DEPARTMENT OF TOURISM PROVIDES DETAILS ON PROPOSED ROOM TAX
Posted: Tue Jan 25, 2011 12:32 pm
~ 2% increase necessary for Territory’s tourism marketing to remain competitive ~
U.S. VIRGIN ISLANDS, January 25, 2011 – Advocating for a measure sorely needed for the Territory’s tourism marketing to remain competitive, the Department of Tourism outlines the need of the proposed room tax increase announced by Governor deJongh during Monday’s State of the Territory address.
The proposal calls for a 2 percent increase in the room tax rate to 10 percent, representing the first increase in more than 17 years. The current rate of 8 percent has remained unchanged since 1993.
Under the proposal, all funds will be applied to the Territory’s Tourism Advertising Revolving Fund (TARF) which is used by the Department of Tourism to implement marketing and advertising campaigns that attract visitors to the destination.
In addition, the proposal includes the implementation of a fee for time share guests of $10 per day to be used for marketing the destination. This measure would represent the first time that all time share visitors will be required to contribute to the TARF.
“It is essential that we take the necessary steps to level the playing field for attracting visitors to our islands,” said Commissioner Nicholson-Doty. “By leaving our room tax rate unchanged over the last 17 years, we have placed ourselves at a competitive disadvantage for marketing the destination while other destinations have adjusted to meet market conditions and have outspent the U.S. Virgin Islands. In addition, the sheer cost of purchasing advertising has significantly increased over time, specifically 16 percent for cable TV, 7 percent for network television and 2 percent for magazines. This room tax increase represents a necessary measure for our tourism industry and for the economy of the U.S. Virgin Islands.”
The proposed measure is the result of a careful analysis of the tourism industry landscape and is designed to place the destination’s marketing spend on par with others in the region.
The daily fee for time share guests, in particular, marks an important step. Currently there is no mechanism to ensure contribution from this growing tourism segment to the Territory’s marketing efforts. Current information indicates that time shares represent more than 15 percent of all accommodations in the Territory.
The proposed 2 percent increase in room tax would place the destination in line with several other destinations in the region and popular tourism destinations globally. Nightly room tax rates for selected destinations include:
· Puerto Rico: 24%
· Dominican Republic: 15%
· Bahamas: 10%
· Aruba: 9.5%
· Jamaica: 8.5%
Room tax rates for popular US destinations:
· New York: 14.75%
· Miami: 13%
· Orlando: 12.5%
· Las Vegas: 12%
· Chicago: 15.4%
In 2010, the TARF collected just over $17 million based on room revenue. Of this revenue, $6 million is spent on advertising while the balance goes to other marketing & promotional efforts. The proposed increase would add an estimated $6 million dollars to the fund. The additional revenue is sorely needed in the area of advertising, as many destinations and the major brands associated with them significantly outspend the Territory on an annual basis. Examples of these annual advertising budgets include:
· Atlantis Resort Bahamas: $15,343,300
· Sandals Resorts, Caribbean: $21,060,800
Based on research conducted about the current advertising landscape, 63 percent of the advertising share of voice is effectively being purchased by competitive destinations. Advertising featuring Mexico represents 27 percent of this figure, the Bahamas 23 percent, and Puerto Rico with 13 percent. These figures underscore the critical need for the Territory to increase its ability to advertise the destination to potential visitors.
In addition to advertising, the funds would also be used to further address matters critical to tourism, including airlift and product development, as well as a continued focus on St. Croix-specific marketing initiatives that further develop St. Croix as a brand for potential visitors.
U.S. VIRGIN ISLANDS, January 25, 2011 – Advocating for a measure sorely needed for the Territory’s tourism marketing to remain competitive, the Department of Tourism outlines the need of the proposed room tax increase announced by Governor deJongh during Monday’s State of the Territory address.
The proposal calls for a 2 percent increase in the room tax rate to 10 percent, representing the first increase in more than 17 years. The current rate of 8 percent has remained unchanged since 1993.
Under the proposal, all funds will be applied to the Territory’s Tourism Advertising Revolving Fund (TARF) which is used by the Department of Tourism to implement marketing and advertising campaigns that attract visitors to the destination.
In addition, the proposal includes the implementation of a fee for time share guests of $10 per day to be used for marketing the destination. This measure would represent the first time that all time share visitors will be required to contribute to the TARF.
“It is essential that we take the necessary steps to level the playing field for attracting visitors to our islands,” said Commissioner Nicholson-Doty. “By leaving our room tax rate unchanged over the last 17 years, we have placed ourselves at a competitive disadvantage for marketing the destination while other destinations have adjusted to meet market conditions and have outspent the U.S. Virgin Islands. In addition, the sheer cost of purchasing advertising has significantly increased over time, specifically 16 percent for cable TV, 7 percent for network television and 2 percent for magazines. This room tax increase represents a necessary measure for our tourism industry and for the economy of the U.S. Virgin Islands.”
The proposed measure is the result of a careful analysis of the tourism industry landscape and is designed to place the destination’s marketing spend on par with others in the region.
The daily fee for time share guests, in particular, marks an important step. Currently there is no mechanism to ensure contribution from this growing tourism segment to the Territory’s marketing efforts. Current information indicates that time shares represent more than 15 percent of all accommodations in the Territory.
The proposed 2 percent increase in room tax would place the destination in line with several other destinations in the region and popular tourism destinations globally. Nightly room tax rates for selected destinations include:
· Puerto Rico: 24%
· Dominican Republic: 15%
· Bahamas: 10%
· Aruba: 9.5%
· Jamaica: 8.5%
Room tax rates for popular US destinations:
· New York: 14.75%
· Miami: 13%
· Orlando: 12.5%
· Las Vegas: 12%
· Chicago: 15.4%
In 2010, the TARF collected just over $17 million based on room revenue. Of this revenue, $6 million is spent on advertising while the balance goes to other marketing & promotional efforts. The proposed increase would add an estimated $6 million dollars to the fund. The additional revenue is sorely needed in the area of advertising, as many destinations and the major brands associated with them significantly outspend the Territory on an annual basis. Examples of these annual advertising budgets include:
· Atlantis Resort Bahamas: $15,343,300
· Sandals Resorts, Caribbean: $21,060,800
Based on research conducted about the current advertising landscape, 63 percent of the advertising share of voice is effectively being purchased by competitive destinations. Advertising featuring Mexico represents 27 percent of this figure, the Bahamas 23 percent, and Puerto Rico with 13 percent. These figures underscore the critical need for the Territory to increase its ability to advertise the destination to potential visitors.
In addition to advertising, the funds would also be used to further address matters critical to tourism, including airlift and product development, as well as a continued focus on St. Croix-specific marketing initiatives that further develop St. Croix as a brand for potential visitors.
Parafins