Killing City Convention Business

June 13, 1994

A year ago the Schmoke administration identified aggressive tourism development as Baltimore City's key economic development tool. That was an understandable decision. Beginning with the opening of the two Harborplace pavilions 14 years ago, Baltimore has become an increasingly popular regional destination. With the construction of an expanded Convention Center and such added attractions as the Columbus Center, that trend is expected to continue.

But is the mayor about to crush the convention industry's enthusiasm for Baltimore?

The Schmoke administration is now proposing to increase the city's hotel room tax to 9 percent from 7 percent to finance its share of the $151 million Convention Center expansion. The hike would take effect in 1996, when the enlarged facility opens with heavy bookings. Baltimore's new tax rate (combined with the 5 percent state tax) would be the highest in the Northeast.

A high lodging tax is an important factor for professional convention planners when they select cities for meetings. Many jurisdictions, having experienced disastrous results after hiking their own room taxes, have now reversed course.

New York City, for instance, is slashing its 22 percent hotel tax in half. In Maryland, Prince George's County is in the process of rolling back its room tax from 10 percent to 5 percent. Why? Because it was "a disaster," in the words of the county's conference and visitors bureau director.

Wrote director Matt Neitzey in Convene magazine, "Hoteliers discounted room rates to offset the tax increase, then cut them again and again in what amounted to a fire sale. Profit margins became deficits, requiring staff cutbacks at every level. Hotel owners filed for bankruptcy protection. . ." Room occupancy rates in Prince George's hotels and motels plummeted from 68 percent to 56 percent.

Mr. Schmoke is taking a big risk in raising Baltimore's room tax. It would give other cities a decided edge in attracting large gatherings. Baltimore's recent, sharp decline in convention bookings could be prolonged. That could mean fewer jobs and revenue from the hospitality industry after 1996.

If Mayor Schmoke is serious about making tourism a centerpiece of future growth, he ought to heed the warnings of business and convention leaders. An exorbitant room tax could destroy much of the benefits expected to come the city's way once the enlarged Convention Center opens.

As a convention town, Baltimore has a lot to offer. But so do many other towns. The City Council should not put Baltimore at a disadvantage in its ability to compete with rival cities.

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