On the eve of the American Hotel & Lodging Association’s March 15-16 Legislation Action Summit in Washington, D.C., a coalition of intermediaries penned an open letter to the hotel industry, urging dialogue about hoped-for federal hotel-tax legislation and inviting AH&LA leaders to meet with the group during or after the conference.
Citing “acrimony in recent weeks” over efforts to legislate a national standard about hotel taxes, the letter — sent by the American Society of Travel Agents, the Interactive Travel Services Association, the Business Travel Coalition, the U.S. Tour Operators Association and Hotel Electronic Distribution Network Association — Â urged the sitdown so hotels and online travel agencies and travel management companies might work together to address any concerns about the legislation’s “potential language.”
As of Saturday morning, AH&LA hadn’t responded to a press inquiry about the letter, but ITSA spokesman Andrew Weinstein says, “Their initial response was that they will share the letter with their hotel partners and approach them about meeting with us, but that it would be impossible to do so in the midst of their legislative summit.”
With OTAs facing dozens of lawsuits by municipalities across the country seeking to get them to remit hotel taxes on the retail — and not just the net — rate, the differences between AH&LA and the coalition of intermediaries appear to be far broader than “potential language.”
The AH&LA’s position is that the OTAs seek a federal tax preference that would prohibit local jurisdictions from taxing anything beyond the merchant rate they get from hotels, and that “the legislation also discriminates against every lodging property in the country by specifically banning hotels from using the new tax category.”
“Because lodging properties will continue to collect and remit all taxes due, TPIs (Third Party Intermediaries) will be able to use their federal tax preference to market a lower final cost because they will be shielded from charging the same amount of tax,” the AH&LA states.
The issue will be one of the central themes of the AH&LA conference next week.
For its part, the coalition of intermediaries states in the letter that it does not “think municipalities should attempt to shift any additional tax burden to hotels and we will work with you to fight any such efforts aggressively.”
Tnooz reported in early February that ITSA and AH&LA had been discussing terms for a meeting about the hotel-tax issue, but apparently that get-together never happened.
So now the intermediaries have gone public with an “Open Letter to Our Partners in the Hotel Industry.”
Asked if the initiative to meet with AH&LA leaders next week, with its conference in full swing Monday and Tuesday, was a publicity stunt, ITSA spokesman Weinstein says:
“Not a stunt at all.  Their leadership will all be in D.C. next week, so it’s the perfect time logistically. (Their conference is only on Monday and Tuesday, so we could meet at any time before, during or after it.)  We would be happy to work around their schedules, but it seems crazy to start a fight on the Hill before we even sit down to see if their concerns — which seem mostly like wording issues  – can be resolved in a way that benefits the entire industry.”
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Side Note: For ASTA, the open letter was signed by Paul Ruden, the travel agency group’s senior vice president, legal and industry affairs. ASTA announced Friday that long-time CEO William Maloney resigned. The chief executives of the four other organizations signed the open letter on behalf of their respective groups.
Apologies for being cynical, but I have to think this letter is mostly grandstanding.
Most significantly, the hotels are not the ones suing the intermediaries. The content of this letter would have been much more appropriate if it were addressed to associations such as the National League of Cities, National Association of Counties, etc.
This does not mean the AH&LA should not be involved – they desperately need to engage in the debate. This issue advancing to this level of dysfunctionality is partially due to the hotel industry standing on the sidelines for such an extended period.
No group can claim innocence in the creation of this debacle.
While I agree completely with the headline of the letter, the issues raised in the document continue to deal with the issue in annoying superficiality.
The prominent suggestion to halt any future litigation struck me as the core objective.
However, the letter also avoids the three elephants in the room:
1) Cities are trying to increase the revenues associated with hotel occupancy taxes. In essence, the cities understand that assessing taxes based on the price paid by the consumer provides a better yield than the amount booked as revenue by the hotel collected by the hotel.
2) Hotels transacting OTA bookings under the commission model are liable for occupancy tax based on the full retail price paid by the consumer, even when the commission paid to the OTA is equivalent to the discount amount under the merchant model.
3) The merchant model provides OTAs with a structural margin advantage compared to the hotel when occupancy taxes for stand-alone hotel bookings are assessed based on the retail price paid by the consumer.
It was most interesting to read that the OTA’s were not competitors of the hotel companies. I would have sworn that I heard David Roche of Expedia’s Hotels.com & Venere.com subsidiaries tell Philip Wolf that hotel suppliers were competitors on Thursday, March 11, 2010 at the PhoCusWright@ITB conference in Berlin.
Regarding the timing, let’s get serious. The letter was sent on the Friday immediately preceding a major conference that starts with a meeting at 4:00pm Sunday afternoon. No reasonable business person could assume that sufficient time could be allotted and the schedules of key participants could be aligned on such short notice.
I would challenge anyone to come up with an example of a successful meeting involving a half dozen associations representing different industries that was planned in less than a week.
So let’s take a poll, was the offer to meet:
a) Disingenuous
b) Naive
c) Oblivious
d) Stupid
e) All of the above
It is a little disappointing. I honestly expected better from the group of five associations. This is an extremely serious and complex issue that deserves all parties to be reasonable and sincere in achieving a mutually acceptable resolution.
My challenge to all the groups involved is to take note of the legislative freak show that has crippled any serious or proactive US healthcare debate. There are strong parallels between the issues – both are complex, involve multiple industries, potentially impact business models, and have high stakes. Most importantly, all parties involved must recognize that maintaining the status quo is not an option and that procrastination only digs a deeper hole.
I sum this letter up as: Great Concept / Questionable Motives / Moronic Timing Tactics.
Robert: Thanks for the comment. As usual, you make a lot of sense. As you note, the timing sure raises a few questions. ITSA has been making direct appeals to the hotels on this issue, designed to stir up some support. This letter is also a direct-to hotels appeal, seeking to convince local properties that they have more to lose by fighting the OTAs than by collaborating. Will it work? We’ll see.
Hm
My two cents on this issue:
How on earth can those greedy cities levy a tourist tax on a percentage of room price base and then try to include commissions to third parties in that base?
A much simpler taxation base is a nominal amount per person per night. If you want to distinguish between classes of rooms, then make categories according to luxury of the rooms for instance based on a statewide or city wide hotel classification.
Next question: To include or not to include the couch surfers? And maybe the family that stays over for a weekend?
To me the whole issue seems a non issue.
On the other hand it is my view that no OTA can claim innocence in this matter given the fact that there are cities who levy tax on a percentage base. They should have gotten a simple legal opinion or a ruling by the local tax office on the matter. No legal opinions and no rulings solicited for? Then they should sit on their burnt parts….
I’m warning you in advance – you may not want to read my answer to your question… It is 9,000 words…
OTAs became aware of the issue in 2000 and started changing description of the amounts in question from “taxes & fees” to “tax recovery charges and fees.” Cities became active on the issue around 2002. The lawsuits started in 2004. This is not a new issue…
Here is the Link: http://www.rockcheetah.com/blog/hotel/bathing-hotel-merchant-tax-quagmire/