Listen up! – Implementing a destination tax is the right thing to do for Huntsville

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Hugh Mackenzie Huntsville Doppler

Hugh Mackenzie
Huntsville Doppler

A tourist trap? I don’t think so.

Last week there was a meeting of Huntsville Council’s Economic Development Committee. Actually, there are only two councillors on the nine person committee, the Chair, Bob Stone and Brian Thompson. And for the record, only one woman on this committee. Justin Trudeau would not be amused!

One of the matters for consideration before the committee was the implementation of a Destination Marketing Fee for tourists who visit Huntsville. You might ask what that is. It is essentially a voluntary tax, imposed by hotels and motels of up to 3 per cent on room rates. These funds would then be used by the municipality, or its agencies, to promote and market tourism. This program was initiated by the Provincial Government about ten years ago and although it is voluntary in nature, it has met with considerable success. For example, the Niagara Tourist Region generates about $15 million a year from this initiative.

All of this may be academic however, because our Economic Development Committee turned the proposal down flat, with almost no one supporting it. At first blush, this may seem reasonable. After all, who wants to ask people to pay more taxes and why should we make tourists pay more money to come here? And what good would more marketing dollars do for Huntsville anyway? All good questions but there is another side to this coin.

Huntsville Council is facing some serious challenges in relation to the financial stability of our municipality and they have not yet come to grips with it. Without some serious changes, Huntsville taxpayers could well be looking at a record increase in what they will be asked to fork over in 2016. This council has embarked on a number of new initiatives which have cost money and they also face critical infrastructure issues, including roads and bridges that need to be addressed. There are also matters left over from the previous council that have yet to be paid for.

Controlling expenditures is obviously very important. That is why council has been going through an exercise lately to examine how to do that and that is why we have seen proposals on the table to look at the viability of town assets such as the Train Station and Muskoka Heritage Place. However, seeking new sources of revenue is equally important to a sound financial strategy and a destination marketing fee for tourists might just be what is required to bring relief to local taxpayers. Here is how that could work.

Currently, our Council is subsidizing the Chamber of Commerce to the tune of $84,000 per year. Much of the Chamber’s work is to market our community. With a destination marketing fee in place, Council could funnel their support for the Chamber through this source, even providing more revenue for marketing, with no cost to the municipality.

Huntsville also financially supports a number of other activities that effectively promote and market our community. The Ironman is another example. This event too, is a major tourist attraction that fills hotel and motel rooms in Huntsville. Council has pledged to back this event for three years to the tune of up to $100,000 annually. For this year’s very successful event, the bill came to more than $90,000. Events such as these could also be funded through a destination marketing fee and save the local taxpayer a bundle of money.

Muskoka Heritage Place costs the municipality $233,000 a year. Funds from a destination marketing fee could not only cover this expense but provide capital dollars to update the facility and provide new attractions that would bring tourists to our community. And the list goes on and on.

Huntsville is now a world-class tourist destination and like many other regions in Canada and other countries, a tourist destination fee is an important tool in maintaining and initiating first class attractions that make people want to visit and spend money. It would not be a slam dunk. It would, as in the case of other regions such as Niagara, require the cooperation of our hotels and motels. But Council has the weight to have a serious influence on that and it is certainly something to be seriously considered.

The decision of the Economic Development Committee will come before Council this month. There is no question that there are two sides to this issue. However, at Council the matter will be decided by nine elected officials. They are the folks responsible for the financial well being of Huntsville. They must weigh carefully the pros and cons of this initiative and decide whether this potential new avenue of revenue is something that would benefit the taxpayers they represent. To simply accept the recommendation of a committee comprised primarily of well meaning, but unelected individuals, without a very close look at both sides of this story, would be a big mistake.

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21 Comments

  1. I agree paying a nominal fee to support a town delivering world class sports, arts, and culture, just makes sense.
    It’s not as though participants, or observers are not going to come simply due to a small fee added to their hotel bill. As a resident and tax payer it should not all be on our shoulders to foot the bill for these things.

  2. Hugh, I am on the Huntsville Economic Development Committee. When the Destination marketing Tax was discussed, Scott Ovell of the Town of Huntsville, reported that the Town of Huntsville cannot legally levy this fee or tax. That is why it was removed from the Huntsville EDC agenda.
    Here’s an excerpt from Scott’s report:
    In Ontario, Destination Marketing Programs (DMP) are voluntary industry-led initiatives that have existed in several destinations at different points in time since 2004. Destination Marketing Fees (DMF) and Voluntary Marketing Fees (VMFs) are terms used interchangeably to describe an amount charged by providers of transient accommodation in a destination or region, for the purpose of supporting regional tourism marketing and development. Historically, participating hotels have voluntarily remitted fees (typically up to 3% of room revenues) to their accommodation industry association who then transferred funds to a local or regional non-profit destination marketing organization for marketing activities promoting their city or region as a whole. Contributions to DMPs from participating hotels were calculated in a number of ways, including for example, as a flat rate per room nights sold or a percentage of room revenues, typically up to 3%. Hotels that choose to participate can fund their contribution to the DMP in any manner they deem appropriate.

    • Muskoka Tourism, among others, have kicked the tires on this idea a few times, going back about a decade. For many reasons, it was met with very little support from the accommodation sector.

    • For those reading this I am Chair of the Economic Development Committee. Gord you are correct that municipalities in Ontario do not presently have the power to impose a Destination Marketing Fee (hotel tax). However, if the Hotels and Motels voluntarily collected up to 3% per night stay, as they do in Toronto and Niagara Falls, this money would be used to increase tourism and therefore help the Hotels and Motels. Some of the committee thought that this should not be added to our “Task List” because it would be too hard to implement and get the hotels to participate. My opinion is that this is a great opportunity not to be missed. It may have its challenges, but well worth the effort. The Huntsville tax payers should NOT be paying the full expense for events like the Ironman.

    • On a recent trip to Vancouver, I paid a “tourism tax” of 2% on my hotel bill near the airport in Richmond BC. I had no concern in paying that when it was explained to me. Such a tax is quite common as a quick search of the internet will demonstrate. However, hotels are not likely to initiate this idea. It is up to the economic development committee and council to take the initiative and as long as hotels are all equally affected, I would think they would consider that a good investment in keeping their rooms filled. How will you know if you don’t propose it?

  3. I agree with Hugh that there is some merit in the tax. I would support the idea under one condition: namely, that the largest resort in Muskoka pay their fair share of taxes and fees. At this time, the largest resort in Muskoka, consisting of approximately 2000 cottages (5000 bedrooms +/- , ( see PKF Report excerpt below) mostly does not pay their fair share of the marketing costs or taxes in Muskoka.
    ****************************************************************************
    In my opinion, it is irrational to discuss tourism in Muskoka without including the largest resort i.e. the “virtual resort”, in the discussion. Yet that is the current situation!!

    PRIVATE COTTAGE RENTALS – POLICY CONSIDERATIONS
    The total impact of private cottage rentals on the resort industry is considered to be significant, and will
    continue to pose concerns regarding the potential for existing resorts and future resort development in
    Muskoka. Based on PKF research and analysis, it is evident that the 3,200 resort units in Muskoka are
    forced to compete with a minimum of 2,000 cottage rental units.
    Many resort owners are looking for the District to develop options to restrict this level of competition, yet
    there are concerns regarding alienation of other stakeholder groups (i.e. cottagers and Lake Associations).
    One identified alternative would be to determine whether criteria could be defined by which “business”
    cottage rentals could be differentiated from those “traditional” cottage owners who rent at limited levels
    when they are not using the property for personal time.
    There are currently no policies restricting private cottage rentals. Alternative options regarding the regulation
    of these rentals involve zoning restrictions or licensing enforcement at the Area Municipality level. There are
    a number of options that the Area Municipalities may consider if they wish to implement policy regarding
    private cottage rental regulations, including the following:
    • Defining “residential” use in the Zoning By-Law to include occasional and traditional cottage rentals
    (e.g. 2-4 weeks per year);
    • Enforcing Zoning By-Laws that ensure unit rental is not permitted under properties zoned for
    Residential use; or
    • Introducing a licensing system that is required for all private cottage short-term rentals.
    Restricting all forms of cottage rental would limit the level of economic impact that is currently being
    generated by these rentals. Alternatively, if the Area Municipalities consider regulating cottage rentals, then
    unit rental could only be allowed if the unit was licensed and license regulations would need to be enforced
    through by-law enforcement to ensure fire, safety and health regulations are being met and standards are
    being maintained. Looking to HST remittance requirements as a control mechanism has been suggested
    through the consultation process. However, this would likely not work as revenue thresholds would seldom
    apply. Nevertheless, regulating could be implemented through a licensing or permitting system.
    Implementing one of these options is intended to benefit the resort community by potentially reducing the
    number of private cottage units available for third-party rental, and creating a more competitive price point
    within the tourist market.

    • I agree with this Dave. To keep everything fair and above board for all who benefit, as many as possible should help generate tourism marketing and development revenue to keeping our community vibrant on many fronts. The one question that still remains would be, who would manage this? A third party flow through business, either one that is currently in existence or one that could be developed? A regional tourism body? A community tourism organization (new or currently in existence)?

    • Completely agree Dave. Until something meaningful is done to address the illegal cottage rental business, even the thought of putting this tax on the backs of the local resort owners is very unpalatable. Take a read of Andrew West’s comments in the Tally Ho article in the Forester last week for an example. I can see that for some it appears to be ‘easy money’, but they must realize that if it was that easy to add another 3% to the guest bills, don’t you think it would have been done already?? This would be a direct hit to the bow of all of the local resorts, many of whom receive very little if any business from most of these events. Restaurants and local shops do much better from these things but there is no mention of a ‘souvenir tax’ or ‘meal tax’.

  4. I would suggest 2 important details I have not read yet? Does the EDC have a projected revenue number from the tax they could share with us? This would be easily estimated with a few phone calls. Secondly, contact a similar size town or region that has the tax already in place and ask them what their cost to implement was annually for this tax. Most are happy to share and might even send someone to help if we ask nicely and return the favor when they need one.

  5. I would agree with many of the comments made above. As an individual who is very passionate about Our community, Always looking for new ways to encourage and promote sport tourism, a major limiting factorsto help these initiatives and new events grow, thrive and be sustainable is the financial commitment to bring these large events to our town. I wrote a long reply to Ian McTavish’s comment in this other article on Doppler (https://doppleronline.ca/huntsville/no-nuit-blanche-north-for-2016/). We have to realize that we are hey relatively small community hosting very large-scale world class events that bring an and diverse number of individuals from around the world too a place that we are so lucky To call home. Every year that I was involved in raising money to pay for the $50,000 licensing fee to host the Ironman 70.3 and our community, it was a continual scramble to find local and corporate partners to meet the financial requirements to pay the licensing fee for this event. People that. Well the answer is simply that Ironman is the 34th and comparing apples to apples, and Ironman branded event brings in a considerably greater amount of people to our area from around the world compared to one that is not Ironman branded. These statistics are well established. So is a licensing fee for these events worth it? For sure, especially when the estimated economic impact is in the millions of dollars to our local community. Just so that people know, in 2014, Mont Tremblant (who has an Ironman 70.3 and full Ironman like us) had an economic impact of $15.4 million. That’s not a number you can ignore.

    Many times Friends that would see me scramble would say why can’t they just tack it onto the registration fee that the athletes pay. However that is money that goes back to the event organizers cannot our local organizing committee. Having a destination marketing fee would help raise the needed money to not only pay the fees associated with an event, but also to help with the marketing of our community, Which for all intents and purposes is a large resort if you think about it. Yes we do have manufacturing in our community but a good chunk of what we do and what we are really really good at hosting these events that showcase our community and surrounding areas.

    The pressure and stress that is placed on the organizing committee’s to raise money to host these events it Is incredible and a tax on certain tourism services would greatly takes the pressure off of these individuals, Including myself, so that we could focus on the true task at hand which is putting on great events in our great community, all year around

  6. I agree with the main point of the article written by Hugh Mackenzie that a destination tax is essential if the Town of Huntsville is to continue to host world class events such as Ironman Muskoka. I am the chair of the organizing committee for the event and know all to well the financial struggles we went through to host the event in 2015. A destination tax could readily relieve the Town of Huntsville taxpayers any financial burden from hosting such events. In essence the TOH would benefit from the increased spending and employment generated by such events at no cost to local taxpayers. Sounds like a win-win to me.
    I would caution Mr. Mackenzie, however, in his use of unsubstantiated financial numbers. The final accounting for last year’s event has yet to be determined. It will be made public at a meeting of the Town of Huntsville’s General Committee on November 25th, 2015.

    • Brian Thompson on

      I too was concerned with the inaccurate figures Mr. Mackenzie used in his editorial.
      Not only the dollar figures Mr. Mackenzie purported as cost to the town but also his assertion that this tax was FLATLY rejected by the EDC. This tax is not an option for council to adopt or reject, as stated by Huntsville Economic Development Officer Scott Ovell, but is a voluntary tax to be adopted by local resorts and beneficiaries of these major events.

  7. Howard Rosenthal on

    Without giving an opinion on the value or consequences of a destination tax I would like to comment on equity. First, all businesses in the area stand to gain from increased tourism and therefore, if such a tax is implemented then it should be applied across all of the service businesses (accommodations, food and beverage, and so on). Applying this tax exclusively to accommodations is not equitable. If the resorts etc feel that private cottage rentals are taking their business (which is likely not as serious as they think or they would like everyone else to think for a variety of reasons) and feel that such a destination tax (and other standards) should apply to private cottage rentals, then that segment would have to receive the full benefits of local tourism marketing in proportion to its size (bedrooms, revenue, or whatever) to the formal resort businesses. Finally, the PKF report is so flawed in so many ways, using it as a reference denigrates ones own argument.

  8. What makes the destination tax difficult to apply is it is not a universal tax. It is a tax or levy applied to visitors to the region who come to enjoy all that the area has to offer including the many events that we in Huntsville work hard to host. By targeting the accommodation sector the tax would in large part apply to visitors as opposed to permanent residents. This would not be the case exclusively if restaurants and retail businesses were asked to collect the tax. Targeting the accommodation sector would avoid a double taxation on locals.
    I see significant merit in this idea. From an accommodators point of view they would be relieved of paying Chamber of Commerce fees as well as handouts to every event committee looking for money. In return they would collect the tax at source at little expense to them. This idea requires some political leadership to implement. Hopefully someone passionate about the idea will step up.

  9. Good subject Hugh and the enthusiastic comments speak to the importance of tourism to our region. But….

    I believe that a destination tax would be a bad move for Muskoka/Huntsville. Mostly because we are not ‘world class’ and I wish we’d stop trying to be. Just saying something over and over doens’t make it so. I think world class should be used when hordes of people are willing to fly around the world to your destination or if Michelin gives you 3 star rating.

    What we are is a lovely, typical small Ontario town near Algonquin Park (which might actually be world class) with an abundance of lakes and rivers and wildlife and small, friendly inns and resorts with owners that know where the moose hang out and how to keep mosquitoes at bay. Those places are doing fine just being themselves and offering a warm, welcoming experience that sticks close to nature. Sports tourism is going gang-busters and kudos on that. Might huge infrastructure development at Deerhurst result in a world class resort destination? Maybe. But it’s not here yet and I admit to being somewhat suspicious of the development intent.

    As a bit of an aside, we were entertaining guests from Brazil this week. We looked for someplace to take them for lunch….somewhere that two little girls could have some freedom to run around. One resort, which is re-opening, spent thousands on an ad in a local magazine. No local number posted so I called a 1-800. A recording told me someone would get back to me. No one did. Our biggest resort doesn’t offer lunch this time of year except in a bar area. A third resort only does lunch on weekends. So we ended up at Boston Pizza, which was nice but no ‘world class experience.’ I understand that you are not going to be open when there are no customers – I made those hard decisions myself 25+ years ago. And took part in these interminable discussions at local, provincial and federal levels.

    Today in the Globe & Mail (Can Canada Bring American Boomers North?) is yet another article on how Canada might get a bigger slice of the tourism pie. I’ve been reading those articles since my long ago days in the hospitality industry.

    When asked why Canada is not in the top 20 destinations for international travelers, TIAC says,” Immigration policy and aviation cost structure are holding Canada back from succeeding in the market. High airfares and taxes, coupled with a need for visa-issuance reform, make Canada a less desirable and accessible place to visit. All this is keeping the sector from capitalizing on what is on course to be a $100-billion industry.” Spokesperson Taylor adds, ““These are the issues that are going to impact how much of the Canadian boomer travel stays home, and how much international baby-boomer traffic comes into Canada,” Taylor predicts. “People want to get the most out of their travel dollar and, in some cases, Canada is not positioned to deliver.”

    So the entire country is still struggling to attract our ‘share’ of the tourism pie. Whistler, Jasper, Quebec, Vancouver, Toronto…. they are world class. And on Trip Advisor and other like sites, the loathing of a destination tax at other than true world class locations are vitriolic. In our wee spot on the globe it’s a struggle. So….do we make it even more of a challenge with a destination tax? I don’t think we should.

    • why is it that no seems to be listening to the group that will suffer the most from this “tax”? perhaps using the word tax may be the issue. To paraphrase what Ms. Peacock so eloquently said this part of the world is not world class and we should not try to charge for that “classiness” if we do not have or cannot deliver.
      Before this hotel fee is implemented the entire ghost hotel or cottage hotel network that is operating as AirBnB or VRBO or any other cottage rental service needs to be included under that umbrella. Imagine not only the dollars flowing in but the rage and possible glut of midsized cottages on the market. Great way to open up a slew of housing!
      No more of this discussion please, if the district cannot properly market this area with the dollars they get now, how can that ever change with more money at their disposal?

      • Air BnB and other private cottage rentals are included in the new Hotel Tax legislation that came out this year. For example Toronto will tax hotels 4% and private rentals 10% in 2018.

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