Report: Indy visitors pay high taxes for travel

  • Comments
  • Print

Visitors pay among the highest travel taxes in the nation when they come to Indianapolis — 17 percent on hotel rates, 15 percent on rental cars and 9 percent on meals.

That adds up to an average single-day, combined travel tax of $34.19, according to the Global Business Travel Association, which ranked Indianapolis No. 8 on its list of the worst 10 cities for travel taxes.

The rankings are based on the amount of hotel, car rental and meal taxes paid by travelers in the top 50 travel destinations in the United States.

Although Indianapolis officials say the city is still making great gains in visitors and is competitive with its convention-city peers' taxes, some in the hospitality industry say those taxes hurt business and are calling for them to be rolled back.

"We just keep inching up," said John Livengood, president of the Indiana Hotel and Lodging Association and president and CEO of the Indiana Restaurant Association. "If we want people to come here and spend money and help out, we are kind of shooting ourselves in the foot."

But the reasons for the increased travel taxes are the exact reasons businesses in Livengood's industry are thriving, said Sen. Luke Kenley, R-Noblesville, who helped craft the tax-funding plans. The taxes help fund Lucas Oil Stadium and an expanded Indiana Convention Center and help to get the Capital Improvement Board, which operates the city's sports stadiums and the convention center, out of debt.

"All these hotels and restaurants are doing a booming business because of this extra business coming into the city," Kenley told The Indianapolis Star. "It's not like nobody is going to go to St. Elmo's because you have to pay a 9-percent food and beverage tax."

And it's not like people aren't going to choose Indianapolis as a convention city because of the taxes, said Chris Gahl, spokesman with Visit Indy, the city's convention and visitor association.

"Although hotel tax and tourism tax is a piece of the overall puzzle that drives a meeting planner's decision in selecting a city, there are hundreds of other variables," Gahl said. "Quality of hotels. Walkability of the city. Things to do culturally. Amenities after hours. Convention center square footage. Overall affordability of the city."

Gahl says the city has low hotel room rates compared with its competitor cities. And he points to the expanded convention center, now covering more than 1.2 million square feet, as another key draw.

That alone has allowed Indianapolis to compete with major cities such as Chicago, Denver and Orlando, Fla., for convention business.

The economic impact of groups that have booked the expanded center that wouldn't have been able to without the added square footage is more than $1.5 billion, according to Visit Indy. Among those: GenCon, the Custom Electronic Design & Installation Association and the Seventh-day Adventist Church, which brought more than 100,000 people to the city in July.

Hotel bookings also have increased despite higher lodging taxes, tourism officials said. When the most recent lodging tax increase was passed, hotel room bookings were at 500,000 annually. Last year, the city saw 734,000 room bookings.

And visitors?

In 2009, Indianapolis had 18 million visitors, generating $3.4 billion in economic impact. In 2010, that number jumped to 20.3 million and $3.56 billion. Gahl expects that the 2011 statistics, out by the end of the year, will have increased again.

Gahl said all this is proof that Indianapolis is competitive with its convention peer cities.

Many of them are ranked right on that 10 worst list with Indy.

"What's interesting about this list is that Indianapolis is alongside many of our key cities that we compete with daily for convention business," Gahl said. "Chicago, Boston, Kansas City, Minneapolis, Nashville are all on our radar as key cities we compete with. It's interesting to see us lumped together in relatively the same tier of travel tax."

Mayor Greg Ballard's spokesman said lists, such as this one, don't necessarily take everything into consideration.

"When it comes to these lists, you have to put everything in perspective," Marc Lotter said. "We have these world-class facilities we have to pay for. And when you look at the record number of successes that Visit Indy's had in booking new conventions and filling Downtown hotel rooms, I don't think it's turning out to be a negative."

Livengood said it can be a negative — that even if convention planners choose Indianapolis, hotels can suffer by having to settle for lower room rates to offset the higher taxes.

"They use that as a negotiating tool," Livengood said.

At the Indianapolis Marriott Downtown, General Manager Phil Ray said he supported the tax increase because he wanted to see the convention center expansion for "the common good of the city."

"It is high, and we do know at some times it does cause some pressure," he said.

But both Ray and Livengood hope that at some point the city will see fit to lower the lodging tax.

"Down the line we would love to see that eventually rolled back," Ray said.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.