Like many Austin residents, I’ve only lived in Texas for a few years. My family has yet to acquire that same good sense, and so remain frustratingly far away. The days that they come to visit are when I’m at my happiest. I’m surrounded by the eccentric culture that makes Austin such a fun city, but I’m also reconnected to those who mean the most.
High hotel occupancy taxes can put a crimp on these anticipated reunions, however. Austin hotel guests pay an additional 15 percent when state and city taxes are combined. That extra expense is often enough to cut a visit short or, at the very least, divert the money that I otherwise would spend showing off the local highlights.
The idea behind the hotel occupancy tax is simple. Travelers pay a premium on top of their hotel bill. The money is then fed into marketing campaigns, convention centers and special events, all in the hopes of expanding tourism and filtering the added revenue down into the local population.
On the surface, the strategy seems sound. Tourism ranks second only to oil and gas in terms of its contribution to the state’s gross domestic product. Preliminary estimates of 2014 indicate that tourism generated $70.5 billion in total direct spending and supported close to 630,000 Texas jobs.
Why shouldn’t cities like Austin take steps to support these positive economic trends, especially when the tax is typically paid by nonresidents, who directly benefit from the amenities that the tax funds?
For one thing, not every visitor is lured to Austin by the boisterous noise on Sixth Street. Sometimes they come because of its people.
Austin has seen tremendous growth over the past decade. This means a sizeable fraction of the city’s population has a nexus of friends and family well outside of a day’s commute. A demographic profile put together by D.K. Shifflet & Associates observed that 56 percent of nonresident, leisure visitors to Texas credited seeing friends and family members as the chief purpose behind their stay.
For these visitors, Austin is the home of their absent companion. The music, food and eccentricities are merely a cheerful bonus.
The added fees can stymie the very activities that make tourism a fount of economic growth. The U.S. Travel Association found that 49 percent of surveyed travelers altered their plans on account of high taxes, usually by shortening their stay or minimizing the number of excursions.
Of course, a lot of people do not rely on paid accommodations, friends and family in particular. Take it from experience, however. There are only so many that can fit within a one-bedroom apartment before tempers flare. At some point, circumstances will demand a paid alternative to sleeping on the couch. Travelers will then find that the added 15 percent can cast a long shadow over a trip’s itinerary.
In short, the rationale behind the hotel occupancy tax needs to be reconsidered. Do subsidized attractions actually alter the behavior of prospective visitors in a way that benefits Austin? And is there a mechanism in place that can reduce — or at the very least redirect — funds when they do not?
Austin has built its success on a reputation of quirky events and a population willing to settle somewhere new. As currently structured, the hotel occupancy tax deters visitors from enjoying either.
Hunker is a policy analyst with the Center for Economic Freedom at the Texas Public Policy Foundation. Twitter: @KathleenHunker.