Hoteliers hope to fill rooms by charging more

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The city is taking steps to impose a new fee on hotel rooms — and the hotel industry is actually on board.

That’s because it would control the money.

The revenue would be managed by a group of hotel executives and used to give incentives, like transportation or speakers fees, to those considering hosting major events or conventions in Philadelphia. Coming off the city’s successful hosting of the NFL Draft, supporters call it a way to compete with other cities trying to snag such events.

It also would add another layer to the already complex way Philadelphia markets itself to visitors, with two separate and at times competing organizations.

Greater Philadelphia Hotel Association Executive Director Ed Grose said a new nonprofit created to manage the money would assist the city’s existing marketing branches, Visit Philadelphia and the Philadelphia Convention and Visitors Bureau, not duplicate efforts. He said having a fund controlled by the hotel managers makes sense, because they know best what fills hotel rooms.

“We know better than anyone on what sells hotel rooms and what doesn’t,” he said. “And we feel since we’re imposing this assessment on ourselves we should have full control on how it’s spent.”

The proposal has the backing of the Kenney administration, and legislation that would make it a reality will be introduced to City Council Thursday.

The move would essentially create a city-wide business improvement district for hotels, similar to the Center City District, which collects a fee from property owners to provide public safety and other services. Hotels with 50 or more rooms would be included.

At 0.75 percent, the fee would add $1.50 to the cost of a $200 per night room.

It is estimated to bring in $5.8 million in the first year, increasing to over $7 million by 2022.

Grose said the money, to be managed by a volunteer board with 10 voting members from the hotel industry and one from the city, would be given out as grants. The grants would be customized based on the needs of a specific event but could cover transportation, speaker fees and food or welcoming activities, among other things.

Julie Coker Graham, president and CEO of the convention and visitor’s bureau, said conventions are often looking for such perks when weighing locations. She said other cities have dedicated funds for incentive packages. San Francisco, for instance, has $35 million, Portland $10.7 million and Seattle $6 million, according to numbers provided by the hotel association.

Coker Graham said Philadelphia has no such fund.

She and Grose said a bid fund could be especially helpful when convention traffic is slow or potential events come up last minute.

As an example, Grose mentioned the NBA’s decision last year to back out of hosting its All Star game in North Carolina due to the state’s controversial law eliminating protections for LGBT people.

“We could have had an opportunity to get that game if we had funds to go after it,” Grose said.

Grose estimated the hotel industry could have brought in $27.8 million in revenue from that event and nine others the city was unable to secure in 2015 and 2016. The convention and visitor’s bureau estimated it could have locked in those events with a total of $7.7 million in incentives.

City money for that purpose is scarce, said Harold Epps, the city’s commerce director, who pitched the idea for the business improvement district to the hotel association. Epps said the city used to have more money to put towards major events but now more of his budget goes to bringing new businesses to the city or to retaining existing ones.

“If I have to make a choice between a football game and putting money into retaining Aramark [headquarters in the city], I’m going to put money into retaining Aramark every time,” he said, in reference to securing the Army Navy game. “That’s a long-term investment. … But we still need to have those kinds of events in Philadelphia because they help lift your brand.”

The fee would be paid by hotel guests on top of a 7 percent sales tax and an 8.5 percent hotel tax.

The revenue from the hotel tax funds the city’s convention and visitor’s bureau and Visit Philadelphia, which are both tasked with drawing travelers to Philadelphia but have not always taken on the challenge in coordination.

A 2014 report by City Controller Alan Butkovitz found friction and a lack of coordination between the groups and noted administrative overlap. He and others have questioned the wisdom of having two such groups, which have two high-paid executive directors, two staffs and even two marketing slogans.

Asked why the city should have another group involved in drawing in travelers, Grose said the new nonprofit will not function as a third entity. Instead, he said, it will work closely with the convention and visitors bureau, which will come to it when it has an event it could lock in with additional resources.

He said the group will not do its own marketing or outreach.

Epps said he is “100 percent” comfortable with the money being controlled by the hotel industry.

“You raise it. You keep it. You decide how it’s used,” he said. “It keeps it pure, simple and clean.”

Grose said he hopes the plan will be implemented before the end of the year. Councilman Derek Green, who is introducing the legislation Thursday, called it a “creative” way to help Philadelphia, which has recently seen success in luring conventions and major events, continue on that path.

“You have other jurisdictions that are trying to do even more than what we do,” he said. “So I think we need to be proactive.”

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1 Philadelphia

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