New York State May Increase Taxes on Hotels

If New York’s state budget passes, tourists could wind up paying more for hotels booked through third parties like Liberty Travel, Globus Tours and Travelocity.

The current version of the state budget now winding its way through Albany includes a 20 percent increase in hotel occupancy taxes for travel intermediaries (meaning travel agencies, tour operators and online travel companies). If the legislation passes and the third parties pass this new cost on to their customers, that would mean higher prices for visitors to New York. In New York City, where the current occupancy tax is now 5.875 percent, the tax for third parties would increase by one-fifth to 7.05 percent.

Not surprisingly, the travel industry is up in arms. “This is basically the Connecticut and New Jersey tourism promotion act,” said Andrew Weinstein, a spokesman for the Interactive Travel Services Association (I.T.S.A.), which represents Orbitz, Expedia and other online travel companies. The association has formed a coalition with the American Society of Travel Agents (A.S.T.A.) and the Business Travel Coalition to fight the bill.

If passed, the new tax would be unique, said Colin Tooze, a lobbyist in Albany for A.S.T.A. North Carolina recently passed a similar tax on travel intermediaries, but in this case the tax levied is the same as whatever the hotel occupancy tax is in the given municipality. North Carolina’s law goes into effect Jan. 1, 2011.

A spokesperson for Assembly Speaker Sheldon Silver’s office said that the proposed legislation was intended to close a loophole under which third parties have paid taxes on the rate at which they purchased rooms but not on the higher price they eventually resold them for. Mr. Weinstein of the I.T.S.A. disputed this, saying it was a misconception that travel intermediaries bought blocks of rooms at reduced rates. “Travel intermediaries, whether online or offline, make their money from service fees or commissions, which have never been subject to hotel occupancy taxes anywhere in the country,” he said.

Meanwhile, Albany’s budget process is even more convoluted than the argument over how third-party travel companies make their money. So is this bill even likely to pass? “Things look stalled in Albany,” said Steve Powers, owner of Hidden Treasure Tours in Long Beach, N.Y., and president of the Long Island chapter of A.S.T.A., “but who knows what’s going on behind the scenes?”

If the bill is passed and the cost passed on to consumers, they could avoid the extra fee by booking directly with the luxury hotels. Then again, that would mean giving up on the package deals that tour companies offer.

Source: blogs.nytimes.com