|Taxing Away Customers.|
By Vijay Dandapani
Thursday, 1st November 2012
A recent issue of the WSJ's Middle Seat column revisited an old travel industry bug-bear: tourism taxation.
Entitled 'The Best and Worst U.S. Cities for Travel Taxes' starts off by noting the obvious (to all except local politicians) that 'Travel is one of the most heavily taxed activities in the U.S., even though most cities and towns try hard to encourage visitors and tourism.'
The column notes that "Travelers don't vote where they travel, so cash-strapped cities and states continue to push fees and taxes onto hotel rooms, rental cars and airports. Cigarettes are about the only thing taxed more heavily among consumer purchases."†
When told about the potential negative consequences of raising taxes in the 80s the city's mayor at the time was famously dismissive saying that they were all out-of-towners.† The consequent drop in tourism vindicated those concerns. A reversal of the tax-hike by a subsequent mayor brought about a gusher of tourists.
Legislators have notoriously short term memories when it comes to tourism taxes and use the tax for a range of allegedly economic advantageous programs including supposed "facilities for travelers, such as convention centers and airports" as well as "help finance general coffers and pay for sports stadiums and youth ball fields."†
The situation across the pond in the UK is not much different with the introduction last year of a ruinous (to the travel trade) hike in airline passenger duty resulting in the highest APD in the world. A group there called the Fair Tax on Flying Campaign that includes over 30 airlines and tour operators has pointed out that the high tax is "deterring both UK holidaymakers heading abroad and foreign travelers hoping to visit Britain."
What is worse is that often these taxes are levied with a promise of a "sunset". But the sun never sets for these extortions on tourists as New York so ably demonstrated last year when the NYC's City Council voted to extend an increase in the city's hotel tax that was set to expire last November thereby adding roughly $2 to the average daily hotel room rate. With tourism reaching record high levels they probably feel vindicated.
That, of course, does not considerthe counter-factual: numbers would have been considerably higher had the tax been allowed to sun-set. The UK's travel trade and tens of thousands of customers who altered their travel plans would probably readily attest to that.
Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city. Member of the board of Directors - Hotel Association of New York.