DL lodging tax brings in visitors
Most travelers may not notice having to pay a couple extra dollars when they stay at hotels or resorts — another line item at the end of the bill.
But those few dollars really add up for the local tourism bureau that is working to bring those tourists to town.
Like many cities, Detroit Lakes has a lodging tax. The 3 percent raised from all lodging facilities in town brings in about $200,000 a year for the tourism bureau to use on advertising Detroit Lakes to out-of-towners.
“It’s pretty cut and dry,” Tourism Director Cleone Stewart said of the city’s ordinance establishing a lodging tax. “We need to use it for marketing outside the area to get folks to stay overnight in DL.”
The tourism bureau is “responsible for marketing and promoting tourism in the city of Detroit Lakes,” the ordinance states.
The lodging tax, which started in 1990 at 1 percent, increased to 2 percent in 1992, and has been at 3 percent since 1994.
“Although with the county tax, we’ll need to add another half percent when that starts,” Stewart said.
That tax is the SMART (Safe, Multi-Modal, Active, Responsible Transportation) tax the county approved about two months ago, which tacks on a half percent sales tax to all things sold in Becker County that are already taxed. (For instance, food and clothing wouldn’t be taxed since they aren’t now.)
The county sales tax will raise approximately $2 million annually and will be used for road maintenance throughout the county. One of the reasons the county passed the tax was because it is estimated that 40 percent of sales tax dollars will come from visitors to Becker County, not just from residents.
In 1990, when the lodging tax was still at 1 percent, it generated $23,600.
In 2010, the 3 percent tax generated $164,000. In 2011, it was $176,000. In 2012, it was $194,000, and in 2013, it was $213,000.
“It’s just the chamber, so it’s hard to market your community,” Stewart said of the need for the tourism bureau and lodging tax. “If there’s a lodging tax, that’s what it goes for.”
Stewart said while the amount of money has increased over the years, it’s likely because room rates have increased, not that there are that many more tourists coming to town.
When lodging operators collect the tax from their customers, they hold the funds to be paid to the city monthly. The operators must also submit forms showing the total amount of room rent collected that month, the amount of tax that was required to be collected and the period of time the rents cover. If lodging facility operators fail to pay the city the tax, they are open to fines.
In the city ordinance (which also comes from the Minnesota Lodging Tax Law), it states that 95 percent of the lodging tax funds will be used to “fund a tourism bureau for the purpose of marketing and promoting the city as a tourism center.”
The city may use up to 5 percent for administrative costs due to collection of the tax from the lodging entities.
The tourism bureau is made up of five members, which are approved by the city council. Three of the members must be from the lodging industry in Detroit Lakes, one must be a representative from the Chamber of Commerce (but not a paid staff member), and one must be from the general community that represents the city council. The board is a volunteer one.
Those serving on the board include Scott Mehlhaff and Dan Berg, representing the lodging industry, Amy Stearns representing the city, and Dave Langworthy representing the chamber. Don Schattschneider was serving for the lodging industry also with the American Legion Campground, but he passed away in January and his spot is still vacant.
Alderman Ron Zeman serves as the city council liaison, and tourism director Stewart sits on the board as well, but neither have a vote.
The group hired an ad agency to give advice on what the best market is for Detroit Lakes to target with its advertising. Stewart is then responsible for placing the ads.
While she places print ads too, most ads are “by and large online now,” she said. She advertises in Midwest Living, AAA, CAA (the Canadian version of AAA) and other publications based in Winnipeg. They also do advertising in the Twin Cities.
“We track it to see what our return is” on each ad, Stewart said.
And even though more people view all the visitor’s materials online, the tourism bureau and chamber still sent out 5,600 Visitor Guides last year in response to requests.
“There is a lot of exposure for Detroit Lakes,” Stewart said. “But the chamber can just do a fraction of that.”
The largest markets for Detroit Lakes include Fargo, Grand Forks, and eastern North Dakota, Winnipeg and the Interstate 29 corridor to Sioux Falls, S.D.
“They have performed the best for us,” she said.
And since Detroit Lakes is the gateway to the lakes, it’s an easy sell.