Tourism Commission considers how to grow hotel taxes beyond convention business

The Tourism Commission has turned its attention to how tourist attractions throughout the city could work collectively to increase the average hotel stay, which would gradually lead to substantial increases in Hotel Occupancy Tax revenues.

At last week’s meeting, the commission heard a presentation from Matt Patton, director of research for Angelou Economics, who performed a free analysis of the local tourism economy to look for opportunities to increase hotel tax revenues outside of the convention and business events centered around the Austin Convention Center. Patton said the many music festivals, University of Texas athletics and the United States Grand Prix race each have a reliable range of annual hotel tax receipts, with music events generating between $525,000 and $2.5 million per year and UT sports collectively bringing in between $550,000 and $4.4 million.

Another popular event, March’s South by Southwest festival, generates $1.1 million to $1.9 million annually in hotel taxes.

The average hotel stay for those events is between 3.2 and 3.7 days, which also creates economic activity from restaurant visits, car rentals and entertainment spending, among other categories.

Patton said promoting attractions in ecotourism, wellness opportunities, dining and spirits, and volunteer tourism are four clear areas that could help keep visitors in town for four or more hotel nights. He said the creation of a “passport” program that offers pre-bundled experiences in those interest areas would likely result in a substantial increase, based on the success of those efforts in other markets around the country.

“How do we encourage an extra day?” Patton said. “If we can bump that to four to four and a half days … we’re gonna talk about a lot more (hotel) tax generation. And how do we get this to work in concert with some of the other phenomenal opportunities and activities and experiences in Austin?”

Chair Daniel Ronan said the city should look for new ways to increase HOT revenues rather than assuming the tax will continue the strong rebound it’s shown after the Covid-19 pandemic.

“In 20 years from now, or even sooner, when it’s 120 degrees outside in the summer, what’s the plan? Are we going to be continually assuming that the current level of (hotel) taxes will continue to rise?” he said. “Are we working to play up the various cultural assets and attractions the city has to offer? That could be anywhere from Zilker Park to the Blanton (Museum) to our historic sites that are run and managed by the city of Austin and supported by (hotel) tax revenues through the Cultural Arts Division or some of the projects that the Economic Development Corporation is working on.”

Ronan said the Angelou Economics study is the commission’s first step in exploring ways to increase HOT revenue, with the city likely needing to allocate funding for more research and analysis that could lead to new programs and partnerships in the coming years.

Commissioner John Riedie said the analysis helps to confirm the value that the city’s many arts and live music events have in generating hotel stays – and the role they could play in helping to bring in more HOT revenue.

“This work is very incremental, but it’s one more piece of knowledge we can use to inform what we do next,” he said.

“As far as (generating) those extra days, I think that it helps things like Hot Summer Nights and Free Week, or even like the small theater festivals like FronteraFest,” he said. “Get those people from Waco and have them spend an extra afternoon after they come and see music. It also points a way for new kinds of marketing that aren’t centered around conventions.”

Photo by Pelle Sten from Stockholm, Sweden, CC BY 2.0, via Wikimedia Commons.

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