Business community weighs in on accommodation tax

A much-debated municipal accommodation tax approved by council just last week goes into effect Friday.

The town will begin applying a tax of two per cent as a starting point, increasing it to four per cent by 2025, for all accommodations with five rooms or more.

It was agreed the tax will not be levied on rooms that were reserved before July 1.

The goal of the tax is to fund tourism marketing programs, and “future tourism initiatives.”

Legislation governing the tax specifies the maximum the town can keep is 50 per cent, which it has chosen to do, the other half going to the tourism branch of the Niagara-on-the-Lake Chamber of Commerce as the destination marketing organization (DMO), to be spent on marketing programs. The town’s portion will go into a special reserve, to fund tourism-related capital projects.

Councillors were told by the town’s corporate services director Kyle Freeborn that Niagara Falls gives 95 per cent of MAT revenue to its DMO, St. Catharines is a 60/40 split, and other Ontario municipalities give 100 per cent of the accommodation tax revenue to fund tourism marketing.

The only project agreed to at this point to be funded by the town’s 50 per cent is $100,000 put aside for the NOTL Museum’s expansion project,  Freeborn said.

A small advisory group of tourism stakeholders was consulted to help with the terms of the program, and another committee will be created to include up to nine tourism stakeholders to assist town staff with “governance processes,” including how the town’s portion of the money can be spent.

It has to be used to fund new tourism capital projects, and cannot replace any money already currently being spent by the town, explains Minerva Ward, president and CEO of the chamber, which will provide representation on the governance committee. 

To explain the distinction, she uses the example of the information bureau in the parking lot of Fort George, already funded by the town, which cannot now be funded by the municipal accommodation tax.

However, the town could use the tax revenue to create a new tourism information office on Queen Street — one that would be far more comfortable and suitable for welcoming tourists than the chamber office, which also uses its space for administration.

Coun. Erwin Wiens mentioned at last week’s council meeting that he doesn’t want to see the accommodation tax go “off the rails” like parking revenue, which was originally intended to offset tourism costs, but in recent years has become revenue to offset taxes.

The role of the DMO and other stakeholders on the governance committee would be to advise on capital projects the town’s 50 per cent can fund, although council will make the ultimate decisions.

Council also approved hiring a contract staff member in 2023 to be funded from the accommodation tax to implement and manage the program.

Ward was a member of the advisory committee that discussed the details of the roll-out of the tax, which had already been approved almost a year ago, after years of discussion leading up to it — for the second time.

The two previous motions to implement the tax were both were approved, although not unanimously — one 6-3, the other 5-4 — but were lacking details, such as the timeline for the increase from two to four per cent, and when the tax would be implemented.

The tax was previously discussed as going hand-in-hand with a tourism strategy that would help create a vision of what tourism should look like going into the future, says Ward.

Last week, council approved moving ahead with the tax before tourism strategy consultations have even begun.

Paul Macintyre, vice-president of Vintage Hotels and until recently the chair of the chamber board, was also one of the advisory group, along with Ward, Tim Coons from Peller Estates, which includes the winery, restaurant and Riverbend Inn; the Bed and Breakfast Association; Janet Jones, a local owner of a B&B; Steve Livet of White Oaks Resort and Conference Centre; and Eric Quesnel of 124 on Queen, which includes the boutique hotel,  restaurants and Starbucks.

Macintyre is not happy with the way the input from those meetings was handled, and he believes his opinion is supported by the accommodation sector. The stakeholders who participated in two advisory committee meetings with CAO Marnie Cluckie and Freeborn had felt the discussions to be productive, Macintyre says, and had made six key proposals, which they expected to be included in the recommendations staff took to council. However, three of them were not, nor were they even discussed.

Macintyre says if he and the others in the group had known their proposals were not to be incorporated in the details, they would have all gone with delegations to council.

“I believe most of us thought our proposals were unanimously agreed upon in principle, smart, well-thought out, and a collective way forward that included tourism’s input, unique to NOTL. We also thought they would at least be presented to council for discussion and consideration,” he told The Local in an email.

The three proposals they thought had been agreed-upon but were discarded were to do with a flat room fee instead of a percentage, an exemption for corporate groups, and a delay in the implementation in the tax.

“A flat fee is easier for operators and the municipality,” says Macintyre. “Niagara Falls only charges $2 flat per room, much less than us, and we compete with them directly in the corporate market. With a strike of a pen they just put us at a competitive disadvantage with our neighbour, and likely slowed recovery in a market that perfectly aligns with longer average stays, reduced traffic and typically business creation at low seasonal need periods.”

As far as the request for delayed timing, he says, “we simply just now got the bylaw details, which allow us to just start preparing.”

There is no “MAT switch” on their systems, he says, and now resources need to be allocated for work to be done in the middle of the season.

One proposal that was accepted was for the tax increases to be aligned with the calendar year.

The staff recommendation council approved is for the first increase to three per cent to be implemented Jan. 1, 2024, and to four per cent on Jan. 1, 2025.

The current provincial strategy, Macintyre says, “is to offer tax incentives this summer to people travelling within Ontario, at the same time that we are launching a new tax.” The implementation of the MAT, he added, “sounds counter-productive if recovery is actually the focus this summer.”

Last week, after two voluntary terms, Macintyre officially became the out-going chair of the Chamber of Commerce and Tourism NOTL.

“A new chair will be nominated and appointed soon,” he says. “I loved every minute working with our tourism community and with all the volunteers, residents and supporters of the hospitality Niagara-on-the-Lake offers. It truly is a community-at-large achievement.”

The municipal accommodation tax “has been divisional,” especially on the back of elected officials saying that residents are paying for tourism as a reason for needing the MAT, he added.

“The commercial sector and tourism is paying their fair share with one of the highest tax levies in the region. Hotel properties within the Niagara region are taxed at a significantly higher rate per hotel unit than the average, with NOTL being singled out as the highest in Ontario,”  — 2.5 time higher than the average.

The intent of the municipal accommodation tax and the legislation that governs it “is to grow sustainable tourism. Anything else is an irresponsible strategy.”

The tourism and the accommodation sector “play a great role in our community, and I believe the community agrees. We came to the table with an open mind and some strong productive suggestions that could make it work and ease the pain that everyone feels with the launch of a tax.”  

The message moving forward should be “that we all pay our fair share, and we all need to be working together. Now let’s start a real, sincere, productive conversation around a proper tourism strategy and put this divisional messaging behind us.”

Ward, who had hoped the implementation of the tax would align with a tourism strategy, says the chamber will be working on a five-year marketing plan for sustainable tourism that can begin ahead of time.

Sustainable tourism, also the goal of the tourism strategy, means balancing the needs of businesses with the needs of residents, and that works best with high-yield tourism, which will be the goal of the five-year plan, she says.

The chamber has always had marketing plans that promote NOTL as a tourism destination, she says, through events, social media, trade shows, campaigns, brochures, magazines, and media, but the plans have been scaled to the chamber budget.

With Tourism NOTL named the DMO for the accommodation tax, “we now have the opportunity to create a more robust marketing plan that will, in addition to the things we have already done, target specific niche markets that have the potential for further development: high-yield leisure and corporate bookings (meetings, events, and conferences), to increase visitation during the off-peak months and mid-week,” she told The Local. 

It would also include weddings, luxury agro-tourism enthusiasts, and elevated culinary tourists, she says, allowing the DMO to “develop tactics and campaigns to extend our tourism season into the fall and winter, thus making us more of a year-round tourism destination.”

While the DMO does not have to report how it spends MAT revenue to the town, she says she expects the chamber, in the interest of transparency and accountability, will share that information.

Tourism NOTL needs to move forward, “especially in this post-COVID era where destinations are aggressively ramping up their marketing.” 

Those who “kept the lights on” during COVID will have momentum on their side, “and we must ensure we serve our tourism industry by implementing a marketing plan that will drive business to their doors.”

In the coming months, Tourism NOTL will define where the DMO’s portion of MAT revenues will be spent, Ward explains, with input from the business community, residents, visitors, and the Chamber’s tourism marketing advisory committee.

It will aim for sustainable tourism development that is “respectful of the physical, environmental, and psychological carrying capacity of NOTL, and focus on high-yield tourism.”

As a chamber, she said, “we represent our members, but as the DMO we market all of tourism and include non-member tourism businesses in our tourism campaigns. We look forward to working with the town on the development of the tourism strategy and on the continued development of a premium NOTL tourism brand, tourism that is respectful of the community, and provides strong returns to the business community.”