Travel industry leaders are warning D.C. officials that a proposed tax on online travel agents and tour operators could depress the District's tourism industry, kill jobs and reduce revenues at a time the city can least afford it.
The District collects its 14.5 percent hotel tax on the room price charged by the hotel, not necessarily what the traveler pays to actually book their stay. Most online travel agents, like Travelocity, buy hotel rooms at wholesale prices and then resell those rooms with a retail markup -- what the industry deems a service fee. The traveler pays the tax on the wholesale price; the District wants to tax the retail.
A recent letter to Council Chairman Vincent Gray, co-signed by five major travel associations, suggests that tour companies and online travel agents would divert bookings out of D.C. and into nearby jurisdictions if the tax is implemented.
"The new tax would effectively reverse the welcoming approach Washington has had to the travel and tourism industry -- damaging that critical industry, raising hotel prices, reducing the number of visitors, creating major paperwork with particular effect on small travel businesses, costing jobs, largely among the most economically vulnerable, and worsening the impact of the current slump in the process," the group wrote.
Legislation introduced by at-large Councilman Michael Brown, with the backing of nine colleagues, clarifies that the hotel tax is owed to the city for the full amount charged to the consumer -- service fee and all. Brown has said the tax would generate up to $10 million a year.
"They're completely blowing smoke," Brown said Monday. "These are taxes that the District of Columbia deserves to get."
Brown said he worked with the D.C. Hotel Association to craft the bill. Only national organizations, he said, are employing "scare tactics" to kill it.
The industry letter was co-signed by heads of the Business Travel Coalition, Hotel Electronic Distribution Network Association, Interactive Travel Services Association, U.S. Tour Operator Association and the American Society of Travel Agents. Hundreds of D.C. jobs might be lost, they said, and with 12 percent unemployment the "city cannot afford to send jobs over the border to Maryland and Virginia."
Jurisdictions in Georgia, California, Texas, New York and Ohio also have tried to collect the tax, and in most cases their efforts are the subject of legal challenges.