After last week’s report that the Memphis tourism industry is on decline, it seems a perfect time for an analysis of the potential role that Memphis’s exorbitant hotel-tax rate had on the drop.

After all, when someone books a room in the city at a specific rate, the bill at checkout will be almost 20% higher because of taxes and fees.  Only two U.S. cities are more expensive because of taxes and fees. 

It’s an issue that political and tourism officials skirt around although hoteliers in Memphis, in their quietest moments, can attest to their concerns about the impact of the hotel-motel taxes.

According to the report on lodging taxes by HVS, Memphis has the third highest total taxes for a hotel room – that’s #3 among 150 cities – with a total lodging tax rate of 18.75%.  There also is a $2 a night fee for the Tourism Improvement Zone, the first fee of its kind in Tennessee.

By comparison to the Memphis rate, New York’s is 14.75%, Los Angeles ifour sdfsd 15.5%, New Orleans is 16.20%, Nashville is 16.25%, while 147 cities have rates lower than ours.

In Memphis, there are a state sales tax of 7%, local option sales tax of 2.75%, Memphis hotel-motel tax of 4%, Shelby County hotel-motel tax of 5%, and a $2 per night Tourism Development Fee. 

The tourism economy in Shelby County declined by 1.37% last year and overnight visitors dropped 2% in 2025 and 3.5% since 2024. 

The Memphis Surcharge

Tourism officials attributed our region’s dip to the growing tourism assets in North Mississippi and Eastern Arkansas.  It’s anybody’s guess what they are referring to, because it’s much more likely that the decline is based on the fact that tourists from our region – the bread and butter of our tourism industry – are staying in those states which keeps them within striking district of Memphis attractions but at a lower daily hotel cost.

All in all, tourism officials seemed oblivious for the decline, delivering up the normal cheerleading to the faithful and hopeful. But here are some facts you’ll never hear at these tourism get-togethers:

A room for one night at Homewood Suites in Southaven may cost $154 and the total cost with taxes and fees is $170.  A room in Courtyard by Marriott Memphis in Southaven costs $197 but with taxes and fees, it’s $217.   The Southaven Tourism and Convention Tax is 1%, the DeSoto County Convention Tourism tax is 2%, and sales tax is 7% for a grand total of 10%.

Meanwhile, if a $197 a night room is booked in Memphis, the cost upon checkout is $235.45. 

A one-night stay at the Peabody also charges a 5% Tourism Development Zone tourism surcharge, raising taxes on a room there to 23.75%, which includes a $14 a day “resort fee.”  Suddenly, a $283 room has an actual cost of about $349.  A $493 room at the Westin results in a nightly cost of $587.  And costs at Big Cypress Lodge soar: a $300 room rate is $402.15 upon checkout (it includes an eye-popping $40 resort fee). 

Sticker Shock

It’s little wonder that sticker shock is a regular occurrence when guests are presented with their final bills at checkout. 

Of course, nothing about any of this was mentioned in last week’s “tourism summit.”  Then again, Memphis Tourism itself depends on the hotel-motel tax for its budget. 

Memphis Tourism itself has said sizable segments of our visitors are “bargain hunters” and “budget-conscious travelers.”  Those are precisely the kinds of tourists who might stop across state lines to save money on hotel rooms. That’s why it seems the time to shine a light on the impact of hotel-motel taxes.

Earlier this year, Chuck Pinkowski, a highly respected hotel and hospitality consultant, said the occupancy rate for downtown Memphis is 50%.  Spending for lodging in Shelby County fell $45 million from 2024 to 2025.

According to its annual report, Shelby County drew 10.3 million visitors in 2025, or an average of 28,219 a day.  With that many people supposedly visiting daily, it’s stunning that downtown is often a shadow of itself with sparse crowds and near-empty streets.  But such is the nature of tourism industry hyperbole and it has been ever such.

Hotel-Motel Tax History

The hotel-motel tax became crucial in 1980 when the Memphis Jobs Conference identified it as the source of funds that allowed Memphis to move tourism from an afterthought into a major economic priority of the city.  By 1987, state law was amended to include the Memphis Convention & Visitors Bureau (now Memphis Tourism) at a higher level and to guarantee a yearly increase of 5%.  As a result, the $750 million tourism industry of 1985 grew to $1.5 billion by 1993 and $2 billion by 1996.  Today, it has a $4.18 billion economic impact.

Early on, it was used to fund the Memphis CVB and to pay the bonds for the Convention Center.  Because Tourism Development Zone revenues could be used for the Convention Center, city and county governments moved the hotel-motel taxes to pay for the building of FedExForum.

Hotel-motel taxes paid for the $500,000 renovation of the convention center music hall in 1991; $200,000 for an acoustic shell for the Memphis Symphony; $11.5 million for improvements to The Pyramid; and $685,000 for a new scoreboard for The Pyramid.

At the direction of Shelby County Mayor A C Wharton, Shelby County’s payment to the Convention and Visitors Bureau funding was frozen for a few years despite state law requiring a 5% yearly increase.  Before the correct funding was restored, tourism marketing funding had taken an $11 million hit.

The tax source again came in to play for the FedExForum again as local governments devised a way to pay for $550 million in renovations that the Grizzlies are demanding for the 21-year-old arena.  Once again, tourism budgets took a direct hit.

To that end, the Tennessee Legislature changed the law to set these new rules for the hotel-motel revenues: 

  • When Shelby County collects the hotel-motel tax, Memphis Tourism receives 35.75% of the tax revenue first.
  • Shelby County receives up to $11.4 million annually to pay the existing FedExForum debt, future renovations debt and the county’s current agreement with the Memphis Grizzlies to cover operating shortfalls through the end of the current lease (2028-29 NBA season).
  • After that, 25.5% of the remaining revenue goes to Memphis Tourism, which will receive no more than 61.25% of the hotel-motel tax in a year.
  • If, after Memphis Tourism receives its first cut, there is not enough money to fund up to $11.4 million worth of debt service at FedExForum, Memphis Tourism will give money out of its share to the county to make up the difference between what the county has on hand and the $11.4 million needed.
  • After the renovated FedExForum bonds are paid off, Memphis Tourism receives 61.25% of the hotel-motel tax money, and the county can allocate 38.75% to other allowed uses.

The hotel-motel tax has grown from a largely ignored, modest source of money for the convention center in 1969 to a go-to source of money by 1991 to bring the Grizzlies to Memphis and now as the money to keep the NBA team here.

For politicians, the hotel-motel fund is treated as a guilt-free source of money on the proposition that it’s being paid by people from outside our community staying in our hotels.  That’s not to say we shouldn’t feel guilty for the high surcharge we are charging hotel guests who visit Memphis or the way that the funds have been raided in recent months to benefit the Grizzlies.

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