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Wisconsin room tax collections rebounded in 2021, as did leisure travel, from the pandemic plunge of a year earlier. But it took until 2022 for revenues to recover in large cities such as Milwaukee and Madison, which rely more heavily on business travel.
In Wisconsin, local governments generally have the option to tax the value of overnight lodging in their jurisdiction by up to 8%. As of 2019, 293 cities, villages, and towns in the state chose to do so. State law generally requires 70% of the revenues to be spent on tourism promotion, with local governments allowed to use the remaining 30% for other purposes.
No major state or local tax in Wisconsin was hit harder by the pandemic than the room tax. As COVID-19 shut down travel worldwide in 2020, revenues fell by nearly half.
The rebound in 2021 was nearly as stark. Statewide figures for room tax collections in 2021 are not yet available, but looking at the top 75 municipalities by room tax revenues, collections increased 73.4% from 2020 to 2021. Still, they remained 11.3% less than 2019.
That said, the divide between the state’s two largest cities and elsewhere was stark. In Madison and Milwaukee, 2021 collections lagged 2019 by 33%. Collections in the remaining 73 communities increased by 1.8% from 2019 to 2021.
Revenues increased from 2019 to 2021 in tourism centers like Lake Delton (+22.2%), Gibraltar (+30%) and Minocqua (+21.8%). But business destinations like Madison saw decreases (-36.1%), as did Milwaukee (-30.3%), and Brown County (-24.2%).
Meanwhile, revenue from online home rentals has increased following the passage of a 2019 state law that required internet marketplaces to collect room taxes from customers. These increased collections may help mitigate some of the room tax revenue declines elsewhere.
In 2020, COVID-19 changed the outlook for hotels and room taxes almost overnight, leading local governments to slash funding for tourism promotion and substitute either federal pandemic recovery funds or, in some cases, general tax revenues to maintain at least some promotional efforts.
Room tax collections in Madison, for example, plummeted by 69% in 2020, one of the biggest drops in the state. To fill the $13 million hole in its budget, the city took a number of steps, including reducing funding for the Monona Terrace Community and Convention Center, Overture Center for the Arts, and Greater Madison Convention and Visitors Bureau.
While projections suggest that business travel will continue to rebound in 2022 and beyond, increased use of video conferencing technology may slow or halt a return to pre-pandemic levels of business travel.
In the face of these impacts, local officials and business leaders will need to fill any ongoing revenue holes and consider whether adjustments to expenditures or future plans may be required.
This information is a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.
