, are reports from hotels entertaining so many first-time visitors. Some attribute this to the success of the campaign shedding a beautiful light on our region. Others gave credit to family and friends who recommended the Traverse City region as their favorite place to visit. Whether it’s word-of-mouth or advertising dollars at work everyone was glad for the boost in business.
Other Factors Affecting Summer Tourism
While the weather and advertising play a huge role in the number of rooms filled on a summer night, there are a few other interesting factors that came into play this season. Some were short term, and others could reflect a growning trend.
On the short term I was rather surprised to discover we may have inadvertently benefited from the tragedy in the Gulf. While oil spewed with seemingly no end into the waters of the Gulf Coast, visitors who typically spent some of their summer on oceanfront beaches opted for our freshwater coastlines instead. A few properties we work with began receiving calls early this summer looking for condo openings for long stays and cited the spill as their reason for traveling north instead of south this year. While they were pleased to accommodate new visitors, everyone feels for the gulf coast areas who are suffering a business loss from that tragic event, and wishes them a strong and quick recovery.
Forecasting Beyond the Weather
Forecasting is a necessary component of hotel management. And just like the weather it requires a strategic approach, but predictions are often inacurate. Hotels use forecasting to determine expected occupancy rates for the coming season. They translate this information into statistics to plan advertising campaigns, target discounts and to determine staffing.
The surprising trend, which I’ve heard about for the last couple seasons, is that visitors are making their travel plans at the last minute rather than weeks or months in advance. This makes forecasting much more difficult.
Mike Hall, general manager of the Days Inn in Traverse City explains,
"We really saw a shorter period of time from reservations made to actual arrival. Traverse City has historically been an area where advance reservations are the norm. However, this year, especially, we have seen 20-30 room reservations per night on Thursday and Friday nights for Saturday arrival. This has put our forecasting, such as it is, out the window."
What’s the Outlook for Fall?
As Labor Day represents the unofficial end of summer we turn our heads to fall. Apparently we also turned our backs to the cool winds that have been blowing in low temps to make it feel like October. Which illustrates the point quite well. Fall is all about the weather. If it’s a beautiful indian summer hotels expect to continue to see solid bookings. Many speculate on an early turning of the leaves and thus an early push for fall visitors. But let’s face it, no one knows what’s coming around the corner as far as the weather is concerned.
What the hotels are is optimistic.
"Many people who were here this summer talked about returning and our fall bookings are ahead of pace from history. We expect to continue strong like we have the rest of the year and finish with one of the best years on the books," said Nick Trahair.
And in case you’re wondering, Mealtickets & Unusal Ideas displays will be there at the front desk waiting for them to arrive.
"Travelers are asking a lot of questions these days – looking for family friendly places to see, do and eat. If we can put something in their hand with information – we have found more interest. When we tell them about someplace and can only show a location on the map – they immediately go back asking questions about what is in front of them," Trahair added.
So I’ll continue my rounds refilling displays, talking to the hotel staff and providing visitors with great ways to enjoy their trip to Traverse City. Cards in hand.
Our congratulations go out to Russ Cole, general manager of the Best Western Four Seasons Resort in Traverse City for his recent honor as 2008 Hotelier of the Year. The award was presented by the Michigan Lodging and Tourism Association at their Driving Tourism 2008 conference in Grand Rapids.
With the renovation of the website Meal Tickets & Unusual Ideas® will finally offer advertising opportunities to area resorts. The unique card displays have always featured restaurants, activities and destinations in an effort to provide visitors with a great selection when they arrive in the area. But what about when they are planning their trip? One of the goals for the new website is to provide potential Traverse Area visitors with information before they arrive. And possibly the first decision they make is where to stay.
The new website provides area hotels, motels, and resorts of all sizes the opportunity to advertise with a banner ad on Mealtickets.com. When placed, an ad will appear on several pages throughout the site, thus increasing the exposure. More than 70 locations already receive advertising exposure on the website within the lodging listing. The banner ads will increase their visibilty and allow for the promotion of seasonal packages or special rates.
For more information on advertising with Meal Tickets & Unusual Ideas® visit the Advertise with Us page or call 231.275.6105.
The Meal Tickets & Unusual Ideas® website is evolving into an interactive resource for Traverse Area visitors. Our newly designed site now features news updates in blog format, which will also be available by RSS feed. This is our way of bridging the gap between the local businesses, area hotels and the visitors who wish to learn more about them. We hope you stop by often to see what’s new with your favorite restaurants, attractions and activities in the Traverse City region.