Lodging industry holding its own

May 30, 2009
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Despite the recession, which has limited travel, and the gloomy fiscal forecast for DeVos Place, which has been projected to lose $839,590 in the upcoming year, Doug Small remains optimistic about the immediate future of the hospitality industry here.

“We’re holding our own against our competitors. As tough as it is out there, this is still a destination with great value,” said Small, president of the Convention and Visitors Bureau, last week.

To illustrate how difficult it is to compete for business in the current economic climate, Small said his bureau lost a meeting bid to a hotel in New York City. The hotel offered the group $50,000 worth of free food and beverages.

Small also said the per-room revenue rate at hotels and motels in the county was down by 7 percent in April, according to figures from Smith Travel Research. The national average, though, had room revenue down by 19 percent that month.

Even though lodging operators in the county fared better than their peers in April, less revenue still means less income to the hotel-motel tax fund. So Kent County commissioners made more adjustments last week to the lodging excise tax budget, which has had a deficit every year since 2001. The biggest shortfall came in 2005 when it reached almost $1.4 million.

Commissioners adopted the $5.94 million budget late last year expecting revenue in 2009 would total $5.64 million, so they approved taking $293,832 from the fund’s reserve to balance the account. But a revenue estimate made after the first quarter showed that only $5.06 million would be generated as income, which leaves another shortfall of $580,032.

So commissioners wrote down the revenue estimate by $580,032 to $4.98 million and then transferred $161,282 from the unreserved and undesignated general fund balance to cover the deficit. The fund balance in the lodging-excise tax account is now at $415,630, the county’s required minimum reserve.

The county uses the receipts from the 5 percent tax on a guest’s bill to make the largest bond payment for the construction of the convention center — $4.86 million this year — and to provide $719,828 in marketing support this year to the CVB. Kent County also funds the West Michigan Sports Commission with $200,000 from the tax revenue and gives $10,000 to Festival of the Arts.

The county has also cut expenses from the account. It transferred a $400,000 payment to John Ball Zoo for exhibits from the fund to the capital improvements fund and moved the expense of a smaller DeVos Place bond into the general fund. There is a possibility that more cuts could be made later this year unless the tax revenue increases.

“Paying the debt on the convention center is something that we have to do; the rest is discretionary,” said County Administrator and Controller Daryl Delabbio.

There is also a possibility the county will join a lawsuit to raise more revenue for the fund. Ingham County Treasurer Eric Schertzing filed a suit earlier this year against 17 online hotel booking companies for allegedly selling rooms at rates higher than the price actually taxed, a practice that reduces lodging-excise revenue to the county.

At least Calhoun, Saginaw and Genesee counties have joined Ingham in the suit. Kent County Corporate Counsel Daniel Ophoff reported last week that he and County Treasurer Kenneth Parrish have discussed doing the same. The suit, filed in Ingham County Circuit Court in March, doesn’t contain a damage amount.

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