Proposed hotel room tax increase would bolster tourism

Ingham County voters will decide Nov. 5 whether to raise the hotel tax 3%.

The proposal to increase the lodging tax from 5% to 8% would add $2.1 million a year starting next year. In 2023, the county collected $3.6 million from the tax. Most of the tax goes to Choose Lansing, the area tourism bureau.

The proceeds can be spent on the “acquisition, construction and maintenance of convention and entertainment facilities designed to encourage tourism and convention business,” the ballot language says.

Ingham County Treasurer Alan Fox said the proposed increase is a “way to up the game a bit because it brings outside money into the community, which is not something we have a lot of options to do through local taxation.”

“We’re looking to try to improve the use of downtown Lansing as a place where people get together to have meetings and bring income into the city,” Fox added.

If it’s approved, Ingham County would follow the lead of 54% of Kent County voters who adopted the same increase in the Aug. 6 primary. In Grand Rapids, some of that money will go for a new riverfront amphitheater, a minor league soccer stadium and an aquarium.

Similar projects could be in Ingham County’s future. However, Choose Lansing CEO Julie Pingston said the funds can also be used for “tourism, marketing, promotion, the renovation and creation of convention centers, event venues and aquariums.”

Under the existing distribution allotment, 80% of the hotel tax funds would go to Choose Lansing, Greater Lansing’s primary tourism advocacy organization. The rest would be split among the Ingham County Fair, the Arts Council of Greater Lansing and the Ingham County administration itself. County commissioners could revise that split, however. 

“It’s all very pointed towards the tourism industry and bringing visitors to the community to create a greater economic impact here,” Pingston said. 

Based on the numbers through July, Pingston said the average nightly hotel stay in Lansing is about $111. Including an existing 6% county-imposed hotel sales tax, the 3% lodging excise tax bump would bring the county’s total rate per nightly stay up to 14%, or about $126.50.

Ingham County has about 3,900 hotel rooms, or just under 70% of the 5,600 in the tri-county region, Pingston said. She noted that newer hotels, including the AC Hotel in the Red Cedar District on the east side and the downtown DoubleTree by Hilton, 111 N. Grand Ave., have added an 8% increase in hotel rooms countywide compared to the first half of 2023. Another recent development, TownePlace Suites Lansing North, 3010 Wood St., is approaching completion.

Pingston added that local occupancy rates ebb and flow with the seasons, depending mostly on Michigan State University athletic and academic events.

Fox said the proposed increase wouldn’t apply to short-term rental businesses, like AirBnBs, even though owners also benefit from MSU events.

“The situation is interesting in that there’s state legislation proposed this session that would have set up a statewide system for assessing a tax on AirBnBs,” but he said it has not gotten out of committee.”

While there have been some discussions in Ingham County on tapping into the growing popularity of the short-term rental market from a taxation perspective, Fox said county leaders “put that on hold” as they awaited the legislature’s decision.

Now that it’s become apparent that the short-term rental tax bill is unlikely to pass this year, Fox said the county will likely start reevaluating its options “in the next couple of months.”

“One of the elements of the proposal to collect taxes on AirBnBs is to broaden the permitted uses of the funds,” Fox said. “The most interesting part about that is the idea to allow counties to use the money for housing and for childcare. That’s something I’m keeping an eye on, because both of those are things that need more funds.”

If county residents pass the 8% hotel tax rate, it would remain in effect indefinitely.