Council to consider hotel tax cut during budget talks
FRONT ROYAL – Hotel owners want town leaders to bring the lodging tax in line with Warren County’s.
But Town Council might only take that request a short way out of fear that Front Royal would lose tax revenue with a lower rate. Councilman Bret Hrbek pushed the idea of cutting the tax rate from 6 percent of net sales to 2 percent to level the playing field with Warren County and particularly the growing number of hotels in the U.S. 340-522 Corridor.
Council plans to discuss the lodging tax rate as it considers the fiscal 2017 budget, Town Manager Steve Burke said Thursday. Any changes would be included in the public hearing on the budget the town will hold in May or June, Burke said.
Hotel tax revenue goes toward tourism efforts and the visitor’s center. Burke told council earlier this week that should council reduce the rate, the town would need to find a way to make up the lost revenue in the tourism budget.
Parkside Inn & Suites owner and former mayor Stan Brooks presented a petition on Monday to Town Council, signed by hoteliers who want Front Royal to lower the tax rate.
Brooks used an example of a bill a patron would pay to stay at his hotel in town and compared that to one a person might receive from a hotel in the U.S. 340-522 Corridor. The same person would pay $7 less for a 3-night stay at either hotel, Brooks explained. He admitted that his smaller business doesn’t compare to the larger hotels in the corridor.
If the Quality Inn in Front Royal collected about $1 million in a year, the hotel would have paid the town $60,000 in tax revenue, Brooks said. If a hotel in the corridor collected $1 million it would pay the county $20,000 at the 2 cents per $100 of sales.
“It is a competitive disadvantage right off the bat,” Brooks said.
The town’s lodging tax funds the visitor’s center that promotes both Front Royal and the county, Brooks added.
“So not only are you at a competitive disadvantage, you’re also paying for part of the marketing for our competitors,” Brooks said. “Unless you’ve been in the hotel business, especially small hotel business, you don’t realize how small those margins are and how much difference it makes.”
The price difference for groups staying at town hotels or in the county can reach $80 or $90, Brooks said. Groups look around for the best rates.
Meanwhile, Warren County tried unsuccessfully to persuade the General Assembly this session to allow it to increase its lodging tax to 5 percent of net sales. The request came up during the most recent town-county liaison committee meeting. County officials plan to try again during the next legislative session, Burke said.
Contact staff writer Alex Bridges at 540-465-5137 ext. 125, or email@example.com