What should Austin spend hotel taxes on?

I have yet to attend a meeting of the relatively new Tourism Commission, but the press coverage of it thus far suggests that it is largely an ongoing debate between the Austin Convention Center’s boosters and detractors.

As Chad Swiatecki explains, those who are tied to the hotel or convention industry are supportive of an expansion, saying that the center isn’t big enough to attract major events.

At Monday’s meeting, the commission approved a recommendation for City Council to amend the city’s legislative agenda for the 2019 session to advocate for bills that could allow HOT funds to be used for programs related to services for the homeless, live music, arts and watershed preservation.

The amendment from Commissioner Michael Searle would also make it a priority for the city to collaborate with other major metro areas in the state with large tourism industries on legislation that would expand the possible uses of local hotel tax funds.

This is an idea that I think has some promise of becoming a reality. There are people on both sides of the aisle who are annoyed with the grip that the Convention Center & Visit Austin have on HOT revenue. Searle, you may recall, is a former aide to Ellen Troxclair and ran the campaign in favor of Prop K, the unsuccessful ballot initiative to conduct an efficiency audit of city government.

Advocates of the convention center generally argue that it’s an expenditure that the city can make care-free, since it is entirely funded by the hotel occupancy tax. The HOT, they point out, is levied on hotel guests and was explicitly designed to promote tourism and/or convention centers. Plus, the hotel lobby did all the hard work writing the law, so it’s only fair that they get the rewards.

Currently, state law mandates that a majority of HOT funds be spent either on the convention center or the convention and visitors bureau. Cities are allowed to spend up to 15% on arts and 15% on historic preservation, but even that money must, at least in theory, directly benefit BOTH the convention and hotel industry. Of course, how on earth do you determine that? Does a Willie Nelson statue on 2nd Street make somebody more likely to book a weekend at a hotel in Austin? Probably someone. Does it make it more likely that someone will hold a big trade show here? Ehh…if whoever is in charge of organizing the annual convention of the American Dental Association happens to be a huge Willie fan, maybe?

I’m generally pretty skeptical of the future of the convention business. It seems pretty natural that in an increasingly digitized world, the relevance of trade shows will decline. I can’t find any good figures from the last few years, although there was a lot of commentary in 2010-12 about how attendance was down from the 1990’s. However, we were still emerging from a recession at that point.

That being said, if the convention business declines in the coming years, I think Austin is poised to do better than other cities simply because it’s a desirable place to visit. The real suckers were the cities that nobody wants to visit –– even suburbs –– that poured money into convention centers. Even worse, some of them funded the boondoggles with general purpose tax revenue. At least Austin’s general fund will never get suckered into that.

The hotel industry will of course argue that they know what’s best for business. But what is more likely, I think, is that the hotels would rather put the money on what they view as a sure bet, even if it is one that offers diminished returns in the long-term.

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