As the summer travel season approaches, the lodging industry is celebrating a major legislative win. This time last year, AH&LA was fighting an intense battle against the Internet Travel Tax Fairness Act (ITTFA). Opposing ITTFA is our number one legislative priority and hoteliers from across the country visited with their members of Congress during our 2010 Legislative Action Summit (LAS) to explain the threat ITTFA posed to the lodging industry.
Aided by a common sense message of fairness, and coupled with several meetings to educate lawmakers, AH&LA has blocked this legislation on the federal level. Although the Online Travel Companies (OTCs) recognize that lawmakers are now aware of the issue and oppose their legislation, they remain determined to gain a tax preference over hotels. Hoteliers need to be concerned.
AH&LA identified early on the threat created by the OTCs that is occurring—hotels are being targeted in lawsuits as a way to recover the tax dollars localities believe they are owed.
The City of San Francisco is suing hotels for taxes it believes were collected by OTCs but not remitted—despite the fact that the hotels have never received this money and have paid their tax bills in full. Here, the hotels are a means to an end—the hotels are located in the City of San Francisco’s jurisdiction. Unfortunately for San Francisco hoteliers, it looks to be an expensive end. This is the scenario AH&LA has always feared and we expect more localities to follow suit if this practice is successful.
The City of Columbus, Ga., successfully sued the OTCs, claiming they owed taxes that were collected but not remitted. As a result, every hotel in the city was de-listed from the OTC websites (Orbitz subsequently came to an agreement with the city and now lists hotels in Columbus again). The OTCs are appealing the court’s decision. In the appeal documents, OTCs state that if the city wants the tax money, they should sue the hotels instead of the OTCs. Again, this is despite the fact that the hotel never collects and has no knowledge of the final tax amount. OTCs have created a lucrative business model by not remitting taxes on the retail rate and they are more than happy to shift the burden to hoteliers in order to keep their tax preference.
In addition to being dragged to court, hoteliers now need to be aware of legislation appearing on the state level. When the OTCs were stymied at the federal level by AH&LA, they began to pour resources into tourism-heavy states in hopes of quickly and quietly codifying their tax loophole on a state-by-state basis. Perhaps the best example of this strategy is in Florida.
Members of the Florida legislative leadership were supportive of the OTC bill due to years of lobbying by the OTCs. Once AH&LA became aware that a bill similar to the federal draft legislation was being considered, we actively opposed the legislation and began to organize Florida hoteliers.
Hoteliers from around the state made the trip to Tallahassee to testify against the bill and AH&LA coordinated with counties to create a strategy to kill the legislation. Thanks to the many engaged Florida hoteliers who testified, wrote, and called their members, this legislation was unable to pass this session.
Three hoteliers in particular deserve special recognition—Keith Overton of TradeWinds Resort, Tom Williamson of Ocean Partners Ltd., and Bob Davis of the Hotel & Lodging Association of Volusia County.
It must be emphasized that while we were able to get the Senate to stop the legislation due to our determined opposition, we expect the issue to reappear next year. This issue has been delayed, not resolved.
Florida is only one of many states that are dealing with OTC bills. Both Virginia and California have had legislation introduced and defeated, and AH&LA fears that this issue will continue to spread.
AH&LA is coordinating with our partner state associations to help hoteliers take preemptive action. The most effective time for hoteliers to contact their state legislators and governors is before the issue has gained traction or momentum. It is significantly easier to alert lawmakers of the possible threats now, rather than to play defense. Make no mistake; many more states will see OTC legislation introduced.
The silver lining in this difficult and time-consuming endeavor is that when we explain the issue to decision makers, they normally agree with the lodging industry’s position. Giving online travel companies an unfair tax loophole that puts hoteliers at the risk of paying substantially higher taxes is incredibly hard to justify. Politicians generally support hoteliers (who happen to be important constituents) and the news media overwhelmingly supports the lodging industry on this issue—if they hear the facts.
Our industry needs to proactively demand tax equality with out-of-state OTCs. Our position is easy to support, but we need to make sure that it is widely broadcast. Every politician, reporter, and decision maker should hear this phrase: OTCs should remit taxes based on retail price, as hotels have always done. If hoteliers do not get this message out and to the public, explaining the devastating effects this legislation would have on hotels in their districts, we will be dealing with higher taxes and an unlevel playing field.
The tax preference for OTCs over hotels is being successfully blocked at the federal level, but remains a massive threat to jobs, revenue, and our entire industry. The best way to ensure victory is to make our voice heard.