Chicago hotels are backing a proposal to raise their room taxes by 1.5 percentage points, from 17.5% to 19%, which would make them the highest in the U.S. (for comparison, Hawaiʻi’s combined Transient Accommodations Tax is about 14%, though the state’s General Excise Tax pushes the effective burden closer to 20%). The increase would generate about $40 million a year, earmarked for marketing and convention sales.
They might want to take a lesson from Hawaiʻi, where the original Transient Accommodations Tax (TAT) was created to fund tourism marketing. Over time, however, that revenue began flowing into the state’s general fund instead of being reinvested in promoting the destination.
In a bit of irony here in Hawaiʻi, lawmakers are now considering a bill (HB1950) that would earmark a portion of TAT back to marketing. Amazing how twisted things can get.
The bigger question is why cities even need to do this. Tourism marketing should already be funded by the taxes visitors are paying today. What other industry sees its product taxed at nearly 20% and still has to ask for funding to promote the very demand those taxes depend on?
