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Oct. 22, 2020 | Thursday
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Tourism industry hates hotel tax, but others see it as essential
The owners of the Prince of Wales Hotel are among those opposing any plan for a hotel tax. (Dariya Baiguzhiyeva/Niagara Now)

Niagara-on-the-Lake, like several other Ontario municipalities, is considering imposing a municipal accommodation tax.

And the idea of a hotel tax has provoked a strong negative reaction from local business owners and industry leaders. 

However, in some jurisdictions that have implemented a hotel tax, there is a much different attitude.

Gordon Orr, chief executive officer of Tourism Windsor Essex Pelee Island, said because half on any hotel tax has to be reinvested in local tourism, his organization is seeing a big boost in funding.

He also doesn’t believe the tourism business will suffer immeasurably  because of a municipal accommodation tax.

“People are going to come to your destination because you offer compelling, authentic experiential tourism assets,” Orr told the Lake Report in an interview.

“As a matter of fact, I think it puts you at a disadvantage if you don’t collect it,” he said. “Because if you don’t have the extra money to market the product or the destination, then that puts you at a disadvantage because there are other communities that do have those extra financial resources.”

A number of Ontario municipalities have implemented a tourism tax. Niagara Falls, Windsor, Kingston, Belleville, Peterborough, Barrie, Huntsville, Timmins, Sault Ste. Marie, as well as larger cities like Toronto, Mississauga and Ottawa have approved or are already imposing the tax.

Provincial legislation allows municipalities to levy an accommodation tax on hotels and short-term rentals and then share the tax revenue with a not-for-profit tourism agency. The tax money has to be spent on promoting and growing tourism.

NOTL has established a subcommittee of three councillors ­– Wendy Cheropita, Allan Bisback and Norm Arsenault – to revisit the hotel tax idea and recommend whether one should be instituted. Council has debated the issue a number of times in recent years but always rejected adding the levy.

Arsenault said if a tax is implemented, the town wants to spend the revenue on tourism-related infrastructure. 

“Road construction, perhaps washrooms ... So it goes to specific purposes that would have benefits to the tourism industry as a whole,” Arsenault said in an interview.

He said the town wants to have an open discussion on how the hotel tax could be implemented, if one is approved.

“Is it going to be a percentage, is it going to be a flat rate? A lot of details and whether we even need it, so we want to go down that road,” he said. “We want to have a discussion with all the players.”

Janet Johnson, president of the Niagara-on-the-Lake Bed and Breakfast Association, is strongly against the tax idea, saying the town hasn’t done enough research on the matter. Johnson also said an independent agency should be in control of the other half of the tax revenue.

“It just doesn’t feel well thought-out,” Johnson said. “Until that changes, there is no way we would support it at this point.”

“We feel that there’s room for the town to get a little tighter on the way they operate. Let’s do that, let’s clean up our house,” Johnson said, adding it’s not a “them” against “us” issue.

The NOTL Chamber of Commerce hasn’t changed its position on the matter since last year when Janice Thomson, the agency’s executive director, voiced her opposition at a council meeting in August 2018.

“At this time, the introduction of the tax wouldn’t be seen in a positive way by the Chamber of Commerce or its members,” Thomson said this week.

While the number of tourists won’t necessarily drop, it was the “immediate thought on the part of the town that this was money they could use for other things” that concerns the chamber, said Thomson.

“The first thing they need to consider is, is it the right thing to do and what would the benefits be locally and to the visitors as well,” Thomson said.

For Tony Chisholm, president of the Friends of Fort George and a cottage owner, categorizing all short-term rentals as Airbnb accommodation isn’t right. He also suggested the town focus on enforcing a bylaw on unlicensed rental accommodations and if the town needs more money, it could instead increase its licensing fee.

“If there is a tax implemented, it should be to pay for an extra bylaw officer to take care of the unlicensed cottages in town because that’s a big problem,” he said.

Chisholm said he doesn’t believe tourists will stop coming to the town if the tax is enforced, but believes they won’t stay for too long and won’t shop as much.

When the idea of hotel tax was brought up last year, it was “disappointing,” as neither the previous council nor town staff had done any research, said Bob Jackson, chief executive officer of Lais Hotel Properties Limited. 

“Many of the conversations have been about ‘How we are going to do this’, not ‘Why on earth would we do this’?” he said.

Jackson also said the Canadian Centre for Economic Analysis was hired before the first tax discussion was brought up to council to do research on how an accommodation tax would affect NOTL.

The report concludes that if a three per cent hotel tax was implemented in NOTL in 2018, the town would have 8,400 fewer visitors for the year.

“A hotel tax in one region may provide a good source of government revenue that does not cause much change in tourism, while a hotel tax in another may provide revenue, but simultaneously cause a decrease in demand for accommodations by reducing tourism in the area, thereby negatively impacting the accommodation industry,” the report said.

“Niagara-on-the-Lake is one such region where a negative impact could occur, tourism for pleasure accounts for 72 per cent of their tourism.”

In Windsor, a four per cent hotel tax came into effect on Oct. 1, 2018.

Orr, of Tourism Windsor Essex Pelee Island, said there are indications his organization will see an increase in its base funding thanks to its share of the tax. 

“The benefit of what we’re doing is we are not going to the general taxpayer to ask for more money to do marketing for the region. The hotel tax is being paid for by the consumer of the product,” said Orr. “They’re not going to not come because of the four per cent, as a general rule.”

Orr said Windsor didn’t come on board with the tax implementation right away, but even smaller communities now are discussing the idea or are looking into implementing it.

Carlo Robazza, chief financial officer for Lais Hotels Properties Limited, said NOTL is “somewhat unique” and can’t be compared to major urban centres.

“It’s far more discretionary spending here and that extra tax certainly changes decisions. In a smaller economy, the impact of these changes is felt far greater than in large urban centres,” said Robazza. 

In Mississauga, the four per cent tax kicked in on April 1, 2018. The city collected $8.9 million in tax revenue from April 1 to Dec. 31, 2018, said Shari Lichterman, director of recreation for the city of Mississauga.

“The revenues support the Tourism Master Plan and allows the city to fund tourism staffing, programs and grants through (the tax) instead of using property tax-based funds,” Lichterman said in an email to the Lake Report. “No formal complaints have been logged pertaining to the (tax).”