Loss of Hotel Rooms Costs Worcester Millions

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Saturday, March 03, 2012

Jaclyn Cashman, GoLocalWorcester News Editor

Over the past four years Worcester has lost more than 26% of its hotel rooms and the financial impact to Worcester has cost hundreds of thousands of dollars and over the next few years - millions. First, Worcester has lost the tourists and tourist dollars relating to the decrease room availability. Second, Worcester is losing out on important revenue derived from a 6% room tax.

A GoLocal analysis of hotel tax revenue in the region unveils that the decline in hotel rooms has cost Worcester potentially as much as $360,000. Not counting the loss of tourism spending at restaurants, theaters and other travel related expenditures.

Worcester County gains from hotel tax

While Worcester’s revenue is declining, towns like Auburn have seen a 48.7% increase in revenue from 2008 to 2011 – a windfall of $551,683 just in 2011. Similarly, Sturbridge saw a 31.4% increase and the town is now realizing $702,352 annually. And even the town of Westborough has seen a 27% increase in hotel tax revenue – totally $842,689.

The Mass College of Pharmacy purchased the Crowne Plaza in 2010, which took away more than 200 hotel rooms for tourists.

Robert Murdoch from Destination Worcester said, "Worcester used to have 941 hotel rooms. We lost 243 with the Crowne Plaza, which was about one third of our inventory."

In 2009 the Massachusetts legislature allowed cities and towns to raise their local option room occupancy tax from 4 to 6 percent. Worcester was one of the only Central Massachusetts cities that didn’t see a boost in revenue from the hotel tax compared to 2008 numbers.

In FY2011, Worcester hotel guests paid $729,800 in room taxes. It seems like a lot of money, but the city actually took in more from tourists in FY2008, before the tax was raised. The hotel tax generated $758,191 in FY2008. The Crowne Plaza Hotel in downtown Worcester closed in 2010, which would account for the fewer hotel tax dollars. 

Worcester's City Manager defends the decision

Worcester Manager, Michael O'Brien told GoLocalWorcester he doesn't regret the sale of the Crowne Plaza. O'Brien said, "“We could have sat back and watched this property sit vacant for years until the market recovered versus what we see underway now – hundreds of millions of dollars in investment to the College’s properties and more on the horizon, with no City enticements or grants, seas of faculty, staff and students in white lab coats, all living, working, and spending in our Downtown. I can sum that up in one word, priceless.” O'Brien said the city is working on getting another hotel into the area. 

The state had a banner year bringing in a record $130.4 million in FY2011 for cities and towns. The tax does not appear to have weakened demand for rental rooms in the Commonwealth.

According to the Massachusetts Department of Revenue (DOR), 177 cities and towns (50 percent of the Commonwealth) has adopted the optional room occupancy tax. 93 cities and towns have elected to tax at a rate higher than 4 percent.

The DOR reported that 124 of the Commonwealth's 352 cities and towns, or 35 percent, either have no rental rooms or fewer than three businesses generating room rental income.

That leaves about 15 percent of the state's cities and towns that have foregone the tax opportunity to generate tax revenue from the local option room occupancy tax.

Worcester County has 69 cities and towns and only 10 are taking full advantage of the 6 percent rooms tax: Worcester, Sturbridge, Southbridge, Auburn, Sutton, Milford, Westborough, Shrewsbury, West Bolyston and Southborough.

8 communities are charging 4%: Lunenburg, Fitchberg, Leominster, Westminister, Gardner, Templeton, Sterling and Northborough.

Connie Pion helped open the Hilton Hotel in Worcester seven years ago. Pion is the director of sales and marketing. When asked about the 2009 tax increase, Pion said, “Anytime you increase anything people always have some concern. The hotel industry was worried, but in the end it had no impact. We support dollars going into the community.”

Dick Kennedy, President of the Worcester Regional Chamber of Commerce said, “I don’t think the hotel tax has hurt the industry. I expect to see more activity for the DCU Center, so the hotels should do better and see some recovery.”

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