Heads in beds took a hit in 2025.
That was the message members of the Eureka Springs City Advertising and Promotion Commission heard during the commission’s monthly meeting Wednesday, Feb. 25.
While retail and food-and-beverage receipts met or exceeded projections, lodging occupancy in hotels, motels and short-term rentals did not fare as well as in recent years — a trend that caused concern among commissioners, including three who own lodging businesses.
CAPC finance director Ty Reed said tourism tax collections from lodging in 2025 were about $22,000 lower than in 2024, dropping from about $950,000 to $927,000.
Food and beverage collections, however, increased by roughly $24,000, rising from $1,106,024 to $1,130,025.
Commissioner David Avanzino, who also serves on the city council and co-owns the Wanderoo Lodge and Gravel Bar, said the decline in lodging should be a focus for both the CAPC and the city council. One idea worth discussing, he said, is whether retail establishments should again contribute to the city’s tourism tax.
“Lodging is absolutely down. We can say that citywide,” Avanzino said, noting that recent sales tax numbers presented to the city council show retail businesses performing strongly.
“We were presented tax remittances overall for the city and retail is up by 32 percent, which is phenomenal,” he said. “I’m glad they are doing that.
“But we are at a crossroads, I believe, and we need to revisit collecting [CAPC] taxes on retail establishments.”
Avanzino said the current system places the burden of the tourism tax primarily on lodging and food-and-beverage businesses even though tourists spend money throughout the city’s economy.
“The way I see it is that we are placing the burden of collecting this tax and passing it on for people who are not putting heads in beds,” he said. “So let’s say for the restaurant industry in town, we’re collecting all this money and people aren’t staying — they’re spending all their money in retail. Fantastic. I’m glad retail is doing good.
“However, if we’re going to continue to advertise this city for all of the businesses in this city, then all those businesses need to be equitably represented tax-wise.”
Avanzino said lodging operators are being squeezed by rising costs.
“With lodging down and restaurants barely swimming, I don’t think that equates to good results,” he said.
Commissioner Robert Schmid, owner of Edelweiss Inn, agreed that higher prices combined with declining occupancy point to a concerning trend.
“Especially when you think that we have increasing prices, the scissor opens up even more,” Schmid said. “With lodging down and higher prices, it clearly indicates you have fewer nights occupied.”
Commission chair Shira Fouste, co-owner of Evening Shade Inn, emphasized that if retail businesses were added to the tourism tax structure, the tax would still be paid by customers rather than businesses themselves.
“The tax money is collected from the person paying for those goods or services,” Fouste said. “We’re just remitting that back to the state or the CAPC or whatever organization.”
Avanzino said lodging and restaurant operators are increasingly being asked to fund events that may not significantly increase overnight stays.
“We are having to raise prices, as Robert said,” he said. “Long-term we are diminishing our capacity to sell ourselves to tourists because we are having to raise prices to offset taxes, tariffs, whatever you want to say.
“And especially when people come to us asking for money to put on events, when those events aren’t putting heads in beds, what are we doing? We’re just throwing money away for an event that is not putting heads in beds that is for locals.”
Tourism director Mike Maloney told commissioners that Eureka Springs is not alone in facing lodging challenges.
“This is endemic to the things we’ve looked at for a while on the proliferation of Airbnbs and VRBOs outside the city limits,” Maloney said.
He said there are more than 1,700 short-term rental properties in Carroll County, many located outside Eureka Springs city limits.
Those rentals still bring visitors into town to shop and dine, he said, but they do not contribute lodging taxes to the CAPC.
“A unit sitting outside the city limits will help retail and will help restaurants,” Maloney said. “They come to town, they shop, they eat. They go back out and they’ll spend the night, and they could have a house of six people or a house of 12 people.
“And yet they are not what we consider a collector at that point.”
Maloney said the issue was discussed during the Governor’s Tourism Conference in Little Rock, where communities across the state reported similar challenges.
“We are losing money rapidly,” he said. “And I can tell you from Governor’s Conference, this is across the board. Every community is facing basically the same situation.”
Commissioners agreed the topic warrants further discussion and likely a workshop.
Any change to the tourism tax would ultimately require voter approval, Maloney said.
Avanzino said the process would begin with the CAPC before potentially going to the city council.
“I had a conversation with the city attorney and she said to me that it has to go in front of the CAPC first,” Avanzino said. “So we’ve got to make that decision before we take it to the city council.”
Retail businesses previously collected a 2 percent tourism tax until about 2007, Maloney said.
Reed told commissioners the CAPC had $1,510,000 in the bank as of Jan. 31.
Actual collections for January totaled $124,000 compared with a budget of $110,000, while expenditures were $279,000 compared with a budget of $309,000.
“So our budgeted net income was about $150,000 negative,” Reed said. “We did a little bit better than we planned in January. It’s just collections are less and expenses are more in January, so that evens out.”
Maloney also told commissioners that legal action has been taken against at least one business that failed to remit tourism tax collections.
“We filed against one,” he said without naming the business. “It’s in the hands of the Carroll County Court right now.”
Another delinquent business has been warned it could lose its Arkansas Alcoholic Beverage Control permit if the issue is not resolved by March 12, Maloney said.
Avanzino said additional enforcement options exist, including filing a “certificate of indebtedness” against delinquent businesses, which could lead to the revocation of a city business license.
“I just want the commission to know that when I see this past due collectors list, my frustration kind of ramps up month after month when I see these people on the same list,” Avanzino said.
“We cannot be complacent. I have a feeling that these businesses are just kind of simply saying, ‘I don’t care, do what you want to me, I can get away with it.’”
Commissioners emphasized that tourism taxes paid by customers do not belong to the businesses that collect them.
“I would assume it’s a cash flow problem,” Schmid said of delinquent payments. “But nonetheless, the amount is owed and should be paid on time.”
Avanzino was more direct.
“They may have cash flow issues. I get it. We all have cash flow issues,” he said. “But the bottom line is you collected a state tax and you have defrauded the government by using those monies to pay for other bills.”
Airbnb tax collection proposal
Maloney also reported on discussions at the Governor’s Tourism Conference involving a proposal that could change how lodging taxes are collected from short-term rental platforms such as Airbnb.
Under the proposal, taxes would be remitted directly to the Arkansas Department of Finance and Administration rather than local municipalities. The state would retain about 3 percent before distributing the remainder to local advertising and promotion commissions.
“Airbnb took a court case to a Supreme Court in a particular state,” Maloney said. “What it amounted to was they are requesting from the state of Arkansas that Airbnbs do not remit to the local municipality but rather remit only to the Department of Finance and Administration.”
The idea, he said, is that the state could collect taxes more efficiently using its existing sales tax enforcement system.
“If you don’t pay your state sales tax, DFA will come and shut your business down,” Maloney said.
However, many municipalities expressed opposition to the idea during the conference, he said.
More information is being gathered about the proposal.
Maloney told commissioners about potential grant opportunities to fund repairs at The Auditorium as the historic venue approaches its 100-year anniversary in 2029.
“This is for us to go ahead and see grant opportunities for the repair,” Maloney said, citing potential projects such as exterior windows, brick and masonry work, roof repairs and improvements to the upstairs green room.
He also said Eureka Springs is expected to become a designated “Base Camp” community in 2027, part of a state initiative highlighting communities that serve as hubs for outdoor recreation.
“The Base Camp theme is inclusive of everything you can do in the great outdoors in the state of Arkansas,” Maloney said. “Mountain biking, hunting, fishing, hiking, camping, skydiving — it doesn’t make any difference what it is.”
The program encourages extended stays by visitors and is part of a statewide effort to increase tourism revenue.
The state currently collects about $26 million annually from its tourism tax and hopes to exceed $50 million within the next decade by increasing visitation rather than raising the tax rate, Maloney said.
Commissioners were also told that a new website focused on The Auditorium has been launched at
esaud.org.
The site includes historical information, photographs and details on upcoming events.
“We’re so excited about it,” Maloney said. “It’s layering in the history of The Auditorium, all the events that are coming up, all the people that will be playing.”
CAPC staff is working with Jeff Danos of the Eureka Springs Historical Museum to restore historic photographs that could be added to the site.
The website was developed in-house.
The commission also considered funding requests under a new policy that limits grant decisions to specific meetings rather than reviewing requests monthly.
All requests presented during the meeting were approved.
Anna Smedley of the Eureka Springs Community Center and Doug Allen of Bubba’s BBQ received $2,500 to revive the Victorian Classic race, scheduled for March 28.
The Victorian Classic was once a major event in Eureka Springs but ended during the COVID-19 pandemic.
The community center was also approved for $2,500 for the Center Street Block Party fundraiser scheduled for May 30.
• $5,000 for the Nightmare in the Ozark Film Festival, Oct. 21-24
• $5,000 for the 45th Annual Eureka Springs Preservation Society Christmas Tour of Homes
• $5,000 for the second “Run Unicorn Run” races
• $5,000 for Out in Eureka diversity weekends in April and November
• $4,000 for a new event, ObscuraCon, scheduled July 24-25 at the Inn of the Ozarks Convention Center
According to its website, ObscuraCon is a two-day convention that brings together researchers and enthusiasts to explore topics such as extraterrestrials, paranormal phenomena, cryptozoology and parapsychology.
The event will include workshops, vendors, paranormal investigations and a costume ball.
The next round of funding requests will be considered in May.
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