LOUISVILLE, Ky. (WDRB) — The owners of Louisville’s larger hotels have a plan to reinvigorate their business after the pandemic — by charging guests additional taxes on their stays.
Under a proposal moving through Metro Council, hotels with 51 or more rooms in Jefferson County will begin charging an additional 1.5% on their bills to fund a new “lodging management district” aimed at landing more conventions and special events that bring large groups of guests to the city.
The additional tax, which would start July 1, would result in a total hotel tax rate of just under 18%, according to documents filed with Metro Council.
“This is something we are wanting to do for ourselves — not asking the government to step in or help us — (to) get our businesses really back to where they were pre-pandemic,” David Greene, general manager of the Louisville Marriott Downtown and president of the Louisville Hotel Association, told the council’s labor and economic development committee during a meeting Dec. 6.
The council could approve the new taxing district at its meeting Thursday.
The tax would raise about $4.5 million a year, which would be overseen by a board primarily made up of the managers of large hotels. Louisville Tourism, the city’s convention and visitors bureau that is already funded by hotel taxes, would provide services to the new management district.
Greene said the money would be available to help secure big events. For example, Louisville lost the VEX Robotics World Championship following 2019 because Dallas offered the organizers a way to hold their event using fewer hotels, thus saving on transportation costs, Greene told the Metro Council committee.
The money generated by the new Louisville hotel tax could have been offered to help VEX Robotics defray transportation costs, he said.
“This ordinance would allow us to generate funds that we could help VEX Robotics offset some of that transportation cost, (to) bring a convention like that back to Louisville and drive hotel room nights,” Greene said.
Council member Kevin Kramer, a co-sponsor of the ordinance, suggested during Thursday’s meeting that Louisville lost the annual Ironman triathlon in 2019 because the city stopped supporting large events with police protection, and Ironman was unwilling to pay for the coverage.
“If the hoteliers decided it was in their best interests to keep Ironman here by using some of these funds in order to cover the costs that that Metro Louisville no longer is willing to cover, they would certainly have the flexibility to do that,” said Kramer, a Republican who represents parts of eastern Jefferson County.
Mayor Greg Fischer’s office did not provide a comment on the assertion regarding police protection and officials with Ironman did not respond to a request for comment.
Greene, who was unavailable for an interview, told WDRB News in an email that the tourism industry still isn’t fully recovered from the COVID-19 pandemic.
“These funds will be used to market Louisville hotels and the destination in an effort to move our hotel occupancies back to and above 2019 levels,” he said in the email. “Our occupancies and staffing levels are still suppressed from the challenges our city faced throughout 2020 / 2022.”
Louisville’s hotel occupancy has risen since the onset of the pandemic but has not reached levels seen in 2019, according to STR, which tracks the hospitality industry.
The new tax — which would be assessed only on guests of hotels with 51 or more rooms — would bring Louisville’s total hotel taxes to 17.7%, from 16.07% currently, according to exhibits filed with the ordinance.
Neither Greene nor Louisville Tourism explained why the rate would rise 1.63 percentage points if the additional tax is 1.5 percentage points.
Greene told WDRB News that many of the cities with which Louisville competes for convention and tourism business already have improvement districts or are “moving forward” with them.
“This is simply the hotel industry asking metro council to allow us to raise the funds to help drive our business and compete with the likes of Lexington, Cincinnati, Columbus, Nashville, St. Louis, Tulsa and many more,” he said.
The proposal does not appear to be controversial.
Metro Council member Bill Hollander said he will vote for the plan despite some reservations.
Hollander, a Democrat who represents the Clifton-Crescent Hill area, said the issue highlights how Metro government receives no direct tax revenue from tourism.
That’s because current hotel taxes fund the convention and visitors bureau, the construction debt for the Kentucky International Convention Center, the Kentucky Center for the Arts and the state — but not Metro government. Louisville is also prohibited by state law from taxing restaurants or alcoholic beverages, he said.
Yet, the city has costs associated with making a hospitable environment for tourists and conventions, such as police, sidewalks, alcoholic beverage enforcement and streetlights, he told WDRB News.
Hollander said no one disagrees with increasing tourism, but he would like to see the new hotel tax revenue defray some of those city costs.
Council member Brent Ackerson said during last week’s meeting that Kentucky’s tax code isn’t likely to change soon and shouldn’t prevent Louisville from approving the hotel operators’ plan.
Ackerson, a Democrat representing Bon Air and parts of the St. Matthews and Jeffersontown areas, said he is encouraged by the fact that the hotel owners want to apply the tax to their own receipts.
“Most people say, ‘Don't tax me; tax somebody else,’” Ackerson said. “They’re saying, ‘Let’s tax ourselves,’ and they see the benefit in it.”
The hotel owners are also pledging to commit 50 cents per room night attributable to the new funding to "local nonprofit organizations," according to materials filed with the council.
"Local homeless non-profit organization(s) will be the priority," according to a summary of the proposal.
