city hall briefing document

8/19/2019 City Hall Briefing Document

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Michael WilliamsGeneral Manager

Chris Brillinger

Deputy City Manager (Acting)

Economic Development and CultureDivisionCity Hall, 8th Floor, East Tower100 Queen Street WestToronto, Ontario, M5H 2N2

Tel: 416-397-1970Fax [email protected]

BN # 36 – Feb 1

2015 OPERATING BUDGET BRIEFING NOTETourism Toronto - Destination Marketing Program

Issue/Background:

At its meeting on February 4th, the Budget Committee requested a briefing note that provides"a summary of the "hotel tax" collected voluntarily from Toronto hotels and given toTourism Toronto, including:

a. an estimate or actual for 2014; b. a summary of financials for Tourism Toronto (e.g. financial statements, annual

reports etc.); andc. an estimate of the "hotel tax" for 2015, considering Pan Am projections."

Key Points:

There never has been a 'hotel tax' in the strict sense of the phrase in Toronto or the Provinceof Ontario.

For many years, the Province set a Retail Sales Tax rate lower than other goods for hotelrooms and other accommodation to support tourism. Prior to the introduction of theHarmonized Sales Tax in 2010, the Retail Sales Tax rate on transient accommodation was5%.

Following the SARS crisis in 2003, the Province allowed hotel associations and/or localtourism promotion agencies to collect from their hotel members, on a voluntary basis, acontribution to a collective fund used for international marketing of the city/region equal to3% of the hotel charges. This was called a Destination Marketing Fee (DMF). The totalcharge was similar to the normal 8% Retail Sales Tax then in existence in Ontario.

In Toronto, the fees were collected by the Greater Toronto Hotel Association (GTHA). Theythen transferred the fees collected (less a small percentage to cover collection costs) toTourism Toronto for destination marketing services.

By 2010, the DMF generated over $30 million per year.

Tourism Toronto used the funds to market Toronto to potential tourists around the world,including managing an information service, website and hotel booking service.

This type of arrangement was also undertaken in Ottawa, Niagara Falls, Kingston, Stratfordand in other smaller Ontario jurisdictions such as Kenora and Dryden.

The use of funds collected through hotels for destination marketing, whether on a voluntary basis or through some official tax process, is very common around the world. A tax approachis not permitted in Ontario at this time.


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In 2010, the Province moved to a 13% Harmonized Sales Tax (HST) with the federalgovernment. One of the requirements of the HST was to adopt a uniform rate on all goodsand services thus removing the 'space' for a destination marketing fee.

The Province agreed to replace the DMF with a grant to Tourism Toronto following theintroduction of HST. At the same time, the Province introduced a province-wide system ofregional tourism organizations (RTO) and designated Tourism Toronto as the RTO for

Toronto, Brampton and Mississauga.

The Province also signaled that they would be reducing the grant over time. Tourism Torontoand the GTHA began to investigate a successor to the DMF. After a considerable set ofchallenges, the GTHA and Tourism Toronto implemented a voluntary destination marketing program (DMP) during 2013 in which the GTHA makes arrangements with some of itsmembers for a voluntary contribution to a fund, most of which is then turned over to TourismToronto to deliver a destination marketing program.

In 2015, Tourism Toronto expects to receive $20 million from the DMP and almost $10million from the Province.

It is estimated that the DMP generated $17.6 million in 2014. Based on the published 2013 Annual Report, Tourism Toronto's revenue and expenses were

broken down as follows:

Tourism Toronto

2013 Revenue

Provincial Funding 44.0%

Destination Marketing Program 41.0%

Co-Operative Advertising & Program Buy-In 6.6%

Ontario Convention Development Fund 5.1%

Membership Fees 2.7%

Interest & Other Income 0.5%Source: Tourism Toronto 2013 Annual Report

Tourism Toronto

2013 Expenses (incl. HST & Salaries)

Meetings, Conventions and Incentive Travel Sales 37.9%

Marketing 34.6%

Finance & Administration 9.5%

Communications 7.9%

International Leisure Trade 6.9%

Member Care 2.1%

Amortization 1.1%

Source: Tourism Toronto 2013 Annual Report

Tourism Toronto's 2013 Annual Report has been received and is available upon request. Thesame document for 2014 is not yet available.

Tourism Toronto's 2013 Audited Financial Statements have been received and are availableupon request. The same document for 2014 is not yet available.


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Questions & Answers:

Q: Is Tourism Toronto an agency of the City of Toronto?

A: No. Tourism Toronto is a not-for-profit Regional Tourism Organization. TourismToronto has over 1,200 members and has an independent Board consisting ofrepresentatives of the hotel industry and other industry stakeholders (restaurants,

attractions, etc.).

Q: Can the City of Toronto implement a hotel tax?

A: No. Only the Province of Ontario has the authority to introduce a new tax on goods andservices.

Q: Does Tourism Toronto provide any funding to the City?

A: Yes. Tourism Toronto transfers funds to the City for visitor services expenses and to

assist with major events such as Nuit Blanche, wayfinding and other support for theTourism sector. For example, in 2014, this support amounted to approximately $800,000.

Prepared by: Larissa Deneau, Manager, Policy Development, Economic Development andCulture, Policy Development Unit, (416) 392-3397, [email protected]

Further information: Mike Williams, General Manager, Economic Development and Culture,416-397-1970, [email protected]

Date: February 11, 2015

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