(The Center Square) – A new report from the Private Property Rights Institute highlights how small hotels are contributing millions of dollars annually to a corporate welfare system from which they receive few benefits.
The "Michigan's Tourist Tax System" study estimated that small “mom and pop” lodging businesses contribute an estimated $10 million a year to mandatory Convention and Visitors Bureau tourism-marketing assessments, despite larger, out-of-state hotel chains mostly deciding how the money is spent and benefitting from the advertisement it funds.
The assessments are mandatory fees collected from lodging businesses by local Convention and Visitors Bureaus to fund tourism marketing and promotional efforts intended to attract visitors to Michigan and increase hotel bookings.
According to the report, these fees make travel more expensive for everyone.
“The assessment can amount to as much as five percent of a guest’s room charge, according to the report,” the institute said. “The fees impact the small lodging owners at a time when they are already struggling with inflation and rising operating costs.”
Charlie Kolean, president of PPRI, told The Center Square in an exclusive interview that it is time for Michigan’s legislature to revise these assessments.
“Lawmakers should reform the statutes authorizing these assessments to give lodging businesses a genuine choice and a meaningful voice,” Kolean said. “At minimum, legislation should allow an individual property to opt out, require governing boards to fairly represent small lodging businesses, mandate greater transparency in spending and executive compensation, and require regular votes before an assessment can be renewed.”
Currently, Michigan lodging businesses can not opt out of mandatory fees for at least 47 of the local tourism bureaus. Despite paying the fees, very few of the small operators are then able to get a seat on the bureaus’ boards.
Kolean said this is just another form of corporate welfare.
“Michigan’s tourism-assessment system is corporate welfare. Family-owned hotels are forced to help fund marketing and lobby for policies that disproportionately benefit the large, out-of-state chains with which they compete,” he said. “Michigan’s small hoteliers should never be forced to subsidize out-of-state hotel conglomerates, which is what the CVB assessment does. At a time when they are already being squeezed by inflation and rising operating costs, this only makes it harder for them to compete.”
In 2024, tourism generated an estimated $54.8 billion in economic impact and 131.2 million visitors to Michigan. According to the institute, this makes it a “major engine” for Michigan’s economy.
The study called on a number of reforms from the state legislature, including more transparency in the bureaus’ books and meetings, limiting administrative costs, and preventing mandatory assessment revenue.
Kolean said these reforms could help lower lodging costs and support the continued operation of small lodging businesses. However, he questioned how quickly lawmakers will address the issue.
“Whether that happens will depend on whether lawmakers are willing to confront a system that has operated with little scrutiny for decades,” Kolean said. “The organizations benefiting from the current arrangement will undoubtedly resist reform, but these findings give legislators a strong reason to examine why small businesses are being compelled to subsidize organizations that often work against them.”