06/14/2012 05:59 EDT | Updated 08/14/2012 05:12 EDT

Niagara Falls' tourist fees collected with little oversight

Four years after being rebuked by Ontario's provincial government for charging a three per cent "destination marketing fee," most of Niagara Falls' hospitality businesses continue to charge the fee under different names, with little or no scrutiny or oversight, a CBC News investigation has found.

The scheme, which has existed since 2004, pulls in an estimated $15 million a year from tourists who are likely unaware the fee is voluntary and can be removed from their bills if they ask.

In 2008, Ontario's Consumer Ministry issued a bulletin warning Niagara Falls hoteliers and restaurateurs that "You must not label a fee 'DMF' or 'DPF' or claim the fee is for a tourism or destination marketing initiative if you are not remitting the fee to a legitimate non-profit agency for the exclusive purpose of promoting tourism."

This week, in the lead-up to the 550-metre high-wire walk across the Niagara Gorge by daredevil Nik Wallenda, the CBC visited numerous hotels and restaurants.

Staff at close to 80 per cent of the establishments surveyed confirm that the DMFs are now called DMDFs (destination marketing and development fees) or TIFFs (tourism infrastructure funding fees).

What's more, instead of the money being pooled for joint promotional purposes for the entire region, each establishment collects and holds on to the untraceable fees, spending the money as they see fit, confirmed Wayne Thomson, chair of Tourism Niagara.

"I have no idea [how much money is collected]," Thomson told CBC News in an interview at Embassy Suites Hotels.

Thomson wears many hats, and in addition to being chair of Tourism Niagara, he is a consultant for a group of the city's largest hotels as well as being an elected member of city council.

"It's an individual property owner's assessment," said Thomson. "Are they getting three per cent and putting it in their pocket? If you think that, you don't know much about tourism in Niagara."

When asked why the fees are not more transparent and put into a pool for tourism promotion, Thomson's response was "Why do they have to?"

Many Canadian and American cities use DMFs to impose levies on hotel rooms as part of organized marketing strategies. However, critics of the Niagara Falls fee point out that other communities ensure there are audits and monitoring of the pooled funds, transparency around how the money is spent, and the fees are not applied on restaurant bills.

Hotels contribute to special projects

Thomson, who is also a former mayor, insists Niagara hotels that participate spend about $2 million to $3 million a year on projects such as an annual subsidy to a nearby convention centre, the Festival of Lights, fireworks and other tourism projects. They also recently contributed an additional $200,000 to the fees demanded by the handlers of Wallenda, who on Friday will attempt to walk across the Niagara River near the American and Horseshoe falls.

Thomson disputed the suggestion more than $15 million is collected each year (a conservative estimate based on 80 per cent of Niagara Falls' hospitality industry participating). However, Thomson admits he has no idea how much is collected. He reiterated that the fee is "voluntary" and that if visitors don't like it, they can request not to pay it and it must be removed from their bills.

Niagara Falls Coun. Janice Wing has been fighting the fee since its inception in 2004. She says the frustration for tourism advocates is that "the monies collected go into the individual business's coffers and there's no control over where or how the money's spent."

She is asking the province to outlaw the current practice, arguing the city has no control over the fees charged, so "we cannot police what these businesses do."

Some major local establishments have refused to collect the fee, over concern for the optics of the practice and its failure to provide money to a region-wide marketing strategy.

Great Wolf Lodge general manager Keith Simmonds says he supports the idea of an organized DMF that would consolidate efforts to promote tourism across Niagara, but only if an official one was implemented with safeguards in place similar to those that have existed in Toronto, Ottawa, Kingston and Huntsville.