Miami-Dade’s hotel taxes have declined at a rate not seen since a global recession slammed tourism eight years ago, straining a favorite pot of public money and raising the stakes for a rebound from Zika fears in 2017.
The ritzy Basel art fair wasn’t enough to rescue December, when hotels generated 7 percent less revenue than they did a year ago, according to the latest numbers from county tax collectors. It was the fourth straight month of declining hotel taxes. That’s the longest losing streak since 2009, when the county’s tourism industry was at the tail end of a decline brought on by the economic downturn and global financial crisis.
While hotel taxes constitute a small portion of Miami-Dade’s $7 billion budget, they subsidize museums, theaters and other cash-strapped institutions. They also provide the dollars needed to pay back about $300 million in county debt on Marlins Park, with bond payments mounting in the next decade.
Sign Up and Save
Get six months of free digital access to the Miami Herald
“How worried should the county be? They should be concerned,” said Stuart Blumberg, the retired head of a countywide hotel association. “Because when they start looking at next year’s budget, they have to figure out how to cover their debt obligations based on a decline instead of growth.”
Miami-Dade’s hotel taxes, which max out at 6 percent on a guest’s bill, were expected to generate about $125 million in 2017. That’s a pittance compared to the $2 billion Miami-Dade earns from property and sales taxes, but still can make the difference between an austere budget and a flush one. Hotel taxes were growing so quickly in recent years that Miami-Dade Mayor Carlos Gimenez drained about $50 million worth of reserves to fill budget holes in 2013 and 2014.
Even with declines over the prior year, hotel-tax revenue remains near record levels. Jennifer Moon, the county’s budget director, said Miami-Dade still has enough surplus hotel tax to cover the downturn for 2017 without any impact to the grants, services or debt payments funded by the tourist dollars often known as “bed taxes.”
“Yes, we’re seeing that bed-tax revenues are declining,” Moon said. “We have the reserves in the current year to absorb the losses. We’re analyzing what it might mean for future years.”
We have the reserves in the current year to absorb the losses. We’re analyzing what it might mean for future years.
Miami-Dade budget director Jennifer Moon
The first four months of the budget year that began Oct. 1 have hotel-tax revenues down about 5 percent. Hotel-tax collections run a month behind, so the 2017 revenue includes money from September. Miami-Dade has collected about $1.6 million less in hotel taxes than it did at the same time last year.
The county numbers amplify a rocky year for Miami-Dade’s tourism industry after federal health authorities warned a Zika outbreak in Miami could pose a health risk to pregnant women.
That August announcement made global headlines, and was the first in a string of Zika advisories that eventually included parts of South Beach, Miami-Dade’s top tourist destination. The final local Zika zone was lifted in early December, which the tourism industry and county leaders hailed as a turning point for public perception. Miami-Dade hasn’t released tax-collection figures for January.
As one of the world’s top vacation destinations, Miami can usually count on a growing hotel industry. In 2015, for example, Miami-Dade’s hotel rooms generated 10 percent more revenue than they did the year before, according to a recent Smith Travel report. But in 2016, gains switched to losses and room revenue dropped nearly 2 percent.
The Smith report showed the losses concentrated in the last three months of the year, suggesting a Zika effect. Hotels also face competition from Airbnb, an online booking service that lets private homeowners rent beds to tourists. The company is in talks with county officials to begin paying hotel taxes on the bookings but isn’t paying them yet.
Other factors also made 2016 an uphill climb for some hotels. New hotels put pressure on rates, a stronger dollar made Miami more expensive for crucial tourism markets in Latin America and Europe, and the Miami Beach Convention Center is closed for renovations. One of the year’s largest tourism draws, February’s Miami boat show, moved locations last year and February 2016 also brought a dip in hotel taxes.
“Zika didn’t help, but when you think about all of these other factors, they definitely contributed to a perfect storm,” said Robert Finvarb, whose company owns Marriotts in Miami and Miami Beach. “I wanted to put a different word between ‘perfect’ and ‘storm.’ Because it was.”
Miami Herald staff writer Chabeli Herrera contributed to this report.