by Cheryl-Anne Sturken | November 01, 2010
The prolonged economic downturn has wreaked havoc on municipalities across the country, leaving cities both big and small struggling with depleted revenues. Among the measures being used to prop up teetering budgets, one of the most common -- and controversial -- has been to hike hotel bed taxes, some by as much as 3 percent. In response, opponents are howling their disapproval, claiming the additional levies will cost them lucrative group business.
Nowhere is the fight more contentious than in San Francisco, where the Hotel Fairness Initiative, or Proposition J, comes to a vote this month. The measure would increase the city's hotel tax by 2 percent, to 16 percent beginning in January 2011, and last for four years. In addition, visitors to the city would continue to pay an established 1.5 percent tourism-marketing fee, bringing the city's total daily hotel tax bill to 17.5 percent.

A number of important city agencies are against the hike, including the San Francisco Convention & Visitors Bureau, the San Francisco Chamber of Commerce and the Hotel Council, along with Mayor Gavin Newsom and a coalition of local business leaders. In support are various community groups and Unite Here Local 2, the hotel workers union.

Steven Falk"This increase will make San Francisco's hotel tax rate the highest in the country and take us out of the competitive bidding process, especially for large groups that are price-sensitive," warns Steven Falk, president and chief executive officer of the SFCOC and one of the founders of Economic Recovery San Francisco, a growing alliance of local business groups that have banded together to fight the ballot initiative. "If you're a planner looking to book 5,000 rooms for an event, and your choices are San Diego or San Francisco, that higher tax is going to make a big difference in where you go," he adds.

Martin D. Balogh, director of meetings and travel for the Chicago-based American Bar Association, is in full agreement with Falk's assessment. "San Francisco, already perceived by planners and attendees as a very expensive destination, is heading toward particularly dangerous waters with this possible tax increase," he says. "Becoming known as also having the highest bed taxes in the country will not be viewed as a positive by decision makers when considering the city as the site for a meeting."

Indeed, the looming possibility of higher taxes already might be costing the city potential meetings business, according to Joe D'Alessandro, president and chief executive officer of the SFCVB. "Five groups that were completely sold on us have told me they would have to take a second look now, because higher taxes will make us that much more expensive for them," says D'Alessandro, who put the groups' combined worth to the city at $120 million. "Obviously, this increase, which we at the CVB are totally opposed to, is not in the city's best interest."