VisitLEX proposes tourism improvement district, funded by fee on hotel rooms

In its Tuesday, February 24th Budget, Finance, and Economic Development Committee meeting, Council will receive a presentation from VisitLEX on a proposal to create a Lodging Management District, also known as a Tourism Improvement District.

According to the presentation, the district would generate an estimated $2.1 million annually for tourism marketing and destination development via a 2% fee on hotel rooms in the district.

What is a Tourism Improvement District?

A Tourism Improvement District is a type of public-private partnership where hotels pay a fee to fund tourism marketing and economic development.

Assessments for Tourism Improvement Districts are not the same thing as taxes. While funds are collected by the local government, they are managed by a board of directors that is made up primarily of the property owners that are being assessed. The funds cannot be accessed or repurposed by local government and have a specific use.

Funds gathered through a Tourism Improvement District are typically used for marketing, special events, and destination planning and development.

Nationally, there are over 200 Tourism Improvement Districts.

How does Lexington’s tourism budget compare to other cities?

The presentation shows VisitLEX's current budget at approximately $10.5 million, which is lower than some comparable cities. According to the data presented, Nashville, TN's destination marketing budget is $44 million; Savannah, GA's is $20.8 million; Columbus, OH's is $18.3 million; and Louisville's is $11.1 million. Some peer communities' tourism agencies have comparable or smaller budgets — Greensboro, NC's tourism agency budget is around $9.4 million, and Madison, WI's is around $8 million.

Of the comparison cities in the presentation, only Memphis, Louisville, Nashville, and Savannah have tourism improvement districts in addition to their base budgets. Louisville has a tourism improvement district that generates $7.8 million annually.

According to the presentation, tourism in Fayette County generates around $1.7 billion in visitor spending, supporting 11,851 jobs and producing $131 million in state and local tax revenue.

How would Lexington’s Tourism Improvement District work?

If the proposal moves forward, VisitLEX would collect signatures from at least 33% of property owners within the proposed district who together own at least 51% of the assessed property value. The proposal would then go through two readings by Council, with a public hearing in between.

If approved, the district would exist for seven years, and could be renewable through the same petition process as described above. A nine-person board of directors would oversee the funds, with at least two-thirds of board members required to be property owners or their representatives.

All hotels within 5 miles of the city center of Lexington with 2 or more meeting rooms with at least 2,000 square feet of meeting space that include a full-service restaurant would be required to pay a 2% fee on all short-term room rentals. The city would collect the assessment and the board of directors would manage how the funds are spent.

The fee could generate a $2.1 million annual budget, which would fluctuate depending on room sales. The board of directors would manage these funds for sales, marketing, destination development, and special events, in addition to operational costs.

What is the timeline?

According to the presentation, VisitLEX is conducting a petition drive in January and February 2026. If successful, the first reading of the ordinance would occur in February or March, followed by public noticing, a public hearing in March or April, and a second reading in April. If approved, the board of directors would be established in April or May, and collections could begin in the first quarter after approval.