City Council approves a new hotel fee

A Philadelphia hotel room will soon cost a little more.

City Council, at the urging of the Greater Philadelphia Hotel Association, on Thursday unanimously approved a new room fee that would add 0.75 percent to the daily rate at a Philadelphia hotel.

The levy, which will be managed by the hotels and used to attract events and groups that fill city hotel rooms, is expected to generate $5.8 million next year, and $7 million by 2022.

“We’re not doing this because we want to add an expense,” said Ed Grose, executive director of the association. “We’re doing this because we think it’s necessary to fill our hotel rooms.”

A year ago, the city commerce director told the hotel group that the city would no longer be able to provide funds or grants to attract conventions and events, such as the Army-Navy Game and the NFL Draft.

“The hoteliers got together as a group and decided that, as long as we were able to set up an assessment, as opposed to a tax, then we would be able to control the money,” Grose said.  “If we can control the money, and make sure that all the funds are used for filling hotel rooms, then we would be willing to do this assessment.”

Legislation, introduced by Councilman Derek S. Green and approved by Council, creates a hospitality-improvement district. “It’s an economic-development opportunity in the city of Philadelphia,” Green said. “Any time we can bring in additional large events, whether arts or sports, it’s a benefit for the bottom line in our general fund.”

The fee, which has the backing of Mayor Kenney, will be in addition to the existing 7 percent sales tax that goes to the city and state and the 8.5 percent hotel tax divvied up among the Pennsylvania Convention Center, Philadelphia Visitors & Convention Bureau, and Visit Philadelphia leisure-tourism group.

The fee is expected to add $1.50 to a $200-a-night room rate. “For every $1 we award, we are expecting $8 back in economic impact,” Grose said. “Mainly, we are looking to fill hotel rooms.” Hotels will begin collecting the fee Jan. 1.

Other cities, including Dallas, San Diego, Tampa, San Francisco, and Los Angeles, have similar “hospitality-improvement” assessments used to compete for large conventions and events.

Philadelphia has more than 16,000 hotel rooms, and with new hotels being proposed, the number could eventually be 3,000 additional hotel rooms.

“This is not another agency,” Grose said. “This is a fund to help our hospitality partners bring in conventions and large events that fill hotel rooms. We’ll use existing staff.”

The awards could be money, or services such as paying for an opening reception, or transportation costs while a group is here.

A volunteer board of 14 hotel managers and one representative from the city will decide how the money is spent.  The board will include hotels on the waterfront, near the airport, on City Avenue, and around the Convention Center. “I want to make sure that all of my members see a benefit from this,” Grose said.

“We have a new supply [of hotel rooms] coming into the city. This is just another tool to make sure that our hotels are full.”

Philadelphia depends on convention and leisure travelers and does not get the level of corporate business that cities such as New York, Chicago, and Washington do.

“We as a city rely heavily on our group and convention business,” Grose said. “Our corporate demand has been flat for quite some time.”