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Hotel taxes bucking state trend

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The autumn downturn in travel was little more than a bump in the road in Central Pennsylvania. County officials have the tax receipts to prove it.
After September’s airborne terrorist assault, nervous travelers canceled trips and put off vacations. As a result, some area counties saw a dip in hotel-related tax revenue. By October, however, collections were back to normal.
The travel industry’s strength here bucked weakness at big-ticket attractions elsewhere, such as Florida and Las Vegas, both of which depend on air travel. Central Pennsylvania is largely a drive-to destination.
Lancaster County, a popular tourist destination due to its Amish population, pulled in more hotel-tax money this September than it did a year ago, said Gregory Sahd, the county treasurer. (Please see chart, page 9.)
The county-level experience is also a bright spot compared with sluggish state collections.
With revenue running below estimate, officials warn that the state budget deficit could top $600 million when the fiscal year ends in June.
Pennsylvania law allows counties to levy a 2 percent or 3 percent tax on overnight stays at hotels, motels and other guesthouses. Proceeds support tourism promotion and economic development.
In Dauphin County, for example, the 3 percent tax is helping to pay for a new arena at Hersheypark in Derry Township.
Dauphin, Lancaster and York counties have collected the tax for several years. Cumberland and Lebanon began collecting the tax this year.
Total collections vary widely. Lancaster plans to rake in nearly $5 million in 2001, up from about $4.5 million in 2000. Neighboring Lebanon is projecting a take of $100,000 in its first year. Cumberland County is hoping for between $800,000 and $900,000 per year, said John Ward, the county’s chief clerk.
September’s haul was off, Ward said. But October’s collections beat expectations.
Ward didn’t think the September dip would lead to cutbacks in programs that count on the revenue.
“This is all new money for them this year,” Ward said. “So my expectation is they haven’t made a lot of plans that a decrease would affect them that much.”
Cumberland officials are sending 48 percent of the money to a regional tourism agency, 30 percent to a proposed Army heritage center, 10 percent to light rail and 10 percent to a county economic development agency. The remaining 2 percent is for administering the tax’s collection.
The recession also is taking a lighter swipe at area hotels, according to Ashish Parikh, chief financial officer for Hersha Hospitality Trust.
Based in Fairview Township, York County, Hersha operates 18 hotels in Georgia, New York and Pennsylvania. Two are in Cumberland and four are in Dauphin counties.
In Central Pennsylvania, Hersha’s revenue is off by about 3 percent to 4 percent, compared with 6 percent to 8 percent nationally, said Parikh.
The main drag has been discount rates needed to keep rooms full, Parikh said. “People are hearing that there are great deals on hotels, and that’s what they’re expecting.”
A typical discount involves a 10 percent savings, Parikh said. Hersha cut rates more heavily in September than in October, he added.
Still, great deals weren’t the main reason Central Pennsylvania remained well traveled, local officials said.
The region is within driving distance of major metropolitan areas and is an easy escape for people still jittery about flying, local officials said. Low gasoline prices made car travel cheaper, while unseasonably warm weather made it more pleasant.
“People can decide on the spur of the moment to get in their car and drive out here,” said Lucinda Hampton, vice president at the Pennsylvania Dutch Convention & Visitors Bureau, East Lampeter Township, Lancaster County. “If they need to get home quickly, they can do that, too,” she said.

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