Peninsula cities near SFO looking to boost hotel tax to increase revenue
By: John Upton
Examiner Staff Writer
July 9, 2009
 |
| Risk worth taking: Burlingame Mayor Ann Keighran is in favor of a hotel tax hike, despite the risk it could drive travelers away and end up costing the city revenue. (Juan Carlos Pometta Betancourt/Special to The Examiner) |
Voters in a handful of cities near San Francisco International Airport will be asked in November to approve raising local hotel taxes — a move that could fill budget holes but possibly hurt local economies that rely on business travelers.
Dave Liang, 38, and his family live in New York but have relatives in the Bay Area. They chose to stay at the Best Western in South San Francisco on a recent visit.
“I looked in San Francisco and it was too expensive to stay one night there with parking. If they raise prices here, we might go somewhere else,” he said.
City councils in San Mateo, Burlingame, Millbrae, Belmont and San Bruno have either approved, or are poised to approve, November ballot measures which, if passed, will increase transient occupancy taxes — better known as hotel taxes — to 12 percent from 10 percent.
Those municipalities’ economies rely, to varying extents, on visitors who land at SFO and choose to stay in hotels on the Peninsula while visiting San Francisco and other Bay Area cities for business meetings and conferences.
“We’re in such close proximity to the airport that we get many people coming in for conventions, business meetings and for vacations,” Burlingame Mayor Ann Keighran said.
Burlingame receives more tax revenue from hotels than its neighboring cities, meaning it has the most to gain from increased hotel taxes. But it also has the most to lose if the 2 percent hike drives travelers away.
The additional revenue that could be earned through the tax increase — $2 million per year — would be used to close budget gaps and improve landscaping and streets that surround the city’s hotels, according to Keighran.
“You can’t take anything for granted, but I would hope that the voters would be in favor of this,” Keighran said.
Burlingame officials recently approved a $37.79 million general-fund budget for the fiscal year that started July 1 that shaves off $3.4 million in spending due to revenue decreases. Millbrae, hit with the local impacts of the declining economy, faced a $1.7 million
shortfall in the city’s general-fund budget for fiscal year 2009-10. Belmont officials were looking at a $220,000 deficit. San Bruno made job and department cuts in its recently approved budget to fill a $2.5 million budget hole.
In San Mateo, increasing the hotel tax is just one of the measures needed to help close an $8 million budget hole, according to Hossein Golestan, the city’s finance director.
The city has more than a dozen hotels and most of the rooms are occupied by business travelers, he said.
“Hotels are definitely a significant component of our economy,” Golestan said. “The transit occupancy tax currently brings in approximately 5 percent of the general fund revenue — so that is fairly significant. In addition, the customers who come to our restaurants and buy other things generate sales tax.”
The hotels also provide major employment opportunities to local workers, he said.
A proposal to increase the city’s hotel taxes to 12 percent from 10 percent would provide an estimated $800,000 in new city revenue annually and probably wouldn’t have an impact on the number of visitors staying in San Mateo, in part because surrounding municipalities are pursuing identical increases, he said.
Lynn Mohrfeld, chief executive of the California Hotel and Lodging Association, said the most likely impact of the increased tax would be a reduction in group bookings, including accommodation bookings for airline crews.
The San Francisco Visitors and Convention Bureau — which is charged by its members to poach would-be visitors from Peninsula destinations — championed a similar recent hike to hotel taxes in The City.
“With business and group travel, 2 percent here and there makes a big difference,” chief executive Joe D’Alessandro acknowledged. “By putting too many taxes and fees on visitors, they will just vote with their feet. If the hotel taxes go up at the airport, then the city of San Francisco could benefit.”
San Francisco’s hoteliers voted last year to increase the hotel tax — from 14 percent up to 15 percent in some areas and to 15.5 percent in inner-city locations — to help fund improvements to the Moscone Convention Center and to pay for new marketing campaigns.
Anne Leclair, CEO of the San Mateo Convention and Visitors Bureau, said local hoteliers in the cities that are boosting their transient-occupancy tax have expressed concerns about also losing a competitive advantage over neighboring Peninsula cities’ properties where the hotel tax rate is lower.
“As a result of those conversations, some of the cities proposing an increase have come up with other ways they might assist their hotels with such things as additional signage,” LeClair wrote to The Examiner in an e-mail.
Colin Davies, who traveled to the Bay Area from England, said his firm put him up at the Motel 6 in South San Francisco, but wouldn’t concern itself with a 2 percent increase.
“The firm we work for makes all the reservations. So a small change in tax won’t affect us and where we stay,” he said.
Tom Callahan of PKF Consulting, a national hospitality-consulting firm, said San Francisco’s hotel taxes are pushing into dangerous territory, but he doesn’t expect the proposed 2 percent hikes at some Peninsula hotels to have a significant impact on visitor numbers.
“North of 15 percent, all of a sudden you get resistance — but as long as you’re under 15 percent, you’re fine,” Callahan said.
jupton@sfexaminer.com
Examiner Staff Writer Andrea Koskey contributed to this report.
SFO arrival numbers remain strong
Although the number of travelers landing at San Francisco International Airport has dipped with the economy’s decline, the regional transit hub continues to funnel scores of visitors into surrounding hotels.
Roughly 1.58 million people touched down at SFO in May — a drop from the 1.64 million people who arrived in May 2008, according to figures published by the airport, which has forecast an overall slowdown in arrivals of 2 percent to 3 percent this year.
SFO has a number of advantages that have buffered it from the sharp declines in arrival numbers experienced by other airports, according to Dan Goldes of the San Francisco Visitors and Convention Bureau.
“San Francisco has not suffered the same sorts of decreases in lift — which refers to seats into a destination — that a lot of other cities like San Diego and Las Vegas have because of its position as an international gateway,” Goldes said. “And ... it is neither a primary business destination or a primary tourist destination — it’s a balanced destination.”
— John Upton
Exploring their options
These Peninsula cities may increase hotel taxes to 12 percent from 10 percent:
Burlingame
- City Council voted June 15 to place the tax hike on the November ballot
- Hotel tax raised $11 million for the city last year
- Tax hike could raise an additional $2 million a year
San Mateo
- City Council is scheduled to vote July 13 on whether to place the tax hike on the November ballot
- Hotel tax raised $4 million for the city last year
- Tax hike could raise an additional $800,000 a year
Millbrae
- City Council voted June 23 to place the tax hike on the November ballot
- Hotel tax raised $2.8 million last year
- Tax hike could raise an additional $400,000 a year
Belmont
- City Council is scheduled July 14 to discuss placing the tax hike on the November ballot
- Hotel tax raised $1.4 million last year
- Tax hike could raise an additional $220,000 a year
San Bruno
- City Council voted June 23 to place the tax hike on the November ballot
- Hotel tax raised $1.4 million last year
- Tax hike could raise an additional $270,000 a year
Sources: Cities of Burlingame, San Mateo, Millbrae, Belmont and San Bruno
Bargain hunting
Best deals available for two nights’ accommodation for one person checking into a three-star hotel:
Millbrae
- Clarion Hotel San Francisco Airport
- $150 + $19.82 tax
- Tax hike would add $3
San Bruno
- Courtyard by Marriott San Francisco Airport
- $178 + $19.60 tax
- Tax hike would add $3.56 San Mateo
- Residence Inn by Marriott San Mateo
- $198 + $22.12 tax
- Tax hike would add $3.96.
Burlingame
- Doubletree Hotel San Francisco Airport
- $208 + $29.30 tax
- Tax hike would add $4.16 Belmont
- Hyatt Summerfield Suites — Belmont
- $298 + $53.96 tax
- Tax hike would add $5.96
San Francisco
- The Pickwick Hotel
- $158.50 + $22.32 tax
- No tax hike proposed
Source: Expedia.com, July 2, 2009
