Local Lodging Taxes during and after the Pandemic

We examine the structure, recent and expected performance, and fiscal implications of the local lodging tax. Lodging taxes have become a uniquely important and interesting local revenue source as the pandemic has restructured many long-standing assumptions about the relationship between place and economic activity. We find that recent hotel revenue performance—a key proxy for lodging tax revenues—varies considerably across regions. Markets focused primarily on leisure travel have recovered to and often exceeded their pre-pandemic levels, where markets focused on commercial travel have generally not returned to their pre-pandemic levels. We show that this leisure vs. commercial market distinction is also a strong predictor of hotel revenue recovery since the pandemic. Local lodging taxes are a comparatively small share of general local revenues, but have noteworthy local fiscal implications nonetheless. In many jurisdictions they are equivalent to more than one-quarter of total non-property tax revenues. We also find that lodging taxes support roughly $14 billion in outstanding municipal debt, including several large bond issues in markets where lodging tax revenues have recovered slowly.