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Counties Consider Hotel Tax Increase to Benefit NKY Convention Center

The Fiscal Courts of Boone, Campbell, and Kenton Counties are all considering the approval of an increase in the region's hotel tax.

A first reading of the proposed ordinance - which would boost the tax by 1 percent - was held at the Kenton County Fiscal Court meeting in Covington on Tuesday night.

The measure is being pushed by meetNKY - the Northern Kentucky Convention & Visitors Bureau - to create a fund that would be used primarily to expand the Northern Kentucky Convention Center. The downtown Covington convention center has long been a topic of discussion for expansion but funds from Frankfort and local streams of revenue have not come through.

The 1 percent increase in the region's transient room tax would raise an estimated $1.2 million to $1.5 million a year through visitor spending, for a Product Development Fund that would generate seed money for the expansion of the Center in downtown Covington, according to an analysis by meetNKY.

The 204,000 sq. ft. center's expansion would create new jobs and spending and maintain its competitive edge in the tourism industry, which brings in nearly $400 million to the region.

"Tourism is a major economic driver in our region," said meetNKY president and CEO Eric Summe. "This is an opportunity to further boost visitation in our area and generate jobs and economic development. Just like a business needs to reinvest to grow, Northern Kentucky must reinvest into its tourism infrastructure to not only boost visitation, but to protect its revenue stream."

In August, Gretchen Landrum, executive director of the Northern Kentucky Convention Center, wrote in an op-ed that the center played a large role in luring CTI to RiverCenter, a move that will result in more than 500 jobs in the towers. "To attract CTI to Covington, the Convention Center board of directors agreed to convert 5,300 square feet of space in Ballroom A on the upper level of the center into a 466-seat, state-of-the-art training center, which will be operated by the convention center," Landrum wrote in the op-ed.

"The state-funded training center is expected to be finished in early 2018. When completed, the auditorium will be similar to the Digitorium at NKU’s College of Informatics, with a two-story digital wall that can display a videos, images, and graphics; seminar seating with retractable desk tops; and state-of-the-art technology."

Landrum continued, "Despite our past successes, the expansion of the convention center is still a crucial need for our community. Even with the creative restructuring of our existing space, we are still running at full capacity. An expanded convention center will generate much needed tax dollars for our community and the Commonwealth of Kentucky and provide growth and vibrancy for Northern Kentucky and the state."

Summe said that tourism and convention business in Northern Kentucky is booming, noting that the region accounts for 39 percent of the $4.4 billion tourism industry in the Cincinnati area, and 20 percent of all travel spending in Kentucky.

The average daily rate for hotel rooms in Northern Kentucky increased 4.85 percent to $91.47 over the past year. Each leisure visitor spends, on average, an additional $101 per day in the region and each meeting/business visitor spends an additional $189 per day on average, according to data provided by meetNKY. For the fifth straight year, local hotel occupancy rates grew in 2015 to nearly 70 percent.

The Northern Kentucky Convention Center opened in 1998 and its 2,500 events have generated $1 billion in economic activity in the region, meetNKY said, and directly supports 350 hospitality-related jobs.

"But a lack of space and increased competition is taking its toll on this economic driver," Summe said. "And while we wait, our competition invests."

Louisville and Lexington are increasing the size and capabilities of their facilities and other competitors are planning or are undergoing similar expansion projects, Summe warned.

Under state statue, the Boone, Kenton and Campbell county fiscal courts can raise the transient room tax by 1 percent, resulting in an overall tax rate of 12.4 percent, without seeking approval of the Kentucky General Assembly. Any amount higher would have to go through the legislative process in Frankfort.

Even with the increase, Northern Kentucky's overall tax would still be lower than the tax in Dayton, Oh. (13.3 percent), Lexington (16.1 percent), Cleveland (16.5 percent), Indianapolis (17 percent), Louisville (17.1 percent), Cincinnati (17.5 percent), and Columbus (17.5 percent).

Summe said that the tax is not one that will be felt by locals. "It's a tax paid by the out-of-town visitors who use and benefit from our hotels and convention center." he said.

While the main purpose of the Product Development Fund would be the Center expansion, it could also be used for other regional efforts relating to the promotion of tourist and convention business.  

Using a hotel bed tax increase to fund a convention center expansion is emerging as the new model in Kentucky, Summe said. To pay for its new center, the City of Lexington received legislative approval to raise its hotel bed tax by 2.5 percent. The city will then use $10 million raised by the increase to pay back $60 million in upfront bond funding fronted by the State of Kentucky.

"A simple allocation from the federal and state government is no longer a reality," Summe said. "The new model is how it was done in Lexington, and we are attempting to take a similar path."

-Michael Monks, editor & publisher
Photo: NKY Convention Center and the Marriott Hotel at RiverCenter (RCN file)