Lexington visitors could pay more in new district for hotel improvement
Hotels in Lexington hope they can attract more conventions to the city — but it would come with a cost to visitors.
VisitLEX, the city’s tourism organization, and a group of large hotel owners want to add a 2% room fee for visitors who book rooms in Lexington. The money collected would be managed by a new public-private partnership tasked with marketing the city as a destination for conventions, meetings and other large-group business.
The tourism organization and hotel owners are in the process of formally proposing the partnership, a “Lodging Management District,” which is a type of business improvement district. The specific kind at the heart of the proposal is referred to as a tourism improvement district.
In the district, money is collected from hotels and used for the benefit of hotels.
VisitLEX President Mary Quinn Ramer presented the district concept to Lexington-Fayette Urban County Council’s Budget, Finance and Economic Development Committee Tuesday.
The district could be in place for at least seven years, and the 2% room fee would apply to hotel properties within 5 miles of the city’s center that have two or more meeting rooms, at least 2,000 square feet of meeting space and a full-service restaurant.
An estimated $2.1 million annually could flow into the district from the fee, though it may fluctuate with room sales, the presentation said.
Before an ordinance could be filed and taken up by council, signatures and addresses of at least 33% of property owners within the district must be collected, and those property owners must collectively own more than half of the property within the proposed district.
Lexington’s hotels have benefited and seen the direct impact of federal dollars from COVID-19 recovery assistance in the American Rescue Plan Act of 2021 “working on behalf of the destination,” Ramer said.
But as that money reaches its spend deadline of Dec. 31, 2026, hotel owners initiated conversations about proposing the district about nine months ago.
In the district scenario proposed Feb. 24, fee collection would be on the shoulders of the city, which already collects the city’s transient room tax. That tax charges a visitor staying less than a month for using a short-term rental like an Airbnb or a hotel room.
Money collected would then be managed by an appointed nine-member board of directors, two-thirds of which would be property owners within the district.
“The board would set the business plan for the year, and they could pick whomever they want to fulfill that contract,” Ramer said. “There are lots of reasons as to why VisitLEX would be a strategic partner for them in that space, given that we are already collaboratively working together on recruiting convention business to the city.”
The additional 2% would increase Lexington’s overall lodging charge fees to just over 18%, a comparable rate to cities without districts like Grand Rapids, Michigan, and Knoxville, Tennessee, and cities with districts like Louisville and Nashville.
Ramer said more than a dozen Lexington hotel owners and managers are on board with the district proposal. Marriott Lexington Griffin Gate General Manager Ron van Haaren spoke alongside Ramer and Tiffany Gallagher, vice president and deputy executive officer at Civitas, a tourism-specific consulting firm that helped prepare the district proposal.
“Over 200 cities currently have something like this in place and more of them are discussing this. It means more money for them to promote their city, to promote their area, their festivals, their tourism,” van Haaren said. “VisitLEX does an incredible job with the funds that they have, but it costs money to keep you at the foreground.”
In December 2022, Louisville became the 200th tourism improvement district in the U.S. It put a 1.5% fee on properties with more than 51 rooms and in 2024 made $7.8 million.
The board overseeing that district has directed money to sports tourism marketing programs, offsetting costs associated with securing industry events and high-profile sports events, and researching new markets that may result in additional room sales.
Tenth District Council Member Dave Sevigny asked why establishment of the district was necessary if the city’s hotels are already on board with imposing additional fees.
“The assessment model gives us the ability to ensure benefit to all who pay in and keep that even so that we have a competitive, even playing field and we do not have free riders in the program,” said Gallagher, the consulting firm leader.
Once signatures are gathered and the petition drive is complete, an ordinance may be written before a public hearing is hosted.
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