After hearing a proposal to add a hotel tax increase measure to the November 2018 ballot, Rohnert Park City Council members unanimously nixed the idea for the measure since the two percent increase would have made Rohnert Parks’ hotel tax rate one of the highest in the county at 16 percent.
Council members have entertained the idea in the past of increasing the city’s Transit Occupancy Tax (hotel tax), however, city staff says despite the benefit of getting an extra $700,000 in revenue from the increase, the hike would just be too much for the local hotel/tourism industry.
Currently the city typically receives $3.8 million per year from its 14 percent total hotel tax rate, 10 percent of which goes towards the Rohnert Park General Fund and helps fund police, fire and medical services. And while a 16 percent rate could provide more revenue that would help the city mitigate the challenges presented by tourism, such as increased traffic and public safety calls, it may decrease business for hotels.
“In discussing this topic with local hotel managers, some noted that increasing our TOT level higher could make them less competitive, particularly compared to Petaluma (12 percent rate) and Santa Rosa (14 percent rate),” Assistant City Manager Don Schwartz wrote. “There’s about a 15 percent (TOT) threshold tolerance.”
Steve Young, of the DoubleTree by Hilton in Rohnert Park echoed Schwartz’s thoughts, saying the increase could have been problematic, outpricing RP hotels from its competitors.
“We’re at the high end of tax rates and if we go above 15 percent that may be problematic since it may turn away business,” Young said.
An increase could also lower tourism use booking rooms in the area on third party travel websites such as Expedia.
The city already has one of the highest top three TOT rates in the county, according to the agenda item report prepared by Schwartz. Healdsburg takes the title for the highest TOT tax with a rate of 16 percent and is closely followed by Santa Rosa (14 percent) and Rohnert Park with its 14 percent, however, if increased RP would tie with Healdsburg for having the priciest rate in the county, something that could hurt local hotels as Young and Schwartz have explained.
And even though tourism in Sonoma County is booming at record levels with hotel occupancy seeing an increase for the seventh consecutive year at an occupancy rate of 78 percent, the two percent TOT increase would also hike up the average hotel cost per night by about $3. The average cost per night for RP hotels is around $120 according to hipmunk.com, so with the raised TOT tax, the cost would be around $124.
Schwartz points out though that these figures are rough estimates as the hotel market fluctuates continuously with the onslaught of many new hotels coming soon to RP and Cotati.
“While more hotel rooms in Rohnert Park will contribute to higher TOT revenues, to some degree those who stay in the new hotels may reflect reduced business for existing hotels,” the agenda item report states.
Cambria Hotel is slated to open in RP in 2019 and there is also the possibility of welcoming two more smaller hotels — Fairfield Inn and Home2 Suites, to the city.
For these reasons city staff recommended that the council not pursue a hike in hotel taxes and the council members present, Mayor Pam Stafford, Vice Mayor Joseph Callinan and Council Member Jake Mackenzie all agreed with the recommendation. “Unless our city manager was feeling some strong pressure for a relatively slight increase in revenue, then I am quite comfortable going with this recommendation,” Mackenzie said.