For the first time in over 20 years, Mobile increased its hotel room tax to generate revenue for tourism marketing, a new commercial airport and to help offset debt on a new $300 million civic senter arena.

It will be a hefty hike. The council approved, with a 5-1 vote, a 2-percentage point increase in the lodging tax rate, taking it from 14% to 16%. That increase is on par with some of Alabama’s largest cities such as Birmingham, which has an overall 17.5% lodging tax rate along with an additional $3 per room charge.

But the council also approved another assessment on hotel stays that is not part of the overall lodging tax.

In a separate unanimous council vote, the city’s Tourism Improvement District (TID) was granted a five-year extension until 2030. Under that approval, a gradual extra assessment will be tacked onto hotel room bills: 1% immediately, 1.5% by October, and 2% by October 2026.

For a hotel room with a rate of $180 per night, the overall 4-percentage-point increase by October 2026, will result in an overnight guest paying an extra $7.20 in taxes. That would increase their total tax bill from $25.20 to $32.40.

Hotel and tourism backers praised the approvals, saying they are needed to promote the city’s new and existing developments. The approvals will also help market hotels and cheaper flights from the future Mobile International Airport terminal, a $381 million project.

“These funds will provide the batteries to power the future assets for Mobile, including Mobile International Airport, Amtrak passenger rail and the Civic Center project,” said Margo Gilbert, vice-president of the Mobile Area Lodging Corporation and general manager of the Battle House Renaissance Mobile Hotel & Spa.

Mobile Mayor Sandy Stimpson praised the lodging tax increase as a step toward helping offset the cost of some major developments that are underway – primarily the civic center arena and the airport. The council approved a $250 million financing arrangement last month to pay for the arena, an arrangement that will be payable over the next 20 years.

“If we didn’t have the lodging tax, we’d have to find additional money which would fall on the citizens of Mobile,” Stimpson said. “This is a huge win for the citizens of Mobile.”

Other city officials said the tax rate increase is needed because it will affect the least number of Mobilians. They have, for months, characterized the lodging tax increase as an assessment on out-of-town visitors. City officials say fewer than 1% of hotel stays in Mobile are from local residents.

“The Civic Center will have to be paid, regardless,” said Councilman Cory Penn. “So only 1 percent of the people who live in the City of Mobile will receive that particular tax.”

Councilman Ben Reynolds was the only council member to vote against the lodging tax increase. He said he doesn’t believe everyone has been “fully considerate” of the 4-percentage point addition in taxes that hotel guests will have to pay by next fall.

“That includes Mardi Gras organizations, myself and others who choose to have a staycation or family members staying for the holidays,” he said. “I think the revenues are there to support the airport in some other way such as with parking facilities. I think there are other revenue streams that could have been explored,”

The lodging tax increase will dedicate up to $30 million from 2025-2036, for the new airport. The increase will set aside $1 million this year, $2 million in 2026, and $2.5 million in 2027, for the new airport.

The amount then increases to $3 million per year from 2028-2035, and then down to $500,000 in 2036.

Stimpson said it will be important to limit the allocation in the first five years of the tax increase. He said the city has existing debt that it has to pay off by 2030. Some of that debt is associated with projects built over 20 years ago, such as the Alabama Cruise Terminal.

After 2030, Stimpson said the city would be in sound financial shape to incur additional debt for more projects, such as a theater at the arena site.

“It’s hugely important we market the airport and arena,” Stimpson said. “The dollars going to Visit Mobile will be used for that.”

Visit Mobile, the city’s convention and visitor’s bureau, will see an increase in lodging tax revenues, rising from its current 33.5% of the city’s portion of the tax to 37.5%.

“We have to continue doing a better job of building occupancy,” said David Clark, president & CEO with Visit Mobile. “There is a lot to do with new assets coming in with the airport and the arena.”

The five-year agreement on the Tourism Improvement District will also add extra funding for marketing areas that are overseen by Visit Mobile.

The city was the first in Alabama to approve a TID in 2020. The district has a five-year life, meaning it is either renewed with support of a majority of hoteliers or it does not get extended. A majority of the city’s hotel operators gave Visit Mobile and the Mobile Area Lodging Corporation (MALC) the approval to extend it for another five years.

During the first five years, the district granted $3.4 million in extra marketing money for promotions of the Carnival Spirit, air service, lodging attractions, and Mobile’s arts.

Capital money was also spent on TID projects such as the Africatown Heritage House, a beautification project in Tillman’s Corner, the purchase of volleyball courts for the Mobile Sports Authority and providing additional security in hotels along the Interstate 65 corridor and in the Tillman’s Corner area.