Convention officials and people in the hotel and restaurant industry are outraged over proposed legislation that would raise hotel and meal taxes in Rhode Island. They say the tax hikes would drive large conventions to Hartford, Boston and other cities, devastating the hotel industry and depriving the state’s cities and towns of millions in revenue.
A 1-percent hotel tax increase would also make Rhode Island the state with the highest hotel tax in New England.
“Make those rooms more expensive. We like that. I don’t ever want to have to sell my convention center on price alone, but certainly affordability is an issue. Anything that makes Providence less affordable obviously helps the competition,” said H. Scott Phelps, president of the Greater Hartford Convention and Visitor’s Bureau.
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Connecticut is currently building what would be the second largest convention center in New England.
“When you’re talking about big conventions, people look at the total price tag. That’s why Boston is giving away space to conventions. This seems contrary to that. It’s kind of like saying, ‘Thank you for choosing us, it’s going to cost you more,’” said Kevin Cameron, chairman of the board of the Providence Warwick Convention and Visitors Bureau and general manager of the Radisson Airport Hotel.
One bill at the Rhode Island General Assembly would increase the 12-percent hotel room tax to 13 percent. Another piece of legislation would impose an additional 1-percent sales tax on meals and beverages at restaurants, raising the meal tax to 8 percent.
The bills were proposed as a way to help an ailing state economy by bringing an immediate influx of cash into state coffers. But they would ultimately do more harm than good, driving conventions – a major economic generator – to nearby cities with lower taxes, say convention and tourism officials.
Increasing the hotel tax by 1 percent could generate as much as $2.2 million in tax revenue, but would cost Rhode Island $25.3 million in economic impact due to fewer conventions and overall influx of tourists, according to an economic analysis commissioned by the Rhode Island Hospitality and Tourism Association.
The highest hotel tax in New England would not be overlooked by corporate meeting planners seeking to book a large convention, said Dale J. Venturini, president and CEO of the Rhode Island Hospitality and Tourism Association.
At a time when the business travel and meeting market has softened, companies will look to hold conventions and meetings in cities that have lower taxes. Providence and Rhode Island as a whole will no longer be competitive with nearby cities and states, including Boston, Hartford, Baltimore, Pittsburgh and Philadelphia, said Venturini.
“We’ve gotten letters from meeting planners, saying that if we raise our hotel tax and our meal tax, it’s going to be a problem for them,” said Venturini.
After Rhode Island raised its hotel tax by 1 percent in 1989, the state experienced a significant drop in its room occupancy rates, while the rest of the nation saw an increase in occupancy, she said.
In particular, Hartford is ramping up its effort to woo conventions and is poised to steal a lot of business from Rhode Island, say industry insiders. Hartford is expected to open a new convention center in 2005, and that city’s mayor has gone on record stating that he will target Providence from which to pull conventions.
The Connecticut Convention Center, a 550,000-square-foot facility, would be the second largest convention center in New England behind Boston’s convention center. The convention center will be owned by the state of Connecticut and operated by the Waterford Hotel Group. Convention officials there are already marketing the new convention center and have more than 50 tentative bookings for the new facility for 2005 to 2008, according to a recent report.
The bill that would raise the hotel tax, known as S-1056, was sponsored by state Sen. Maryellen Goodwin (D-Providence). The bill that would raise the meal tax, S-1057, was co-sponsored by Goodwin and Sen. Rhoda E. Perry (D-Providence). Goodwin did not immediately return a call seeking comment.
In 2001, lawmakers in Rhode Island rescinded the last increase in the hotel
tax. The tax would have funded Heritage Harbor Museum, Waterfire and other cultural
projects, according to the Rhode Island Hospitality and Tourism Association.
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