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As hotel taxes evaporate, so do millions in funds for Explore St. Louis, America's Center and other public facilities nationwide

Social distancing and quarantines to counter the coronavirus' spread have taken a heavy toll on the hospitality sector in particular
Credit: SLBJ

ST. LOUIS — Economic downturns never bode well for public coffers, but the coronavirus fallout is shaping up to be a worst-case scenario for cities and states that mortgaged their economic futures on a steady stream of visitors to local restaurants, hotels and shopping districts.

To be sure, a financial double-whammy is about to slam state and local governments as a surge in unemployment will, if history is any indicator, eviscerate household incomes, consumer purchases and real estate transactions. At the same time, demand will rise for public services such as Medicaid, unemployment benefits and related social safety nets.

At most risk are agencies and public projects subsisting on revenue from consumption taxes, namely hotel-occupancy and sales taxes. Social distancing and quarantines to counter the coronavirus' spread have taken a heavy toll on the hospitality sector in particular, with hotel occupancy rates plummeting nationally by roughly 75% and tourism destinations shuttered indefinitely until the pandemic passes.

HOUSTON WE HAVE A PROBLEM

The city of Houston averaged $77 million in annual hotel occupancy-tax collections between fiscal 2009 and 2018. The revenue supports $75 million in bonds used to finance the city's convention center.

Locally, empty hotel rooms could translate to millions of dollars in lost revenue for Explore St. Louis, the tourism agency that runs the America's Center convention complex. The agency is funded by a 3.75% hotel tax in St. Louis County and in the city, but regional hotel occupancy rates have plunged to under 30%. Explore St. Louis President Kitty Ratcliffe said that in fiscal 2019, which ends June 30, the agency will collect about $14 million in hotel taxes, off from a previously anticipated $19 million. Based on a survey Explore St. Louis conducted, hotels in St. Louis city and county are expected to lose "well over $100 million" in hotel revenue in 2020.

Canceled conventions also spell trouble for Explore St. Louis and the overall St. Louis region. Revenue projections for America's Center are down by about $18 million for 2020, but that's just a drop in the bucket compared to the impact canceled conventions will have on the region's economy. St. Louis' 25 largest conventions alone were estimated to generate $157 million in regional direct spending in calendar year 2020. The six that have canceled so far will eliminate about $35 million from that total. Another nearly $95 million is on the line from upcoming conventions that have not yet canceled, but could do so if limits on large gatherings are not lifted in time.

General tourism is also in jeopardy. Because Explore St. Louis' marketing funds come from hotel taxes, Ratcliffe said the agency could struggle to attract visitors once people start traveling again.

"We spend a few million dollars every year on leisure marketing in external markets," Ratcliffe said. "Right now, it’s not looking like we’re going to have those funds to be able to do that."

Ratcliffe said Explore St. Louis is working on grant proposals to try to get the money from other sources. It has also created several working groups (for hotels, restaurants, retail, transportation and event venues) that are meeting to develop best practices for operating before, during and after the economy reopens.

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