Council approves new hotel fee agreement, freeing funds for homelessness services

Next year, the city will begin receiving revenue from a new fee on hotel room stays that will provide an estimated $7 million per year to cover housing or other services needed by those experiencing homelessness.

Last week, City Council approved an ordinance change creating the Austin Tourism Public Improvement District (TPID), a funding mechanism that connects the city’s tourism industry with efforts to address homelessness. The new district, encompassing hotels with 100 or more rooms, will levy a new 2-percentage-point assessment on gross taxable room revenue starting in April 2025. Those funds will primarily support marketing, group business incentives and other efforts to drive hotel occupancy and economic activity, with the city receiving reimbursement payments into the General Fund that have been earmarked for homelessness services.

A portion of this revenue is expected to benefit the House Our People Endowment Fund, which was established in 2023 to provide financial support for homelessness initiatives. The fund is intended to be used for capital projects, operational costs and housing services. The HOPE Fund was designed to complement Austin’s existing homelessness programs and provide additional resources for addressing the city’s growing housing needs.

By using assessments from hotel room rentals, the TPID aims to generate new revenue without relying on general tax increases. Hoteliers, who voted among themselves over the past year-plus to levy the fee on their businesses, plan to use much of the funding to increase marketing efforts and bolster business during the coming four-year closure and reconstruction of the Austin Convention Center.

While the primary focus of the TPID is to support Austin’s hospitality and events sectors, city staff has highlighted its potential to indirectly provide funding for social services through mechanisms like the HOPE Fund.

The ordinance also includes oversight measures, requiring annual reviews, public hearings and approval by Council for updates to the district’s service plan. A new ATPID Management Corporation will oversee the district’s operations and funding decisions.

The concept of an additional levy on hotel stays to help address needs related to homelessness first surfaced during the first term of former Mayor Steve Adler. A 1 percent fee was the starting point for the negotiations with local hotels, but a change in state law that restricted uses of TPID money led to a reworking of the proposal, with the need for a financial buffer during convention center closure also shaping the talks in recent years.

Rob Gillette, general manager of Renaissance Austin hotel and chairman of the board for Visit Austin, told Council the expanded marketing and pricing deals that will be enacted with TPID revenue are expected to replace nearly all of the 400,000 room nights per year that will be lost during the closure of the convention center.

“I would tell you the passing and implementation of the Austin TPID is absolutely critical to our industry and to our community,” he said. “We find ourselves in a unique and really an unprecedented time. We have a much-needed redevelopment expansion of the convention center. … Quite simply, the TPID will be our lifeline.”

Council Member Vanessa Fuentes praised the work to get the TPID put into place and singled out Council Member Ryan Alter for his work to help create the HOPE Fund last year.

“As part of this agreement, we also have a new, dedicated revenue source through the previously adopted resolution by Council Member Ryan Alter, which establishes the HOPE Fund, which will help us ensure that we have much-needed revenue to support homelessness, particularly around permanent supportive housing and the wraparound services.”

Photo made available through a Creative Commons license.

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