On Monday, September 26, the City Council unanimously approved an ordinance creating the Seattle Tourism Improvement Area (STIA). The legislation creates a special taxing district that will charge $2 per bed night to guests in hotels with 60 or more rooms in the greater downtown area. The estimated $6 million that will be raised will be used for promotion, advertising, sales and marketing services to get people to visit Seattle. Councilmember Tim Burgess led the work to bring this idea from concept to reality, taking it through the many legal steps that are required to implement this kind of program.
This is, in effect, a voluntary taxing district. Like a Local Improvement District (LID), which is a mechanism that can be used by communities to come together to tax themselves for a specific improvement, the STIA was developed and advocated for by the hospitality industry. 77% of the 53 hotels that will be taxed under the STIA signed a petition asking the City to impose this tax. None of those who had not signed opposed the tax during the Council deliberations.
The hotels did this because we are entering a strange era in promoting tourism. Tourism is a very important part of the Seattle economy, supporting over 50,000 jobs in the Seattle/King County area – 20,000 in Seattle. Seattle is a renowned destination, known around the country and around the world as a City that is a great and interesting place to visit. The estimated $6.9 billion that tourists spend in our area generates $416.2 million in taxes for the state and city.
Yet, Washington has never spent very much on tourism, especially compared to other destination areas. In 2010, Washington spent only $1.8 million promoting tourism – while British Columbia spent C$60 million. We can’t count on people to keep coming just because we have great word of mouth – advertising and information makes a difference. In 2011, the state tourism budget was completely zeroed out as the state tackled its daunting deficit problem. The Seattle Convention and Visitors Bureau is supported by voluntary donations – and those are the first to go when the economy tightens up.
Hence, the STIA. The City will collect the funds, and will be reimbursed for our costs. The Convention and Visitors Bureau will administer them – and we anticipate that the $5 to 6 million raised annually will generate $34 million in new business, support 500 jobs, and add $3.42 million to Seattle’s tax revenues.
This is a classic example of a win-win approach to public-private partnership – with no downside for either party. The hotels get more business, the City gets more tax revenue, and the impact is minimal on local people, since the vast majority of the revenues will come from visitors (who will likely not even notice this small addition to their hotel bill).
Collectively, we can come together and create value for all of us. Individually, this would be almost impossible. This creative approach is also a lesson about the value of working together to make things happen for mutual benefit. The hotels know that they are in competition, but that their success also depends on cooperation. People in Seattle know this better than many people around our country apparently do.