After five years of consideration and debate, on April 16, Lakeway City Council unanimously approved a hotel occupancy tax, often known as a HOT tax.
The tax that will be levied on guests of hotels, motels, and bed and breakfasts within Lakeway city limits will go into effect July 1. The new tax, which will be in addition to the 6 percent tax levied on hotels by the state, will be 3 percent the first year, 5 percent the second year and 7 percent the third and following years.
The HOT tax is expected to generate hundreds of thousands of dollars per year. Under state law, the money generated must be spent on either the construction of a convention center or on projects that enhance and promote tourism.
"We are really glad this is finally coming to the forefront," said Steve Zbranek, Lake Travis Chamber of Commerce chairman-elect.
Councilman Dennis Wallace said while he would have preferred the tax to increase more gradually, he thinks the tax has become necessary for the growing city.
"Things are changing whether I like it or not, and we have to adapt," he said.
The money generated from the HOT tax will let Lakeway control its brand, Mayor Dave DeOme said. He said the money will provide a way to let people throughout Texas and across the nation know what Lakeway is about.
"I'm all in favor of this, and I'm excited about this," he said.
DeOme said in January that he became supportive of the HOT tax after learning it could help fund the expansion of the city's activity center.
Public comment
During a chance for public comment in February on the HOT tax, nearly a dozen people spoke. The comments were generally split between local hotel operators who said the HOT tax would put their business at a disadvantage against hotels without the tax and local business leaders who said the money generated from the tax could help bring more tourists to the area.
Lakeway Resort and Spa Manager Troy Mathews said a HOT tax could negatively impact the resort's corporate and group clientele, which makes up more than half of the resort's business. He said the tax could cause the resort to either lose out on the competitive group business market or force the resort to absorb the additional tax to compete with nearby hotels.
Neither Mathews nor anyone else opposing the tax appeared at the April 16 meeting. Mathews did not immediately respond to a request for comment on the passage of the tax.
Laura Mitchell, Lake Travis Chamber of Commerce president, said she was excited about the passage of the HOT tax. She said in February that the money generated by the tax could help draw people to the area during a time when many potential tourists are deterred by the low lake level.
A 2011 study found that visitor trends dipped significantly when Lake Travis is below 660 feet above sea level, she said. Lake Travis, as of April 27, was at 639 feet above sea level.
"Unfortunately, there is no current mechanism to inform potential visitors that Lakeway and Lake Travis are and will always be open for business," she said. "The use of the hotel occupancy tax may be used to reach those potential visitors to draw them into Lakeway."
Commission to manage tax revenue
A commission consisting of involved stakeholders will manage where the money generated by the HOT tax is spent. City Council postponed an ordinance establishing the commission until May.
Councilman Alan Tye, who has been a proponent of the tax since the idea was proposed, said the city is focused on getting the right people on the commission to make sure the money is properly spent.
"This has been a long time coming for me," he said of the passage of the tax.
