A number of hot-button issues have highlighted the somewhat tenuous relationship between the hotel industry and government in recent years. The list, which includes the likes of pool lifts, health care and National Labor Relations Board rulings on unions, reads like a roster of suggested speaking points at the American Hotel & Lodging Association’s Legislative Action Summit.
But while most of these percolate on the federal level, there’s another that has plagued hoteliers for years, if not decades, that hits a bit closer to home: bed taxes.
The charges, which can range from 3% to more than 20% of a guest’s room rate, originally were intended to fund the promotion of local and state tourism. But allocation has shifted gradually over time to fill the gaps in porous state and local budgets.
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Joe McInerney AH&LA |
It’s an easy sell from a political perspective, AH&LA President and CEO Joe McInerney told me a few days ago. “They say it’s for people that don’t live there, and they can afford to pay it.”
The only problem, of course, is that when costs begin to creep up, an entire destination can become less competitive on a national level.
“Unfortunately, when you get stuck charging too much in taxes, people stop coming, especially discretionary money, whether it’s coming for a holiday or just a long weekend,” McInerney said. “And then convention and meetings groups will stay away.”
That’s one of the reasons why hoteliers in New York fought so hard against an outrageous bed tax that crept over the 20% mark some years ago. An outspoken hotel coalition, led by the likes of Jonathan Tisch, raised enough noise to rein charges back to a more reasonable—but still costly—tax in the high teens.
What makes these and other municipal bed taxes hardest to stomach is that there’s no direct return on investment in most cases. Again, a politician could argue that hoteliers benefit from the paved roads and policemen are made possible by general municipal funds. But if that logic holds water, every business sector should be targeted with industry specific taxes—not just hotels.
Fortunately, some forward-thinking districts are pushing the pendulum back in the other direction and reallocating bed tax funds to promote tourism.
The most recent is Columbus, Ohio, a few hundred miles down the road from HotelNewsNow.com headquarters here in Cleveland. The city’s mayor earlier this month unveiled plans to reallocate nearly all dollars the city receives next year from its bed tax to initiatives by Experience Columbus, the Greater Columbus Arts Council and the Human Services Chamber, according to The Columbus Dispatch.
The 10% tax previously only allocated a portion of tax revenue to such efforts. Experience Columbus, the city’s conventions and visitors’ bureau, will receive $4.74 million this year. Next year, that will jump to $7.3 million under the new plan. The bureau could receive $8.5 million in 2014 if it meets certain conditions.
“It’s a great move for Columbus,” McInerney said in response to the move.
Fortunately, the city is not the only one to push for a more common sense approach that reinvests dollars back into the industry from whence they came. The cities of Terrell and Victoria in Texas as well as several cities in Mississippi are just a few such examples dug up by Tamika Figgs, a researcher at the AH&LA’s Information Center.
Here’s hoping more politicians follow suit and let common sense rule the day. If they’re looking for a good argument in today’s economy, all they need to do is cite jobs growth. According to an independent study commissioned by Columbus before laying out the new tax plan, the city’s tourism and arts support nearly 100,000 jobs in the area.
Those are numbers on which the hotel industry and government surely can agree.
Now on to the usual goodies …
Stat of the week
53%: The percentage of respondents to a recent TripAdvisor survey who said they would not book a hotel that does not have any reviews on the site. The findings, compiled in a September PhoCusWright survey commissioned by the review aggregator, included input from 2,739 participants solicited at random through a pop-up invitation link.
As we reported in this week’s “Hotel website blueprints” special report, the major brands are obviously aware of this trend and are adding reviews—collected from both proprietary systems as well as third parties—on their newly revamped websites.
Quote of the week
“Is the entire model working anymore?”
—Maxine Taylor, executive VP of asset management for The Chartres Lodging Group, as reported in “Agency model spurs concern over brand fees.”
Taylor’s frustration regarding the fragmented and increasingly costly distribution landscape mirrors that of more and more hoteliers with whom I speak. She later goes on to explain that third parties used to drive only 1% of business within Chartre’s portfolio, which today stands at nine owned assets and five more under management contracts. Now third parties are driving close to 10%, which cost more than $1 million in fees in one hotel alone.
Comment of the week
“the cost is less important than the continued success of the OTA's in garnering customer loyalty for themselves, building their brands, and commoditizing ours. bad deal for the hotel industry all around”
—Commenter “Anonymous” responding to “Agency model spurs concern over brand fees,” which examines whether franchisors and brand managers should be collecting fees for demand they did not generate but instead was generated by third parties.
Email Patrick Mayock or find him on Twitter.
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