SUCCESS STORY
How Alabama Mountain Lakes Tourist Association is Creating Positive Tax Revenue from Rentals in North Alabama
When the Alabama Mountain Lakes Tourist Association saw hotel development stalling, they discovered the hidden growth of short-term rentals across 16 counties. By working with Granicus to drive tax compliance, they were able to increase statewide revenue collection by eight percent.
SITUATION
Spanning 16 counties in the North Alabama region, the Alabama Mountain Lakes Tourist Association provides support and awareness to a wide area of popular destinations. Lakes, waterfalls, and other natural attractions can be found near technological and business hubs, not to mention the numerous universities that frequently draw travelers for sporting events.
So, it was odd when Alabama Mountain Lakes Tourist Association President Tami Reist was approached to do a study on why one of the most prestigious lakes in the area wasn’t seeing any new hotel development.
“Lake Gunnersville is one of the most prestigious lakes not only in Alabama, but the country,” she said. “They’ve held the Bassmaster Classic several times, had a new Google data center that was opening up. We wanted to see what was going on.”
Records showed that the last hotel had been built in the area in 2002, perhaps based on a popular investment report that showed the occupancy demand for the area as, per Reist’s description, relatively flat. But when her team ran Air DNA data (which measures short-term rental occupancy), they found that the area had a 41% growth rate.
The issue of short-term rentals (STRs) was making an impact on the area’s economy.
“As the short-term rental market grew, we started hearing from people that said, ‘We’re not staying in a hotel/motel. We’re staying at a home,’” she said. “Our tourism bureau is funded by lodging taxes that help us bring in business to the community, such as ball tournaments and other events. And people are moving away from traditional lodging to homes. There’s a shortfall.”
While Reist stated she’s a fan of short-term rentals, even using them herself, the revenue shortfall from residents operating STRs left her feeling that operators were taking a one-sided advantage of the organization that helped attract visitors.
SOLUTION
After meeting with the State Tourism Director to review the data, the decision was made to move forward with a new host compliance program.
“He could not believe the movement that we had (in short-term rentals),” she said.
A colleague from another state told Reist about their successful Host Compliance experience with Granicus, which she said motivated her to consider bringing the Granicus tool to her agency.
“We actually had a meeting with Granicus and one of our state representatives to come up with a strategy for our host compliance,” she said. “An independent survey we had done showed we could potentially gain up to $30 million in our general fund.”
With the state’s support, Reist had Granicus work to identify homes that were not properly paying lodging tax as STRs and send, per Reist’s count, over 2,500 notification letters through Granicus’ Host Compliance Tax Collection and Letters modules. These letters connected STR operators to a website where they could be properly educated about their tax responsibilities, as well as settling any outstanding taxes.
“We may start seeing a slowdown on building traditional hotels because the short-term is taking over,” she said. “STR hosts depend on their tourism bureau to help send them business. So, if they are not understanding the lodging tax and are not paying it…and traditional hotels are…then we’re going to have less money to use to bring customers in.”
For Reist and the Tourist Association, the new digital presence has become what she calls “our Amazon.”
“You know a lot of the communities are working on online sales, such as Amazon or Wayfair. And to me this is ours,” she said. “(STRs) are not going away. It’s continuing to grow. We see it by logging into the system and seeing the numbers increase.”
RESULTS
In just two months, Reist found a 21% increase in revenues billed out through the Granicus Host Compliance system. The impact was so immediate, that Alabama Mountain Lakes staff were initially caught off guard.
“I failed to tell my staff,” Reist recalled. “And our phone started ringing off the hook because the letter was getting action. I started having calls that were saying, ‘I owe you $100,000!’ ‘I owe you $25,000!’ ‘I owe you $10,000!’ And I said, ‘All I need you to do is go to that link that’s on that letter.’”
After launching the letter campaign in January and February 2022, over 40 properties had logged into the system to address revenue collection issues by March. Since then, the system has gained 500 community users and, driven by the 16 counties in Reist’s area alone, statewide STR revenue collection in Alabama increased by 8%.
Throughout the year, the service remained active, even when addressing some of the seasonal challenges that Reist said the area faces.
“It is very tough, because in Alabama, football season you’ll see homes open up. And then after games, they close down,” Reist said. “That’s a nightmare for an accountant. But we’ve been able to better facilitate this thanks to the data that we get from Granicus. It’s been very beneficial to us.”
Reist said that while she’s working to move the needle on STR tax revenues in North Alabama, there are opportunities to apply the success from her agency to larger STR efforts throughout the state.
“It really is making a difference and they’re seeing that it’s working,” she said of her reporting back to legislators. “So now I’m working with several senators to try and make this a part of budgets for the next year. A lot of people are running out of the COVID monies. This is something to what we’ve done to continue to find revenues and help our area.”
