BN # 36 Feb 13

Michael Williams
General Manager

Chris Brillinger
Deputy City Manager (Acting)

Economic Development and Culture

Division
City Hall, 8th Floor, East Tower
100 Queen Street West
Toronto, Ontario, M5H 2N2

Tel: 416-397-1970
Fax 416-397-5314
mwillia5@toronto.ca
www.toronto.ca

2015 OPERATING BUDGET BRIEFING NOTE

Tourism 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 to
Tourism Toronto, including:
a. an estimate or actual for 2014;
b. a summary of financials for Tourism Toronto (e.g. financial statements, annual
reports etc.); and
c. 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 Province
of Ontario.

For many years, the Province set a Retail Sales Tax rate lower than other goods for hotel
rooms and other accommodation to support tourism. Prior to the introduction of the
Harmonized Sales Tax in 2010, the Retail Sales Tax rate on transient accommodation was
5%.

Following the SARS crisis in 2003, the Province allowed hotel associations and/or local
tourism promotion agencies to collect from their hotel members, on a voluntary basis, a
contribution to a collective fund used for international marketing of the city/region equal to
3% of the hotel charges. This was called a Destination Marketing Fee (DMF). The total
charge 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). They
then transferred the fees collected (less a small percentage to cover collection costs) to
Tourism 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, Stratford
and 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 approach
is not permitted in Ontario at this time.

-2

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

The Province agreed to replace the DMF with a grant to Tourism Toronto following the
introduction of HST. At the same time, the Province introduced a province-wide system of
regional 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 Toronto
and the GTHA began to investigate a successor to the DMF. After a considerable set of
challenges, the GTHA and Tourism Toronto implemented a voluntary destination marketing
program (DMP) during 2013 in which the GTHA makes arrangements with some of its
members for a voluntary contribution to a fund, most of which is then turned over to Tourism
Toronto to deliver a destination marketing program.

In 2015, Tourism Toronto expects to receive $20 million from the DMP and almost $10
million 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
Destination Marketing Program
Co-Operative Advertising & Program Buy-In
Ontario Convention Development Fund
Membership Fees
Interest & Other Income

44.0%
41.0%
6.6%
5.1%
2.7%
0.5%

Source: Tourism Toronto 2013 Annual Report

Tourism Toronto
2013 Expenses (incl. HST & Salaries)
Meetings, Conventions and Incentive Travel Sales
Marketing
Finance & Administration
Communications
International Leisure Trade
Member Care
Amortization

37.9%
34.6%
9.5%
7.9%
6.9%
2.1%
1.1%

Source: Tourism Toronto 2013 Annual Report

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

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

-3Questions & Answers:

Q:

Is Tourism Toronto an agency of the City of Toronto?

A:

No. Tourism Toronto is a not-for-profit Regional Tourism Organization. Tourism

Toronto has over 1,200 members and has an independent Board consisting of
representatives 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 and
services.

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 the
Tourism sector. For example, in 2014, this support amounted to approximately $800,000.

Prepared by: Larissa Deneau, Manager, Policy Development, Economic Development and
Culture, Policy Development Unit, (416) 392-3397, ldeneau@toronto.ca
Further information: Mike Williams, General Manager, Economic Development and Culture,
416-397-1970, mwillia5@toronto.ca
Date: February 11, 2015