Chattanooga: Tourism thrives despite taxes on lodgings

At more than 17 percent, Chattanooga’s lodging tax is one of the highest in Tennessee, but that doesn’t appear to deter tourists whose visits helped push up hotel tax collections in the city by 3 percent last year, records show.

“I don’t believe we have ever lost a piece of business because of high taxes,” said Bob Doak, president of the Chattanooga Area Convention and Visitors Bureau.

Among Tennessee’s major cities, Chattanooga’s lodging tax rate is higher than that in Memphis, equal to Knoxville’s and slightly lower than Nashville’s, according to the Tennessee Hotel and Lodging Association.

Nationally, some lodging taxes in California, such as in San Bernardino, San Francisco and Los Angeles, top 24 percent. Outside California, Chattanooga’s rate is among the highest of larger cities. The national average is 13.36 percent, records show.

When travelers check out of a Chattanooga hotel, they pay the statewide 7 percent sales tax, 2.25 percent local sales tax, plus a 4 percent city lodging tax and a 4 percent county lodging tax for a total of 17.25 percent.

Marshall Welch, who visited Chattanooga recently from Clover, S.C., said lodging taxes are not something that typically would keep him from visiting a city.

“That’s one of those things you don’t really recognize,” he said. “When you are planning (a trip), that is not usually something you ask. Most of the time when they are quoting you a room rate, they give you the rate without the tax.”

Cities with high lodging taxes often have lower average room rates, according to information provided by the American Hotel and Lodging Association.

That is the case in Chattanooga, Mr. Doak said.

“Yes, we have a high tax rate, but our rooms are usually much lower than in other places,” he said.

The average rate for a hotel in Chattanooga is less than $72 a night before taxes, according to the lodging association. The average daily room rate in Knoxville is $74. In Nashville the average room rate is $98. In Memphis, the average daily room rate is $87.

The national average daily room rate is $101.

Records show that Chattanooga’s hotel tax collections increased about 3 percent to $3.7 million in 2007 and Hamilton County’s lodging tax collections increased about 4 percent to $4.1 million.

According to Smith Travel Research, Chattanooga area hotels rented almost 1.9 million rooms in 2007, generating more than $129 million for their owners.

Hotel rentals in Chattanooga increased 1.8 percent in 2004, 7.3 percent in 2005, but occupancy fell 3.1 percent in 2006 yet increased 1.2 percent in 2007, records show.

The lagging economy and record-high gas prices should not keep Chattanooga hotels from attracting visitors, said a downtown hotel general manager.

“Chattanooga is a tremendous drive-in market,” Bill Mish of Vision Hospitality Group said. “Chattanooga still captures a lot of group visitors.”

Vision Hospitality, which is converting the Clarion Hotel on Chestnut Street into a Double Tree, also is building a Holiday Inn Express on M.L. King Boulevard at the foot of Cameron Hill.

Mr. Mish said he has no worries about finding guests to fill the new 92-room hotel.

REINVESTING THE REVENUE

Walt Baker, chief executive of the state lodging association, said Chattanooga, unlike other Tennessee cities, reinvests lodging taxes into tourism-friendly attractions such as the riverfront.

Mr. Doak said hotel tax collections paid $65 million toward the $120 million 21st Century Waterfront price tag. Hotel revenues also help maintain the Riverwalk along Amnicola Highway and Finley Stadium as well as fund the Convention and Visitors Bureau, he said.

“Nobody likes high taxes, but they pay for a lot of improvements,” Mr. Doak said. “We are a valued destination, and we are reinvesting (tax revenues).”

Mr. Baker said Collierville, Tenn., charges visitors 19.25 percent lodging tax, but that money is spent on sidewalks, street lighting and other improvements that don’t attract visitors.

Savvy travelers will opt instead to stay a few miles away in Memphis, which offers visitors more and only charges about 16 percent lodging tax.

“If you are investing the money and causing consumers to pay a little more, then you have to give them more in return and make it worth the trip,” he said. “If you are not doing that, then that can be the catalyst for staying somewhere else.”