Kevin R. Molloy, the executive director of the Lancaster County Convention Center Authority, calls for an increase in the hotel room rental sales tax in a “white paper”, entitled “Recommended Funding Shortfall Solution“, which he has released to the media.
Molloy states: “I believe that the best solution for funding the shortfall faced by the Lancaster County Convention Center is the adoption of an increased hotel room guest tax. I recommend an increase of the hotel room guest tax to 5.0% from 3.9%.”
Molloy explains: “If no action is taken, I anticipate that, as a result of a cash shortfall and in accordance with county ordinance, beginning April 2012 the bond holders of the convention center will receive 100% of the 3.9% hotel room guest tax revenue (instead of the current 80%, with the other 20% going to the CVB for destination marketing).”
He continues: “A hotel room guest tax increase of 1.1% (approximately one dollar per average hotel room night) would benefit (1) the convention center and (2) the CVB’s destination marketing — the primary engine for attracting visitors to Lancaster County — and (3) the broad spectrum of hotels and businesses across the county affected by tourism.”
To substantiate the above, Molloy then provides a theory of Supply and Demand that raising the price of an item or service does not lose customers: “The hotel room guest tax is paid by consumers, not by hotel owners. It is not an income or gross receipts tax. It is a tax paid by hotel guests. The proposed 1.1% increase would equal about one dollar on the average county hotel room rate of $90. The new rate would still be absolutely in line with regional and metropolitan markets.”
Countywide room rental sales taxes have declined in recent years and remains about the same for 2011 as for 2010. This is despite the considerable addition to the number of hotels including the downtown Marriott. Hoteliers have recently observed the result of achieving less revenue per guest room has caused many to defer usual and necessary investments in renovations and improvements, causing the region to become less attractive as a destination. They have also noted that less people patronizing hotels means less visitors patronizing restaurants and recreational facilities.
If the convention center absorbs the revenue that now goes to the Visitors Bureau, there will be less promotion of tourism and convention center business, thus adding to downward spiral.
Two big questions not addressed are: 1) How close is the Convention Center to a bankruptcy that triggers existing county guarantees? and 2) What is the financial condition of the adjoining Marriott Hotel, whose debt is guaranteed by the City of Lancaster?
The equitable owner of the hotel, under a long term lease with option to purchase at a modest price, is Penn Square Partners, a venture of subsidiaries of the High Companies and the Lancaster Newspapers, Inc.