More concerns about the proposed occupancy tax increase

A letter sent to the Henderson County Board of Commissioners and the Flat Rock Playhouse by Jack and Linda Grup, owners of the Highland Lake Inn and Seasons Restaurant, about the proposed occupancy tax rate increase (received via email, most boldface is mine):

Gentlemen,

I am writing to you to ask a number of important questions and to respectfully request that the Commissioners not approve the new 1% addition to the current 5% occupancy tax rate, as currently proposed, that is intended to be delivered directly to the Flat Rock Playhouse.

My wife Linda and I, and our businesses, Highland Lake Inn and Season’s Restaurant are huge supporters and business partners of the Flat Rock Playhouse (FRPH). We have had a strong and effective partnership over the past 13 years. This partnership certainly assisted our dynamic growth at Highland Lake Inn every year through 2007. We also hope and believe that this partnership and marketing cooperation assisted FRPH’s success over those years to some small degree.

2008 was the beginning of the Great Recession. From 2008 through 2010 our business got 30% smaller in sales. Our reaction to this was to also reduce our operating costs. We got smaller in reaction to the dramatically reduced sales.

It seems to us that FRPH management took a different approach in the face of the challenge of the recession. They grew in size by implementing a second venue downtown and by building the YouTheatre. Both very admirable endeavors made in a very difficult business climate. The downtown venue created the need to fill more seats while guest’s disposable spending was declining in the face of the recession. These additional expenditures, along with reduced ticket sales appeared to have resulted in a $1.4MM loss in 2010. We assume these are the primary drivers for the need for additional funding at this time.

There is good news on the horizon though. With the help of the Flat Rock Playhouse draw, Highland Lake Inn has seen 5% sales growth in 2011 and projected 10% growth in 2012. We might assume that FRPH will see similar improvements. It seems the tourists are slowly returning. We all work very hard to help facilitate that return of our guests.

It is important for us to state, that we do not oppose better utilizing tax funds to better assist Flat Rock Playhouse’s success in a very difficult business climate. We all benefit from their success. Our only concern is deciding where to best get those funds from and who is best positioned to manage the utilization of those funds to best support tourism growth in our county, and at the Flat Rock Playhouse.

In order to better understand the situation, I  recently attended a FRPH briefing regarding how they would utilize the estimated $446,000 in occupancy tax funds delivered to them over two years under the proposed plan. I have read the “Playhouse Tourism Plan summary” delivered to us at this briefing by Mr. Marini. The stated goal is for FRPH to use the funds “To pursue a strategy of “cooperation and integration” among all tourism entities in order to “change the game in terms of tourism in Henderson County”. We wonder if these goals are not the exact same goals of the old Travel and Tourism Board, but delivered by a wider cross-section of the Tourism leadership in the county (including the FRPH) than that represented in the proposed FRPH model. 

There is currently $1,000,000 estimated occupancy tax collected for the Travel and Tourism budget to promote tourism in our county. Could we indeed make better utilization of the existing 5% occupancy tax we already collect to better assist the FRPH and the other tourism businesses in the county? At a recent board meeting I attended I heard that Travel and Tourism may even have the ability to give more to the FRPH from recent past occupancy tax increases they may no longer need. I also understand that the FRPH has already collected an additional $234,000 from new government sources in 2012. With an improving economy, will this be sufficient to get FRPH back on a more solid, routine management track to better fill their seats without an additional tax increase? Shouldn’t these avenues be pursued before we add an additional tax on our lodging guest’s decision process? This seems especially important given that none of this seems to have been clearly vetted with many of our tourism professionals and business owners in the county who will need to be part of the success we all desire for the FRPH and increasing tourism in our county.

When we first heard about this proposed tax increase, we were not aware that it would be directly delivered to the FRPH. Even though we are a major tourism business in the county, nobody asked us our opinion. We understand that the Travel and Tourism Board, and many of our lodging business owner associates were similarly not contacted for their opinions in regards to this important change in the way we determine how we spend tax dollars for county tourism expansion. We thought the tax being considered would be allocated to the FRPH through the Travel and Tourism Board with appropriate controls and success monitoring measures, just like most all other occupancy tax expenditures. This seems the most appropriate management of any additional tax dollars collected to expand tourism opportunities in our county.

If the FRPH needs emergency funding in order for them to survive then we support assisting them getting that funding. The arts ARE worth supporting.  Flat Rock Playhouse must succeed. We should certainly consider assisting them with tax collections if necessary in order for them to survive. But is this an emergency? And where should this funding best come from and how should it best be delivered? What we do agree upon is that the FRPH is too important in our community to allow it to fail. 

After reading Mr. Marini’s Playhouse Tourism plan summary, we assume that the funding is not emergency funding. If this is true, should we assist FRPH with monies collected via a 20% increase to current occupancy tax with a new, additional 1% occupancy tax delivered directly to the FRPH? We agree with many of Mr. Marini’s goals as stated, but differ on who should lead those efforts. In his Tourism Plan Summary presentation, it seemed to me Mr. Marini may believe we may not have best spent the current 5% tax via Travel and Tourism leadership and he seeks to spend the money more effectively under FRPH control and expertise with reservations systems and improved cooperation between tourism entities in the county.  I worry about further distractions of the FRPH leadership into these new ventures when, as in both of those cases, FRPH may not be the best entity to maximize our probability for success. I also wonder what prevented this improved cooperation in the past.

Along with Mr. Marini, I do wonder though if we can find a way to make a stronger destination appeal via better cooperation amongst our county tourism businesses and better marketing spending of the occupancy tax dollars we collect. Mr. Marini stated his concern that the new Tourism Development Authority may be in a state of confusion as it reorganizes and may not be the best place to direct new levels of cooperation and effectiveness of the spending of our tourism tax collected. He believes the FRPH is better suited to this task. I would rather put our focus on making a smooth transition from the past good efforts of the Travel and Tourism Board and improving the new Tourism Development Authority effectiveness so that they may better drive a strategy of improved cooperation and integration in the spending of the occupancy tax dollars collected. I am encouraged by what I heard from our new Travel and Tourism Executive Director, Beth Carden regarding a Spring Tourism forum to help to bring all of us together to improve our inter-business cooperation. This way we better utilize our current 5% occupancy tax funds, and prepare ourselves for more effective spending of an additional 1% tax collected if we ultimately deem this important to the growth of tourism and the success of the FRPH in our county.

Who is better prepared to “To pursue a strategy of “cooperation and integration” among all tourism entities in order to “change the game in terms of tourism in Henderson County”? I believe it is a newly energized  Travel and Tourism Authority  with a wide cross-section of Tourism leaders on its board (potentially including the FRPH of course). This will allow the FRPH to focus on its broader core competencies as it recovers from a very tough recession and the pains and opportunities represented by capital and operating budget expansions during that time. I believe we can work together better though the Tourism Development Authority to best understand how to help fill the recently expanded seat totals at the FRPH (via the downtown venue addition) while also increasing the average tourism dollars attracted to our county in the best interest of all of our county tourism businesses.

Finally, we may indeed need further tax collection to help us improve our destination tourism appeal in the face of increased competition in Buncombe County, but I believe we first should seek to better understand the impact on local lodging tourism businesses as we continue to increase the total tax paid by our tourism lodging guests. Our lodging guests are now paying 11.75% including sales tax which will rise to 12.75% if this tax were to be approved by the Commissioners. It should be noted that since 2006 the occupancy tax has already been increased by 67%.

Again, we are strong supporters of the Flat Rock Playhouse and their management team. We just think these questions deserve further consideration and discussion that include a broader cross-section of the tourism business leaders in our county. Travel and Tourism and the County may already have the money needed to better support the FRPH in our current occupancy tax funds. If, after this review, it is then determined that the FRPH needs even further funds in order to survive and to prosper, the Commissioners and the new Travel and Tourism Authority should work with FRPH on both the revenue enhancement (tax collection), marketing and cost control side to determine the most effective use of our current occupancy tax dollars collected (5% or an estimated $1 million) or any new tax being considered. Until that is completed, we respectfully ask that you delay or cancel this proposed occupancy tax increase that is intended to be delivered directly to the FRPH. We believe this approach will better serve our joint efforts to ultimately increase the tourism dollars spent in Henderson County in the best interests of the Flat Rock Playhouse and the other tourism businesses in our county.

Best Regards,

Jack and Linda Grup
Owners, Highland Lake Inn and Season’s Restaurant