RFP Season: Why You Should Know Lodging Taxes
With many planners already knee-deep into the RFP process for 2016, negotiations over preferred hotel rates are already heating up. With what could be the most stressful few months of the year for planners, it’s easy for the vexing matter of lodging taxes to fall between the cracks.
It’s tough enough that hotel sales managers are asking for hefty rate hikes in numerous markets across the country, lodging taxes will add as much as another 18 percent in some destinations to attendees’ nightly hotel bills.
Certainly when entering into rate negotiations with hoteliers, it’s important that planners be knowledgeable about the lodging tax situation in that market—and be up to speed as well on the tax situation in other destinations that might be under consideration for that meeting or event. Resourceful planners will then want to use that competitive intelligence to their advantage as a negotiating tactic.
According to a recently released update on hotel occupancy taxes in the top 150 destinations across the U.S., the conventions, sports and entertainment unit of hospitality consulting firm HVS uncovered some decidedly scary numbers (for planners anyway). In many destinations, there will be a stiff state lodging tax, which then gets combined with an equally stiff tax levied by the local jurisdiction. So the resulting number is easily double digit.
At the top of the HVS list (as of year-end 2014) are Kansas City and St. Louis, Missouri, with total nightly lodging tax rates of 18.35 percent and 17.93 percent, respectively. Five destinations then tied for third place, each imposing a nightly lodging tax of 17.5 percent: Birmingham, Alabama; Cleveland, Ohio; El Paso, Texas; Omaha, Nebraska; and Overland Park, Kansas.
The country’s most popular meeting and event destinations come with (somewhat) lower—though still double-digit—hotel occupancy tax totals, according to HVS: Orlando and San Diego, for example, each levy a 12.5 percent tax; Scottsdale, 13.92 percent; Las Vegas, 14 percent; Honolulu, 14.25 percent; New York City, 14.75 percent; Los Angeles, 15.5 percent; and San Francisco, 16.25 percent.
By comparison, Chicago—with a total nightly lodging tax of 11.09 percent—is a veritable bargain. Revenue-starved cities and states clearly see lodging taxes as an efficient way of raising money. As the authors of the HVS study astutely point out, lodging taxes from a political point-of-view can be easier for communities to accept because they don’t affect the man or woman in the street. “Visitors that use lodging accommodations aren’t constituents,” they note.
In some cases, the revenues raised go towards the locality’s general fund. But more often, the monies are directed specifically to travel promotion or the construction or operation of a tourist friendly facility like a sports stadium or convention center. For their part, hotel owners view this as a positive, stadiums and convention centers creating demand for guest rooms.
In negotiating room rates, budget conscious planners may not ultimately choose one destination over another because of steep lodging taxes. But all other criteria being equal and with thousands of additional dollars at stake for a large meeting, it’s certainly a point worth bring up. This is especially true in an RFP season where room rates are already on the rise, meaning the tax bite will be even greater.