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June 1, 2008
Online Travel Industry Having Tax Problems
There seems to be a few cities in Texas that want the online travel industry to ante up millions of dollars in lost tax revenues - and there is a possibility this could move to the other states. Houston and San Antonio - guess Dallas would be next if the decider is towns with NBA teams - have filed suit against online travel companies for not paying the right amount of occupancy taxes dues.
"Hotels in Houston must remit to the city the hotel-occupancy tax of 7 percent, based on the price at which they sell rooms. The city uses the money to promote tourism and to pay off debt for Reliant Stadium, Toyota Center, Minute Maid Park and the Hilton Americas convention hotel".
'The city took in more than $57 million in the occupancy taxes in 2007," a Houston City official told the Houston Chronicle.
"On Tuesday, a federal judge granted San Antonio's motion for class-action certification in its lawsuit against 16 companies including Hotels.com, Expedia.com, Priceline.com and Orbitz. The San Antonio suit alleges the online companies collect hotel tax at the retail rate but only pay taxes on the bulk wholesale rate they are charged, " WebProNews reported
Obviously the travel industry is claiming increased costs will have an impact on tourism. That is absolutely true, while the local governement may not collect the taxes and does lose - the money comes in the pockets of those who visit and thus the average spend of the customers will be less. So maybe the local chamber of commerces should think about that and talk to the mayor.
Bookings will be down slightly because of higher prices - even though the prices will just increase across the board so people will not recognize the jump. Either way in a time of high gas prices actions like this will only hurt the travel industry as a whole. There are not many travel agencies left and few would be looking to invest in one right now.
Posted by Frank Watson at June 1, 2008 10:14 PM
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Comments
Great perspective Frank,
I think anything a city does that would cause an increase in rates is quite ridiculous for a few reasons:
1) the more expensive a city is to visit, the less people come to visit. Every guest spends $X on food, etc when they come. Not sure a few "rich" visitors will make up for the bargain hunter masses that a city can attract w/ breaks instead of additions
2) These towns should use that money to promote booking directly with the local hotel instead of using GDS services. Most larger hotels will match the GDS rate if you book directly. This means more money for the hotel and more for the locals.
Just my $.02!
~Carrie
Posted by: Carrie Hill at June 2, 2008 10:30 AM
I could truly understand Carrie's (and Frank's) comment if it weren't for the fact that Expedia, Hotels.com and the like weren't deceiving the consumer into thinking the fees they currently charge were all tax. Come on - Expedia, Hotels.com and the rest of you in the dot com industry that continues to deceive the public, disclose to the consumer what they are actually paying and quit hiding behind the facade that full disclosure would give your competion a leg up. The cities and counties filing suit are not the bad guys here they are only asking Expedia, etc. to pay what they have the consumer believing they are already paying -- which is tax on the amount that they advertise on their website. It is so obvious that most consumers are unaware that the rate they book on the internet is not the rate that Expedia, Hotels.com and the like pay to the actual hotel. It is less and in some cases it is MUCH, MUCH less (normally about 30%). AND to make matters worse they charge a service fee on top of it all and lump it togather under the title of taxes and fees. This lumping togather fools the consumer into thinking that the amount goes to the local authorities -- IT DOESN"T!!! I just wish just once the consumer, reporters, etc., would read the agreement on the websites of Expedia, Hotels.com, etc. and truly see what it is they are agreeing to!!.
Of course the tourism industry says increased costs will have an impact on toruism -- and it does. But this is not additional monies being paid this is money that is already being collected under the guise of tax and is not being forwarded to the taxing authorities!!
I, for one, believe that if I, as a consumer, am paying tax for a unit that is costing $100.00 a night (based on an online rate) and Expedia, Hotels.com or whomever pays to the hotelier at a rate of $70.00 a night for that unit, the total tax I pay (or that I presume is tax) should go to the local taxing authority.
Just one persons opinion!!
Posted by: Sue at July 9, 2008 1:06 PM
