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Proposed new fee on Austin hotel rooms could help city pay for critical needs

Two highrise hotels on Rainey Street in Austin.
Gabriel C. Pérez
The city is working on a deal that would allow hotels to impose a 2% fee on nightly room stays. The money would have to go toward tourism and marketing efforts.

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People who visit Austin could soon be paying to help the city address some of its thorniest issues.

On Thursday, the Austin City Council agreed to partner with local hotels in a deal that would generate millions of dollars for the city. If the plan gets approved, the city would create a tourism public improvement district, which would allow hotels with 100 rooms or more to impose a 2% fee on nightly room rates.

There are 159 hotels within the city limits that have 100 rooms or more. At least 39 more are expected to open by 2027, according to data from the Austin Convention Center. Nightly room rates averaged around $184 across the city and $256 downtown. That comes out to a few extra dollars per night for people who book rooms, industry experts said.

The proposed 10-year deal would generate more than $390 million — a slice of which would go to the city. Hotels would be required to use the additional money on efforts to increase tourism. Austin is expected to get at least $78 million over that 10 years. The agreement guarantees 20% of the revenue will go to the city for major event expenses and promotion.

Proponents of the district say this money will be needed while the Austin Convention Center is closed for redevelopment starting in 2025. The downtown area is expected to see a significant drop in revenue during the closure, which should last about four years.

Council Member Ryan Alter, who helped negotiate the terms, said this is a win-win for residents and hotels. The money will be spent on additional marketing that will increase hotel stays and boost the local economy.

“Through this deal we will be able to invest in our workers, invest in our local businesses and invest in our residents," he said.

Alter said it will be up to the city to determine what the money can be spent on, but he will push for it to go toward homelessness response. Council Member Vanessa Fuentes, who also helped negotiate the deal, agreed and said she’d also like to see it fund child care efforts and public safety.

“Certainly this council will have a lot to consider in how we allocate the funds that will be freed up in our general fund to address our critical needs,” she said, adding that the tourism commission also recommended the money be used to address homelessness.

Nenad Praporski, general manager for the Fairmont Austin hotel and chairman of the Austin Hotel & Lodging Association, said the district will give Austin the ability to be more competitive in attracting people to visit beyond events like South by Southwest and the Austin City Limits Music Festival.

“This would be a great tool to market our destination and be very competitive when it comes to encouraging business to come to Austin,” he said.

Praporski said increased tourism helps boost the economy because visitors not only spend money on hotels, but also at restaurants and businesses.

Thursday’s vote is only the first step in the process. For the district to be official, 60% of eligible hotels with 100 rooms or more must approve it.

Praporski said he hopes that will take place over the next several months, so hotels can begin imposing the fees early next year.

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Luz Moreno-Lozano is the Austin City Hall reporter at KUT. Got a tip? Email her at Follow her on X @LuzMorenoLozano.
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