Council Kills Proposed Occupancy Tax on Ocean City Lodging

Ocean City will not impose a 3 percent local occupancy tax on hotel and motel rooms as well as rentals booked through popular online services such as Airbnb and Vrbo.

At the urging of hotel and motel representatives, City Council allowed an ordinance that would have implemented the tax to die Thursday before it was given final approval.

Council originally introduced the ordinance for the 3 percent tax on Nov. 21 by a 4-3 vote. However, there were indications that it would not receive enough support during the final vote Thursday because of opposition from hotels and motels.

“We listened to what people were saying and realized that there is a lot more due diligence that needs to be done,” Council President Pete Madden said. “We’re going to take a step back and re-evaluate what we’re doing and why we’re doing it.”

Madden noted that Council has no intention now of bringing back the occupancy tax for another vote.

“Not anytime soon,” he said in an interview after the meeting.

For the last two years, Ocean City officials have been kicking around the idea of imposing an occupancy tax on lodging as a way to generate extra budget revenue for the town.

Originally, the 3 percent tax was proposed only for rentals booked through online services such as Airbnb and Vrbo. But four members of Council expressed concerns that the city was not being consistent with the tax, so hotels and motels were added to an amended version of the ordinance that was introduced Nov. 21 by the 4-3 vote.

    The seven-member Council doesn't go forward with the tax.
  

Almost immediately, the hotel and motel industry expressed its opposition to the tax and urged Council not to go through with it. Industry representatives warned during Thursday’s Council meeting that the tax could discourage price-conscious hotel and motel guests from vacationing in Ocean City.

“The 2024 season had lower occupancy for all of the hotels and motels, and this will certainly hurt more. Ocean City guests have been stating that the city is pricing itself out of the middle-class market, and those are our people,” said Karen Barlow, manager of the Beach Club Hotel and Beach Club Suites.

Barlow warned that an occupancy tax would not only hurt the hotels and motels, but would have the broader impact of harming the entire city.

“But perhaps most important is the overall impact this will have on the entire city. If we increase rates by an additional 3 percent tax, guests will likely stay fewer nights and therefore there will be less spending in Ocean City and a negative overall impact on revenue for the community,” Barlow said.

Karen Morella, a local resident who has worked at the Beach Club Hotel, agreed with Barlow that an occupancy tax would simply make it more expensive for visitors to vacation in Ocean City.

“I really think that we have hit our visitors a whole lot, and we need to step back. If we want to continue to be America’s greatest resort, I think we have to make it affordable for the people to come here and for them to be able to spend their money with our different vendors,” Morella said.

    Michele Gillian, executive director of the Ocean City Regional Chamber of Commerce, urges Council not to approve the occupancy tax.
  

Michele Gillian, executive director of the Ocean City Regional Chamber of Commerce, expressed support for the hotels and motels in comments to Council. She also asked the governing body to reconsider the occupancy tax.

“Our hotels and motels are such an asset to Ocean City, and we want people to keep coming to America’s Greatest Family Resort,” Gillian said, using the city’s tourism slogan.

The state already charges a 5 percent occupancy tax on hotel and motel stays, as well as the 6.625 percent state sales tax, according to the New Jersey Treasury Department website.

Ocean City’s proposed 3 percent occupancy tax, if approved, would have added an extra layer to the cost for hotel and motel guests.

Peter Voudouris, president of the Flanders Hotel, said the “timing is bad” for an occupancy tax. He noted that 2024 “was a little soft” for hotel reservations.

“I understand the need for increased revenue, because I have a big budget, too. But you know what, timing is everything. And in my opinion, as I spoke to you, this isn’t the right time,” Voudouris told Council while urging them not to go through with the occupancy tax.

If it had been approved, the occupancy tax would have taken effect on Jan. 1, 2025. Voudouris said the Flanders has already booked about $1 million in reservations for 2025, so it would have been difficult to retroactively charge hotel guests the 3 percent tax.

“That 3 percent, I can’t go back to these people and tell them they have to send me more money. That’s a bad business practice. On a million dollars, at 3 percent, I can’t afford to take a $30,000 hit on my budget. Budgets are tight,” he told Council.

    Flanders Hotel President Peter Voudouris says "this isn't the right time" for a lodging tax.