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Lakeway council defers vote on hotel-occupancy meeting incentive program after policy questions
Summary
Council reviewed an ordinance to create a hotel occupancy tax (HOT) meeting-incentive reimbursement program that would set aside $200,000 annually and reimburse hotels up to 25% for negotiated meeting incentives; council directed staff to revise language and return at the next regular meeting.
Lakeway city council on Feb. 18 reviewed an ordinance (Ordinance No. 2025-O2-18-O2) to establish a hotel occupancy tax group meeting incentive reimbursement program that would allow hotels to apply for HOT funds to support room discounts, transportation and other incentives aimed at attracting meetings to Lakeway.
The proposal would create a dedicated annual pool of $200,000 from HOT receipts and authorize reimbursement of eligible costs — characterized in the staff report as “a sweetener” hotels could use when negotiating with meeting planners. “This program basically is targeted at allowing our hotels to compete better against hotels from in other markets by competing harder by being able to provide incentives like room discounts and transportation,” Hotel Occupancy Tax Fund Coordinator Steve Wiley told council.
Council members and staff discussed program mechanics, eligibility thresholds and reporting. Wiley said the ordinance’s current draft uses a room-night threshold (30 room nights) and a 25% reimbursement cap as a starting point. Council members proposed several edits during the discussion: lowering the room-night threshold to account for two-night meetings, measuring eligibility by consecutive room nights rather than event nights, and clarifying whether food-and-beverage or meeting-space costs could be funded.
Councilman Kent O’Brien recommended treating eligibility as room nights rather than discrete events so the program could capture common two-night meetings. “Is there a way to implement a two-night stay? … My point is to say 30 room nights — if it was two nights…that I would qualify in my mind,” O’Brien said during the discussion. City staff and the city attorney cautioned that Texas law limits HOT expenditures to items that primarily promote hotel occupancy; staff advised tying reimbursements to room nights for clearer reporting.
Council members also discussed whether the program should require hotels to apply before offering discounts or if a standing annual allocation could be approved and reimbursements processed after events. Wiley said his preference was for a front-and-back process — a short application followed by post-event documentation — to reduce the risk of ineligible uses. He told the council he had spoken with local hoteliers, who are enthusiastic, and with other Texas cities that have similar programs.
After extended discussion on thresholds, allowable expense categories, and whether to encourage “buy local” benefits through hotels, Councilman O’Brien moved and another council member seconded a motion to request revised language and rehear the item at the next regular council meeting. The motion to defer carried unanimously, 6-0.
Council direction to staff included returning with clarified definitions for qualifying room nights, explicit reporting requirements, language explaining how the $200,000 annual allocation would be managed, and text resolving whether in-kind discounts to meeting space or third-party merchants could be included consistent with state HOT statutes. The council did not adopt the ordinance on Feb. 18 and took no funding action tonight.
What happens next: staff will revise the draft ordinance to address the council’s direction and bring a revised proposal for consideration at the next regular meeting.
