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Feud and Lodging

Harleys, taxes and the performing arts: County hoteliers fight proposed tax hike.



When 15,000 Harleys rumble through Richmond next month, they'll attract much more than uneasy stares from passersby.

Area politicians, downtown boosters and government officials plan to follow the hogs' unmufflered movements through the region. Their goal: Muster up enough economic evidence to win support for the planned $158 million Performing Arts Center.

How? By following the unmistakable "po-ta-to" purr of the Harleys to track the hotels where the conventioneers are staying.

"We're going to look in the parking lots," says Ed Barber, a member of Chesterfield's Board of Supervisors. "Chesterfield is not going to consider this issue until the Harley Davidson [rally] comes to town."

It's the latest twist in the effort to make downtown a performing arts magnet. To secure a critical piece of public financing for the project, someone has to convince a growing number of angry hotel and motel operators in Chesterfield and Henrico counties that it makes sense for them to help foot the bill. Boosters hope the 2004 National H.O.G. Rally Aug. 27-28 proves that big-city gatherings send business their way.

Some non-city hoteliers complain of being hogtied, again. Because of tax hikes in the mid-1990s, they say they're already paying off bonds on the convention center. (Currently, 6 percent of the regional 8 percent room tax goes toward the convention center.) Now, the Virginia Performing Arts Foundation is banking on an additional 1 percentage-point tax increase to generate another $14 million to $15 million for the arts facility, which officials say is necessary to support the convention center nearby. According to state law, all four jurisdictions in metro Richmond — the city, Henrico, Chesterfield and Hanover counties — must approve the increase for it to fly.

"To add on another tax is just not fair, and it's just not the right thing to do," says Jackie Dankos, who owns two hotels in Henrico, a 63-bed Knights Inn and a 72-bed Sleep Inn. "We were promised that we wouldn't have any more tax increases by the localities. How can anyone justify taxing us more?"

Downtown boosters argue that the hotel industry is the most logical industry to tax because big conventions attract out-of-towners who stay in hotels and motels throughout the region. They cite an economic theory known as "compression," which stipulates that as conventioneers fill up the hotels immediately surrounding the convention hall, they spill over to hotels farther out and in turn send normal day-to-day hotel business to other hotels, as well. In Richmond, the theory goes, a steady diet of large conventions should increase business for all hotels within a 20- or 30-mile radius.

But there isn't much evidence to support the theory. Jack Berry, president and chief executive of the Richmond Metropolitan Convention & Visitors Bureau, says there is no way to know for sure how much business conventioneers are generating for hotels outside the downtown area. Reservation habits are changing — partly because more conventioneers are booking online instead of through traditional planners, Berry says, which makes it even more difficult to follow convention-related room bookings.

Instead, he says, local officials base their figures on registered convention attendance.

So how many hotel rooms were filled when 14,000 churchgoers attended the Presbyterian Church USA convention in late June? Should estimates be based on an average two people to a room — for 7,000 hotel rooms per night — or three people, which would produce 4,666 rooms per night? Berry says it isn't an exact science.

Heywood T. Sanders, a professor of public administration at the University of Texas at San Antonio who specializes in convention economics, says it's impossible to make a case for compression without concrete data.

"You can't simply assume it's going to happen. It requires real analysis," Sanders says. "If they can't tell you where those folks are booking hotel rooms, then they have no basis for assuming there is any compression. They are guessing."

Many of the conventions produce conventioneers who pay for hotels and meals out of pocket, and this muddies the water even further. Some will stay four and five to a room to save money, Sanders says, and many aren't splurging on entertainment.

And that's what galls many hotel and motel operators. They say they haven't seen much business at all from the convention center and have a difficult time understanding why they are being asked to help pay for the Performing Arts Center.

"The only time I see compression is during race weekend," says Nick Patel, president of Horizon Hospitality in Chester, which operates six hotels, three of which would be affected by a lodging-tax increase. "I won't see anything until attendance gets to be 70,000-plus. There has to be a very large number of attendees."

Many hotel operators in the counties appear to be against the tax. A group of hotel and motel operators, dubbing themselves Concerned Richmond Region Hoteliers, got together earlier this year and surveyed the local industry. The group says in January it polled 149 hotels representing 15,093 rooms in the region. Of those, the group found that 72 percent of operators were against the tax increase — representing 107 hotels with a total of 8,413 rooms. It reported that 29 operators representing 5,091 rooms supported the tax. (Two were neutral and 11 didn't respond).

While the group didn't hire an independent consultant to conduct the survey, it appears to be no less scientific than the poll taken at a meeting last year by the Richmond Hotel and Motel Association, which represents about 8,200 rooms in the region — about half of the number polled by the Chester group. At that meeting in October, a majority of the hotel operators present voted for the tax increase. But hospitality officials weighted votes based on the number of hotel rooms, not individual hotels.

Since then, proponents of the tax have been pushing the idea that the hotel industry as a whole supports another increase to help pay for the arts center. At the least, it doesn't appear to have the support of a majority of hotels in the region.

Brad Armstrong, president of the Virginia Performing Arts Foundation, says his group has plenty of evidence that compression is real. Given the chance, he expects to prove skeptical hotel operators that in the future, with an improved Broad Street and a shiny new arts center, the tax increase will prove worthwhile.

"We just feel that this region needs to work together," he says.

P.C. Amin, the area's biggest hotel owner with 15 hotels in the metro area, says this year his hotels contributed $2.2 million to the convention center. And, to date, he says his hotels haven't received any business from the convention center.

"We have not found any business that has come to us from the conventions," he says. "That was a dream."

In the absence of solid evidence, boosters are hoping that 15,000 Harley Davidson enthusiasts will shed some light on the matter. Chesterfield Supervisor Renny Humphrey, considered to be the swing vote on a county board split 2-2 over the lodging tax, says she'll be following the hogs in late August.

"It would give me some indicators to the validity of the argument," she says of the Harley festival. "My husband drives a Harley, so I know what a Harley looks like." S

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