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Lodging Industry Seeks Level Playing Field with OTAs

LugarThe travel and tourism industry, of which lodging is a significant component, is a key driver of the economy in Hawaii. In 2013, 33.9 percent of all jobs in the state were tied to the lodging industry, either directly or indirectly, and hotels, motels, resorts, and lodges generated $997.6 million in tax revenue for local and state governments. More importantly, the 285 lodging properties and 56,802 rooms in Hawaii are responsible for $1.9 billion in wages to the hardworking men and women in the state’s hotel industry. With every new job and every new hotel room, our industry is making a further investment in the people of Hawaii.

At present, the hotel industry in Hawaii finds itself on an uneven playing field with online travel companies, and the Hawaii Supreme Court is currently considering whether or not this disparity should stand. Hotels, many of which have a significant online booking presence through their own branded sites, are remitting the full taxes for online bookings to Hawaii, while online travel companies are not remitting full taxes for online bookings. That is because unlike hotels, online travel companies do not calculate local and state taxes on rooms based on the retail price charged to customers. Because of this disparity, hotels are subject to a higher effective tax rate than online travel companies for the same product.

We urge the Supreme Court of Hawaii to ensure fair and equal application of the law. The application of Hawaii’s general excise and transient tax laws, which are vital to the state’s tourism and infrastructure, should be applied fairly and equitably to hotels and online travel companies. Despite assertions to the contrary, having online travel companies remit taxes will not depress tourism in Hawaii. In fact, the reality points in the opposite direction—other states with enforced equitable remittance of taxes between hotels and online travel companies have since had an increase in tourism.

By not having to remit the full taxes for rooms booked online, online travel companies are receiving a dividend from the state of Hawaii while marketing many other locales in competition with Hawaii’s destinations. Contrast this to the significant investment hotels on the ground in Hawaii have made in the state, its infrastructure, and most importantly, its job market and community. Over the past several years, tourism in the state has been on an upward trajectory in large part thanks to the significant investments and marketing efforts by the hotel and lodging industry. In 2012, a total of 8.028 million visitors arrived by airline and cruise ship—a 10 percent increase over the 2011 totals and 1.01 million more than the number of visitors in 2010.

At its heart, this is not an issue of harming the travel and tourism industry—it is a matter of guaranteeing equal application of the state’s existing tax laws instead of picking winners and losers through unequal application of the law. The future of Hawaii’s hotel industry is very promising, and hotels are continuing to drive job creation and economic growth in the state. To continue this positive momentum, however, it is important that the hotel and lodging industry have the assurance that they will be operating on a level playing field with online travel companies. We urge the Supreme Court of Hawaii to make the decision that is right for the state and its tourism industry.

Katherine Lugar is president/CEO of the American Hotel & Lodging Association. Learn more at www.ahla.com.

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