News

Salem sees big boost in hotel taxes

By Chris Cassidy
Staff writer
Published: March 26, 2008

SALEM — Home sales are down. The price of oil is sky-high. Recession may be ahead.

But not everyone is hurting.

The city is seeing a dramatic rise in hotel-motel tax revenue, a sign that hotels in the Witch City are doing more business than they were a year ago.

Revenue generated from the city's hotel tax during the eight-month period from July to March is up 22 percent from the same period a year ago — from $195,860 to $239,128.

"October was a record-breaker for sure," said Juli Lederhaus, general manager of the Hawthorne Hotel. "So was November. Even into December, we broke some records and even in January."

So why the increase?

Tourism experts say that in some ways, the slower economy is actually helping local hotels. The declining value of the dollar makes the United States a more attractive vacation destination for Canadians and Europeans, because their money goes further.

Plus, cash-strapped Americans fed up with the rising cost of gasoline are opting to stay closer to home for their vacations. So more visitors are coming from places like New York, New Jersey, Pennsylvania and Connecticut.

"All indications are that we're going to have a strong tourism year," Mayor Kim Driscoll said.

Julie McConchie, executive director of the North of Boston Convention and Visitors Bureau, said the same trend is being seen statewide. She recently heard British Airways is considering adding 11 percent more departures from London to Boston.

"It all adds up to stronger performance," McConchie said.

McConchie cited recent surveys showing hotel occupancy in Massachusetts jumped 4.5 percent from January 2007 to January 2008. Hotel room rates across the state also climbed 5.7 percent over last year.

"What's going on in terms of Salem is consistent with what's going on throughout the state," McConchie said.

The hotel tax is a 4 percent surcharge to guests' bills. About 25 percent of the money funds Destination Salem, the city's tourism agency, while the rest goes to the city's general fund.

The city hopes it will have a cyclical effect. The more money that can be raised through the hotel tax, the more it will have to reinvest in promoting tourism, which in turn, should bring even more visitors to the area.

Right now, many media ads have been purchased through joint ventures with about five or six different businesses. The ads may be effective, but they mainly promote the few businesses that can afford to put up the money for the ad campaign.

Destination Salem's executive director, Kate Fox, said she hopes the new tax money will pave the way for ads promoting the entire city as a destination.

"I look forward to having funding in our marketing budget to do an ad campaign that promotes Salem for all of what it is and brings people here for all the sites," Fox said.

While it's reason to be optimistic, the sharp jump is only a start, Lederhaus said.

"What Destination Salem will get is a drop in the bucket compared to what they need to actively promote tourism in Salem, but at least it's something," she said. "We have a long way to go before we get to what I would consider to be a healthy marketing budget for tourism in Salem.

"But we're going in the right direction now. We were going in the wrong direction for years."

Lederhaus commended Driscoll for pouring money back into tourism — a practice that was discontinued under former Mayor Stanley Usovicz.

Tourism is important now more than ever because Americans will still take vacations this summer, even as they face higher prices at the gas pumps, said Paul Sacco, president and CEO of the Massachusetts Lodging Association.

"In every gas crisis I've seen, they'll spend the money to get there, but their discretionary spending will be less," Sacco said. "So you and I might say, 'We're going on our trip, but we don't have to eat out every night.' But you'll still take the trip."

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Staff writer Chris Cassidy can be reached at 978-338-2526 or by e-mail at ccassidy@salemnews.com.

Hotel/motel tax

Revenue the city has taken in from a 4 percent hotel/motel tax during the first eight months of the fiscal year (July to March)

2008 $239,128

2007 $195,860

2006 $172,394

2005 $138,101