Council takes look at lodging fees with hopes of attracting visitors

By Travis Gulbrandson

A Business Improvement District (BID) has been established for the city, which might result in a lodging fee of up to $2 per room, per night for those who stay in local hotels.

The action was taken during the Vermillion City Council’s regular meeting Monday night.

City manager John Prescott explained that a BID can be funded by special assessments and/or an occupation tax.

Special assessments usually are used for brick and mortar projects, while an occupation tax can be imposed against users of space within a district or upon rooms rented by a lodging establishment to transient guests.

The issue was raised by the Visit Vermillion tourism committee of the Vermillion Chamber of Commerce & Development Company (VCDC).

VCDC executive director Steve Howe said the committee realized it did not have the funding to start activities that could generate new visitor dollars.

“We just don’t have a lot of money with which to grow some of these visitor stays in the community,” he said.

That is when the committee decided on a BID, where a lodging fee of up to $2 can be imposed – which Howe pointed out that the hotels would have the responsibility of collecting.

“I think the (committee’s) initial interest was in terms of how can this fee be used to generate more room business to the community, more room stays. How can we better promote our community?” said city manager John Prescott.

“Typically, people staying in hotels are inclined to eat in our local establishments, shop in local establishments, participate in events in local establishments. While it’s relatively common in the state, each community sets their own plans,” Prescott said.

Aberdeen, Brookings, Custer, Hot Springs, Mitchell, Rapid City, Sioux Falls, Spearfish, Watertown and Yankton are among the communities in the state that currently have a BID with the $2 fee.

Howe currently is in the process of talking to local hotel and motel owners about the issue.

“In looking at the hotels, the Best Western and Holiday Inn Express have both indicated that they haven’t offered an approval and support of this because it is too early in the process, and they want to know more about where those funds would be spent,” Howe said.

Comfort Inn owner Joe Eckert verified this viewpoint at Monday’s meeting.

“I’m not opposed to it,” Eckert said. “In fact, I think there’s potential for a great opportunity here if it’s done right, but the area of concern here is … how those monies are spent.”

By contrast, other entities such as Super 8 and West End are opposed to fee, Howe said.

“They feel that as lower-cost hotels and motels, they feel that would impact their rate in what they take from their customers at a greater percentage than it would the larger hotels,” he said. “Both feel that this wouldn’t be necessary in order to increase stays.”

The city council members approved the resolution to define the boundaries of the BID, which Prescott said is the first step in a process.

“The boundaries of Business Improvement District #1 are established as non-contiguous properties to include all hotels and motels situated within the corporate limits of the City of Vermillion,” he said.

The council members also approved a resolution authorizing Mayor Jack Powell to appoint members to the BID district with the approval of the city council.

Prescott said dollar amounts of any fee will be recommended by the board members to the city council.

Howe added that “about $55,000” could potentially be raised on an annual basis with a $2 fee.

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