Deficits at the state and local government level are horrendous. Knowing that wrenching decisions must be made, I got to thinking: Why aren’t hoteliers educating state and local governments about losing out on tax revenues from rooms sold on OTAs?
Typically, when a hotel sells a room to a guest, the state and local sales and lodging taxes are calculated on the room rate paid by the guest. However, when a consumer purchases their hotel room from an OTA via the merchant model – wherein the guest pays the OTA, not the hotel – the hotel receives about 70-80% of what the guest pays for the room while the OTA retains the balance. Sales and lodging taxes are calculated and paid on the net rate the hotel receives. As far as I know, the OTAs pay nothing to state and local jurisdictions for the 20-30% of the rate paid by the consumer but retained by the OTA.
For every “net rate” room night purchased by consumers on an OTA, state and local jurisdictions are missing out on important tax revenues. Um, don’t states and localities need this money….like, badly?
In recent years, the hotel industry and OTAs faced off on federal legislation promoted by OTAs to exempt the 20-30% overages from taxation. Although there isn’t pending federal legislation at the moment, shouldn’t our industry be educating state and local governments about how a significant source of tax revenues is at risk? Why aren’t we pointing out the inequity of one major – and growing – booking channel taking the same amount of money from consumers yet failing to remit all the taxes that would ordinarily be due? Our cities and states need this money….we should be helping!
Originally posted: innteralia.com