|by Kirby D. Payne, CHA, (Kirby is president
of The American Hospitality Management Company which provides consulting
and management assistance to hotels in the U.S.)
Recently our company felt forced to get involved politically with two issues at the local level as opposed to the state and national level where we are more comfortable. At the state and national level, getting involved Can insure your opinions are known by legislators, policymakers and regulators. Depending on the issue making your opinion known can have significant impact on the outcome of very major issues. At the local level community action can have immediate and direct impact.
Issues Arise Over Tourism
The first of these local issues related to forming a Visitors & Tourism Bureau in Hinckley, Minnesota where our company operates the Best Western Gold Pine for owner. The funding for such a venture typically comes from the proceeds of collecting an occupancy tax in the community. In Minnesota, to accomplish that a city ordinance is necessary. In this column I will describe the process and the results.
The second issue relates to the planned development of a new hotel across the street from the Econo Lodge we operate near the University of Minnesota in Minneapolis for two investors. In that case we felt the new hotel would both hurt the our hotel to the point of possibly putting us out of business but was also not in the best interests of the community encompassing the area immediately around our hotel. In a future column I'll detail the events and what happened. The effort is still underway as this column is being written.
The need for a Visitors & Tourism Bureau (VTB) in Hinckley was foreseen several years ago by one of our competitors. In 1992-1993 Emmett Erpelding, whose company operates the Holiday Inn Express in Hinckley, began to anticipate declining business among the hotels in Hinckley which were not affiliated with Grand Casino in one way or another. Supply would increase about 150 rooms in 1994 with the addition of the Grand Hinckley Inn and was rumored to be increasing another 300 rooms in 1995 or 1996 with the addition of another hotel immediately adjacent to Grand Casino on the reservation.
When Emmett first discussed his VTB idea with me in late 1993 1 had mixed feelings. When I discussed it with our client, who ultimately would have to live with the VTB's effects on market performance and the potential sales price of his hotel in the future, he was opposed to the idea for two principal reasons. These were the traditional don't get involved in raising taxes of any kind, ever and what if the Hinckley hotels didn't have control and other Pine County hotels and businesses in general did.
In late 1994 we began to realize that the negative impact of the opening of the Grand Hinckley Inn was going to be much greater than we anticipated. At this point Emmett and I discussed the matter again and I did a little research with the help of Tom Newcome, Esq., General Counsel and Lobbyist for the Minnesota Hotel & Lodging Association where Emmett and I serve on the Board of Directors. While I got some good technical advice about the state law regarding occupancy tax, one fact was very important to me. With one exception, counties cannot enact occupancy taxes. Only incorporated towns and cities can do it, Counties only come into play in the case of unincorporated townships. This was important to me because one of our client's principal objections was his fear of a VTB being controlled by entities outside of Hinckley who might have different goals from Hinckley's hotels. With that hurdle out of the way and business continuing to decline I got the go ahead from our client to proceed. With Emmett on an extended trip early in the year the task of getting the process started fell on me.
Letter Writing Campaign
I started by preparing a letter to each Hinckley City Councilperson asking them to enact an occupancy tax for the purpose of funding a VTB. The letter was sent to their homes and included historic information regarding the market's occupancy and reference to the applicable state law. This letter was followed up with telephone calls by several people and discussions in various interested forums including the monthly hotel marketing meetings which take place in Hinckley to coordinate activities with Grand Casino. The feedback we were getting was that the hotel operators in Hinckley had divergent opinions or were ambivalent. The Council Members had mixed feelings also but we felt the Mayor was in favor of the idea.
A second letter was sent to Council Members and about the same time the subject was placed on the Council's agenda as a discussion item. A few hoteliers appeared and commented on the idea. At the Council meeting Council Members took note of which hotels were absent and what the room count in favor and opposed seemed to be. The Council decided to have an informal meeting within a few weeks with the hotel operators in order to try to get them all in one place and hear their views.
First Council Meeting
That meeting was very similar to the Council meeting but the lines between those in favor, opposed or not taking a position were more clearly drawn. The Pine County Tourism Association which wanted a county wide program was also represented. Some of those appearing who were opposed to the idea were not as familiar with the law as they might have been and may actually have hurt their credibility in the process. For example, one person believed that a VTB could not hire paid staff and could only use its money for direct promotional purposes and as a result could only function with volunteers from Pine County Tourism Association. Clearly, most Convention and Visitors Bureaus (CVBS) and VTBs in Minnesota have staff and office space. Look at Bloomington, Burnsville, Minneapolis and Saint Paul for large examples.
Subsequent to that meeting the Council decided to hold a formal public hearing and invite any who had an interest in appearing. Between the two meetings conversation continued among hoteliers and interested community and county parties. Jim Ausmus, Hinckley's City Clerk/Administrator was asked to research the disputed points of law and operational issues with the Minnesota League of Cities and other sources. We sent follow up letters to Council Members and worked with community members to garner support for our position. We also evaluated the position of each hotelier very carefully.
Change of Feelings
Those that we felt would modify their position based on reason were visited with informally in different forums. Fortunately, their positions started to change. In one case, I wrote the President of the owning company detailing the issues. In the letter I asked that he consider directing his General Manager to change his position. That General Manager, for whatever reason, became neutral on the issue. By the time the public hearing occurred in May most hotels were in favor of the ordinance, a few were neutral and only one was opposed.
The owner of the hotel which was opposed to the ordinance felt strongly that it was inappropriate to add more taxes and that other than 1-35 traffic and Grand Casino there was not much more that could be done to attract additional business to Hinckley. He felt particularly strongly that the average price increase of $1 to $2 in taxes would hurt business in Hinckley and cause people to go elsewhere. That, of course, begged the question that with over eighty communities in Minnesota charging an occupancy tax where would someone go. His more valid argument as a native of Hinckley, which he stated very tactfully, was that he didn't want more business going through the community and didn't feel outsiders should be trying to run the town. My job, of course, is to look out for my client's financial interests even if I agreed with that particular thought.
At the public hearing the Pine County Tourism Association took the position that the tax would be divisive between the county and Hinckley. The proposed solution was for Hinckley to collect the tax and turn it over to the Pine County Tourism Association to be managed. That idea didn't go far but the proponents of the occupancy tax may have had a moment of concern when I jumped up and accused the representative of the Pine County Association of trying to hijack our tax revenues!
Ordinance on Agenda
A few days after the public hearing the Mayor placed the ordinance on the Council's agenda. That was a good sign because for all practical purposes he could have killed the idea by not doing that just as he could have by not having the hearings. During the period between the public hearing and the Council vote, anyone with an interest in the subject was discussing it and lobbying the Council Members and each other in one fashion or another. I was fairly confident that we would prevail and get the ordinance.
Not only did that happen a few weeks later, but both Emmett and I were honored to be appointed by the Mayor along with Jim Ausmus to form the entity and develop the Bylaws. We met about ten days later and discussed the issues relating to the Bylaws. These were drafted in about two weeks and circulated to the hotel operators for comment. After a few adjustments to the Bylaws they were signed the week of July 10th and circulated so that Directors could be appointed appropriately in time for the first meeting of the Board of Directors on July 18th-
The Bylaws are somewhat unique in that the VTB will not have members but rather any one can participate at no cost other than for any services they may buy such as advertising. The VTB will not be competing with Hinckley's Chamber of Commerce for membership dollars. Another unique factor is that in addition to each hotel appointing a Director, three constituencies were identified as having a right to participate and have representation on the Board of
The three constituencies are: the Chamber of Commerce with two Directors representing the other business interests in Hinckley and the surrounding area; the City Council will appoint two Directors to represent the City of Hinckley; and, to insure that Pine County's tourist attractions are considered, the Pine County Tourism Association may appoint one Director.
This was my first time being involved in seeing an idea taken through the entire process at the community level, I learned a lot from it and enjoyed it. It was great to be a part of executing Emmett's idea and it will be rewarding to be active in the Hinckley Visitors and Tourism Bureau and seeing all of the city's hotels reap its benefits.
For additional information, contact:
Kirby D. Payne at the firm
American Hospitality Management Company
1500 South Highway 100, #375, Minneapolis, MN 55416
Phone: 763-591-7640 Fax: 763-591-1593