Tourism, Occupancy Tax and the Bible on Ocracoke

Editor’s note: The Ocracoke Observer shares these comments made by George Chamberlin, owner of the lodging Captain’s Landing, last night (Thursday) at the Occupancy Tax Board meeting where Kris Noble, Hyde County planning and development director, presented a plan for a new Tourism Development Authority.

Economics 101, or,

Tourism, Occupancy Tax and the Bible on Ocracoke

Let me state that I am not a professor of economics nor am I an expert on the Bible.  But, after helping to build and operate an inn on Ocracoke going back to 1998 and being exposed to the good people of Ocracoke and its churches since the 1980s, and after listening carefully to the families that have been here since the 1700s, permit me to state a few facts as I see them with the goal of helping Ocracoke and Hyde County to take a proper path towards the future.

To begin, my basic premise is that any tax that targets one segment of tourism is unfair, discriminatory and should be illegal.  The fairest tax [if that is at all possible] would be a sales and use tax.  You pay a tax on a product if you decide to buy it; otherwise, you don’t pay it.  There are very few places where a tax is JUST levied on gift shops or JUST restaurants.  But some people have no problem placing a tax on JUST the lodging industry. What the heck, it’s not your money!

The reasoning in itself is unfair:

The Innkeeper doesn’t pay it- they just collect it.

It is done in other markets, why not here?

It is just a small amount therefore it won’t make any difference.

The tax will be used for JUST tourism so it benefits the industry.

OR,

The tax MAY be used for “the community as a whole” so it benefits all.

The answers to each of the above quick comments could be a full University subject on how to operate an Inn and I do wish to emphasize the point to those NOT in the business of providing lodging that they should consider each point seriously.

Let me explain:

The innkeeper does pay it.  When a room is sold it is sold as a package with tax included.  The buyer nor the innkeeper cannot sell the room without including the tax, it is illegal.  The buyer cannot purchase a room without considering the total cost, it is not logical.  And, in a tourist environment, stays are usually for multiple days and the total amounts of room and TAX is usually substantial and, therefore, must be considered by the buyer as part of their family vacation budget.  The innkeeper needs to consider the total cost to correctly price a room while still considering overhead costs and the market environment.  The innkeeper must also consider the market they are in in order to correctly price a room.  Therefore they must also know:

What is the “break-even cost” of a room?  Consider that EACH Innkeeper must take into account such things as:

How much does it cost to clean and maintain any given room?

What overhead costs, direct and indirect, must be considered.

If seasonal, as in Ocracoke, what is the correct price for that season?

What are the other Innkeepers offering for prices and amenities?

Bottom line:  Every penny counts!

Occupancy Tax rates are higher in other areas so why not raise the rates here?

Some lodging owners are dealing with very slim profit margins and are truly “the little guys.”

This is where the Bible comes in.  Rather than comparing Ocracoke lodging with completely different markets consider the saying from the bible about “caring for the least of us” before being assured a place in heaven.

So, ask yourself the following:

Are you comparing the family owned or oriented Ocracoke lodging to any major chain such as the Hiltons, Holiday Inns, Sheratons, Hampton Inns, and Marriott’s?

They are ALL chains with hotels that have 30, 50 or even 100 or more rooms and backed by a NATIONAL CHAIN that can drastically reduce costs.  Almost all are NOT SEASONAL!  Almost all are in markets where customers expect to pay an amount consistent with that chain and, in some cases the taxes really are lower than in Ocracoke.  In summary, you cannot compare our market equally or fairly with others.

An Occupancy Tax is just a small amount and won’t make any difference.

Well, it does.  It has to be considered as part of the total price of a room cost as mentioned previously.  To many travelers, every dime counts; especially when multiple nights are considered and are usually not the same “cost is no option” visitor that you might see on other vacation spots such as Hilton Head Island.

If you think the occupancy tax doesn’t mean much, why not consider that ALL segments of the businesses in Ocracoke and Hyde County pay a “tourist tax”??

Do we really think that the shops or restaurants would be eager to pay such an additional tax?  Why not just ask the state to raise the sales-and-use tax?  One of the probable reasons to not do that?  It would hurt tourism.

This new tax amount would ONLY be used for tourism.

Sorry to remind those of you that haven’t been around very long, but that was the ORIGINAL premise of the current occupancy tax.  It was later morphed into a tax that could be “used for any purpose” and now, when it is being used for some good in the community but is also being considered for such things as “$37,500 for a thirty minute fireworks display” and other questionable aims, the experts have now come to the conclusion “we need more money to develop tourism.”

The current tax is used in the community so it benefits all.

I suspect, if you poll the lodging owners on Ocracoke, you will find they are resigned to the current occupancy tax and at its current rate.  I think you will also find that they agree that funds collected by this tax have done some good in the community.  I certainly think so.  But we can do a better job.

So let’s ask a few questions about the present and the future:

For the Occupancy Tax Board:

Don’t we have a reserve fund?  Why do we need it? How much is it and have we asked Hyde County for the amount be reduced so as to put more dollars to work?

Can we do a better job of allocating the money collected to serve the community for REAL NEEDS and put aside a specific amount “just for tourism?”

For the County:

Can’t we take the “road less traveled” and do the more difficult task of finding other sources of revenue to promote tourism other than just sticking it to the Inn keepers and those guests that chose to stay on Ocracoke for multiple days?  Remember, the tourists that stay multiple days spend money in shops, restaurants, go fishing and pay to go on tours.

One of the considerations for the future includes a “passenger only” ferry.  If implemented, those tourists will spend money in shops and restaurants, possibly visit the beach and may even go fishing.  How many do you think will spend more than just a day on Ocracoke?  Very, very few.

So, why not consider a tax on the “day trippers” as they are called that clog the roads, use the facilities and look for bathrooms?  Or are we expected to require more “occupancy tax” money to fill the void?

In summary, if more funds are needed to bring more tourism to Ocracoke, to “expand the seasons”, to bring in more tourism dollars and to provide for such truly needed items in the village as an X-ray machine, a building or facility for a morgue (yes, I said a morgue) a professional building, superior public rest room facilities and more, we need to expand our thinking before jumping off a cliff that puts the lodging owners in a bind and lets everyone else walk off thinking what a good job they did by providing more short sighted tax money for unworthy needs.  We need the State to partner with us so as to help us expand our thinking and take a more comprehensive look at how to secure the long term future for Ocracoke and Hyde County.

George Chamberlin
Ocracoke
February, 2015