Denton wants to add a tourism tax on hotels in effort to drive more business to the city

Tyler Morning Telegraph
By Christian McPhate, Staff Writer
November 20, 2023 
Updated Nov 20, 2023

As the general manager of Homewood Suites near Unicorn Lake, Emily Wright remembers what it was like before the Denton Convention Center opened in 2017 and understands the benefit hotels like hers receive when the event space is booked.

It’s a compression that a representative from Hilton Garden Inn claimed had recently filled the hotel to max capacity on a Sunday, when they are normally at 50% capacity.

“When the convention center has groups and has business, we get that business,” Wright told Denton City Council members at their Tuesday afternoon work session last week. “We fill the compression.”

Wright also understands the importance of offering incentives to attract new groups as part of the bid process against other hotels in places like Dallas and Oklahoma City. She told council that her hotel loses business since they’re not able to offer a shuttle service through an incentive.

The two local hotel representatives joined Mike Pistana from Discover Denton and Scott Joslove from the Texas Hotel and Lodging Association to discuss why a tourism public improvement district (TPID) is needed in Denton to help hotels with 75 rooms or more become more competitive in the bidding process to bring additional business, such as group meetings and events, to Denton.

The TPID would assess a 2% tax on each taxable room only at hotels with 75 rooms or more in Denton to help generate additional demand for local hotel activity.

For example, if a room rate is $100, then 2% of that rate will go to the TPID, a public district that is estimated to generate $12.6 million over the proposed 10-year service period if approved by the City Council in February.

“That’s why Dallas was able in one year to double their conversion rate [for bids]” Joslove said. “It’s not that they suddenly became that much more effective and efficient. It’s that they could bid on so many more events that wanted to come to Dallas [due to the incentives provided by the city’s TPID].”

Mayor Gerard Hudspeth, who voted with a unanimous council to support the TPID’s proposed service plan, also explained that the TPID could fill a hole that has been left by the city’s allocation of the hotel occupancy tax, also known as HOT funds, to local hoteliers.

“That’s just what I’ve heard from people is, ‘Hey, you gave HOT funds to this organization, and they’re not generating room nights,’” Hudspeth said.

City staff stressed that they are currently working to improve the allocation process for HOT funds and the data collected for how those funds are used. It’s currently self-reported, city staff said.

The TPID’s proposed service plan would divide the $12.6 million revenue at 43% to marketing (advertising and promotion), 43% to sales (business recruitment and incentives), 8% to administration and 6% to tourism research, according to the Nov. 14 presentation.

The council’s support is only a step toward establishing the TPID.

State law requires petition signatures by more than 60% of the appraised value of the TPID’s proposed properties and that meet one of the two criteria: more than 60% of the surface area of hotels within the district or more than 60% of the number of hotels in the district, according to the Nov. 14 presentation.

So far, a committee of hoteliers has been created to draft the service plan and petition letter. After the council work session, the next step is to send a letter to hoteliers, obtain signatures for the petition and submit it to the city for validation.

Public notice for residents will arrive in January, and two public hearings will occur in February to discuss the proposed TPID.

If approved by the council, TPID collection is estimated to begin in March.

According to the Nov. 14 presentation, local hoteliers first approached the council about creating a TPID in 2018. Seven cities in Texas currently have such districts, including Austin, Dallas and Fort Worth.

Joslove offered a breakdown of how TPIDs work in other cities:

• In Dallas, Fort Worth and San Antonio, the TPID applies to hotels with 100 or more rooms.
• In Arlington, the TPID applies to hotels with 75 or more rooms.
• In Corpus Christi, it’s for hotels with 40 or more rooms.
• In Frisco, Joslove said he believes the TPID applies to hotels with 30 or more rooms.

Denton currently has 17 out of 27 hotels that have 75 rooms or more, according to last week’s presentation.

Those hotels range from Embassy Suites (318 rooms) and Homewood Suites by Hilton (107 rooms) to Motel 6 (81 rooms) and Fairfield Inn & Suites (75 rooms).

Joslove said they settled on hotels with 75 rooms or more because they were the ones “to benefit directly from the activities of the TPID” and more likely to support the creation of the TPID.

Hoteliers within the district will constitute the Denton TPID board, and Discover Denton would serve as the administrator responsible for implementing decisions and recommendations of the board.

As for the TPID tax, it would be collected under the same schedule for local hotel tax collections, which requires quarterly reporting and remittance from hoteliers to the city.

Any new hotel of 75 rooms or more would be automatically added to the TPID, according to the presentation.