As the summer season heads toward its peak, Rhode Island’s six tourism districts’ budgets will see a long-awaited boost from taxes generated by housing rentals on online platforms.
Distribution of the 5% lodging tax on room rentals collected by third-party hosting platforms such as Airbnb now includes a cut for local tourism districts. The change is included in the state’s fiscal 2020 budget, which began July 1.
Previously, the districts received nothing from tax revenue collected from such transactions, while R.I. Commerce Corp., the state’s lead tourism agency, raked in about 75%.
Now, five of the tourism districts stand to share – albeit unevenly – up to 45%. The sixth district, the Providence Warwick Convention & Visitors Bureau, will separately collect 5%. Cities and towns where rentals are located will still collect about 25%.
The tourism districts combined are expected to gain about $194,100 in fiscal 2020. That gain will come at the expense of Commerce RI, which will see its share drop to 25%, according to the state’s budget office.
State officials estimate that online hosting platforms will bring in about $386,971 in taxes for fiscal 2020.
Commerce spokesman Matt Sheaff declined to comment on the new formula, but said the agency anticipates collaboration with local tourism districts.
“We know this was a priority for the tourism regions and we look forward to working with them to maximize our paid advertising efforts, [and] driving more visitors and revenue to our beautiful state,” Sheaff wrote in an email.
As a result of the change, lodging taxes collected by third-party proprietors are now distributed the same way as lodging tax from traditional hotels, inns and bed-and-breakfasts.
Some tourism professionals say the shift could bring an end to years of money-related frustrations, while others believe more changes are still needed.
Evan Smith, president and CEO of Discover Newport, says discontent began more than five years ago, when tourism districts and the private sector were concerned about the state’s lack of spending on tourism marketing. Then in fiscal 2018, tourism districts took a funding cut when their share of the 5% hotel tax was reduced from 47% to 42%. The move diverted more money to Commerce RI.
To make matters worse, it was becoming apparent that districts were losing out on revenue from online hosting platforms.
The recent redistribution is a big improvement, Smith says. But Jessica Willi, director of the Block Island Tourism Council, thinks restoring the districts’ hotel-tax percentage back to 47% would help stop annual battles over funding.
“It would be good to get back … to a place where we aren’t going through these funding fights every legislative session,” she said, calling the redistribution a “step in the right direction.”
Elizabeth Graham is a PBN staff writer. Email her at Graham@PBN.com.