2017-08-03 / Front Page

Tourism Revenue Takes Hit

By Bob Rulli

As the summer season churns on and tourists from near and far stream into the City by the Sea and surrounding towns, the area's largest proponent for tourism is facing a significant reduction in revenue on two fronts.

Discover Newport is the official destination marketing company for Newport and Bristol counties and is funded by the 5 percent state lodging tax charged to guests who stay in hotels, inns and motels. Prior to July 1, Discover Newport received 47 percent of the revenue collected through the lodging tax in Newport and Bristol counties. That amount has now been reduced to 42 percent, and while a 5 percent reduction may not seem significant, it represents a potential loss of over $300,000 for Discover Newport, according to Evan Smith, president and CEO.

The lost revenue is now being allocated to the Rhode Island Commerce Corporation, the state's Economic Development Agency. Rhode Island's statewide tourism efforts fall under the umbrella of the Commerce Corporation.

The failed "Cooler & Warmer" marketing slogan, which featured Iceland in a promotional video, was a product of the state's efforts. The slogan never resonated with the public the way it was intended to and was quickly abandoned by Gov. Gina Ramondo. Smith said, "The state has vastly improved their efforts and they are important partners in our efforts, but the state received $4.64 million as their allocation in Fiscal Year 2016." Smith continued, "That amount of revenue is ample funding to support a robust state travel program."

The original reduction in Discover Newport's allocation was set to take effect in 2015, but after the uproar over the "Cooler and Warmer" program the legislature postponed the change until July 1 of this year. Smith points out that his organization is more than just summer tourism. "With an annual budget of $3.4 million, 30 employees and responsibility for the Visitors Center, we have generated impressive results in growing and supporting our tourism community," he said.

Discover Newport works with the lodging industry, attractions, retailers, restaurants, recreational partners, transportation companies, event promoters and conventions to grow the area as a destination. He pointed out that “tourism is a very competitive industry and a critical component of both the local and state economies; we are competing with cities like Savannah, Georgia and Charleston, South Carolina and we are getting out-spent.” The result, he fears, is a decline in market share.

Smith testified before the House Finance Committee, and through the efforts of Rep. Laura Carson, he had a meeting with House Speaker Nicholas Mattiello. However, he came up empty-handed in reversing the reduction. Both Sen. Louis DiPalma and Carson sponsored separate bills in the Senate and the House, but they were never called to the floor.

Unfortunately, the bad news doesn't end with the reduction in the lodging tax allocation. With the rapid growth of online booking sites like Airbnb and HomeAway, many cities are stepping up their efforts to collect taxes on those room and home rentals. In Newport, a property owner renting a room for 30 days or less is required to collect a 7 percent state sales tax, a 5-percent lodging tax and a 1-percent local hotel tax. According to City of Newport Finance Department records, as of July 17, there were 198 registered establishments renting rooms. That number includes hotels, motels, bed and breakfasts, inns and private property owners. Discover Newport receives no allocation of the state lodging tax from private rentals.

Airbnb and Home Away are referred to as Housing Platforms. The state legislature approved legislation in 2015 that applied the tax to these rentals. But rather than replicate the formula used for the hotels and motels, revenue generated from housing platforms is split differently with 75 percent going to the state and 25 percent going to the municipalities.

Smith sees this as "unfair and disappointing." Smith describes himself as being "70/30" when it comes to Airbnb and other Housing Platforms. He believes that bringing visitors to the area is a good thing, but is challenged as to whether it is appropriate for Discover Newport to support them for free. Many of his traditional hotel partners have an issue with Smith promoting companies like Airbnb in Discover Newport's marketing programs.

Part of Smith's 70/30 comes from the Housing Platforms not taking a supportive position of having the same allocation formula of the lodging tax applied resulting in two different lodging formulas. Senator DiPalma said, “I would gladly reintroduce my bill. I want to sit down with the six tourism councils to put everything on the table. And I'd introduce new legislation, including combining the allocations from the platforms."

While the city records indicate 198 registered establishments, Andrew Kalloch, a public policy manager for Airbnb, offers a much different picture. In an email message dated July 13, he said that in Newport, Airbnb has "390 active hosts, creating 22,000 guest arrivals who stay in Newport on average two nights a month." The City of Newport recently contracted with Host Compliance, LLC at a cost of $29,980 to monitor short-term rental identification and compliance.

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