<B>Lodging Tax Rates Rising</B>
By Bruce Serlen
Houston's 17 percent nightly lodging tax is still the nation's highest in 2001, but more cities than ever before are levying charges on travelers in excess of 15 percent, typically considered the upper limit on these fees. San Antonio, Texas, which taxes travelers 16.75 percent, ranked second this year among U.S. cities surpassing 15 percent, followed by Knoxville, Tenn., Columbus, Ohio, and Seattle.
For travel buyers already under stress to contain travel costs, the taxes on travel to these cities are one more factor to weigh as negotiations get underway in the next few months to determine hotel rates for 2002. Buyers have little control over where their travelers' business will take them. As a fixed cost that can't be negotiated, however, high hotel taxes would increase the pressure on buyers negotiating with hotels in these cities to keep rates at the 2001 level, if not to decrease them.
And while not at the 15 percent mark, lodging taxes in key U.S. gateway cities still are significant this year. For example, the nightly tariff in Chicago is 14.9 percent, 14.5 percent in Washington, D.C., and 14 percent in both Los Angeles and San Francisco. Travelers to New York and Boston, meanwhile, pay 13.25 percent and 12.45 percent, respectively.
"We can't point to a formal correlation, but our sense is that cities with hotel rates already near the ceiling are less likely to impose stiff occupancy taxes because they don't want the total cost to the traveler to be sky high," said Rolfe Shellenberger, senior travel consultant at Rochester, Wis.-based Runzheimer International, which collated the data. "Conversely, municipalities where the hotel rates are more modest would be more inclined to add a stiff nightly tax."
Shellenberger said this could be attributed to what he termed, "the perception factor."
"Municipalities are very sensitive to their reputation," he said. "Once hotel costs become prominently visible, they are concerned people will start bypassing the destination."
Traditionally, the purpose of lodging taxes has been to fulfill travel-related public needs, such as building convention halls or improving traffic control. "But they're also used simply to fatten cities' operating funds," Shellenberger said. The irony is that projects supported by the tax often don't benefit business travelers and other short-term visitors. "There seems to be an unquenchable need for municipalities to tax those who aren't beneficiaries of the tax," he said.
In the case of Houston, the 17 percent tax is a combination of city, county, state and sports authority fees. The largest pieces are the city and state taxes, which are 7 percent and 6 percent, respectively. While acknowledging that the high tax negatively impacts the city's image to some degree, Joan Johnson, president of the Houston Hotel and Motel Association, said the city is still a cost-effective destination for business travelers. "Even with the tax, our hotels are priced competitively," she said. According to Runzheimer statistics, first class accommodations in Houston typically cost $239 a night. The tax adds $41 to the nightly bill.
Not surprisingly, the head of the Greater Houston Convention and Visitors Bureau contested Shellenberger's claim about the tax's beneficiaries.
"The tax has been--and continues to be--used for significant projects that benefit not only Houstonians, but visitors to our city as well," said Gerard Tollett, the bureau's president and CEO. "Without that money, facilities like Enron Field, the stadium where the Houston Astros play, the expansion of our convention center and the new convention center hotel would have remained pipe dreams."
At the opposite end of the spectrum, Runzheimer reported that the cities with the lowest occupancy taxes in the country in 2001 were Billings, Mont., with a 4 percent tax, followed by Erie, Pa., and Trenton, N.J., both with a 6 percent tax.