Lodging industry opposes tax hike

Visitors to Hawaii hotels, who are already paying the nation’s top prices, should get ready to dig deeper into their wallets to offset a broader application of the state’s transient accommodations tax.

On average, visitors paid almost $293 per night to stay in a Hawaii hotel during the first quarter, the highest rate in the nation, according to a Hawaii Hotel Performance Report released by the Hawaii Tourism Authority last month. Based on that figure, they also paid roughly $30.45 nightly for the transient accommodations tax, currently 10.25 percent of the room charge.

Historically, TAT, which is in addition to the state’s 4.5 percent general excise tax, has been levied solely on hotel, resort and timeshare industry rooms. It hasn’t applied to daily resort fees, which might include a variety of bundled offerings from fitness center use to bottled water, Wi-Fi, phone calls and the like. But this past session, state lawmakers passed Senate Bill 2699, which could apply TAT to virtually any lodging business transactions, from resort fees and parking to food and beverage orders, activities, spa appointments, banquet services or the like.

According to a study conducted in May by Travel Hawaii, some 111 Hawaii hotels currently charge resort fees, ranging from $10 to $46 per day. Parking costs, which also have been exempted from TAT collections, could run another $9 to $35 per day. If Senate Bill 2699 becomes law, hotel, resort and timeshare visitors would automatically pay another $2 to $8 per night to cover TAT on resort fees and parking alone. Factor in conference events, wedding banquets and the like, and costs could quickly add up.

Increases revenue

Supporters said the bill would beef up resources by adding a minimum of $11 million in revenue to the state budget. Unite Here Local 5, which represents about 12,000 union members, supported the original measure, which limited TAT expansion to mandatory resort fees. However, Local 5 Secretary- treasurer Eric Gill said the union doesn’t support the final version because it believes it could have unintended consequences.

“Nickel-and-diming undermines guest satisfaction,” Gill said. “It affects tipping, and it could impact banquet bookings and other business.”

The union isn’t often aligned with the Hawaii Lodging & Tourism Association and the Waikiki Improvement Association. However, in this case the parties share similar concerns. Mufi Hannemann, HLTA president and CEO, hopes Gov. David Ige, who has until June 25 to veto the bill, will meet with stakeholders prior to making a decision. Bill opponents are circulating a petition, which already has 1,750 signatures, to present to Ige, he said.

Hannemann said the measure is unfair given the State Council on Revenues’ recent projection that this year’s tax collections would grow by $125 million, “thanks in large part to the tourism industry’s strength.”

“With such a large surplus making its way into state coffers … why are we adding an additional burden on our hotels and visitors?” Hannemann said.

Could decrease tourism

The bill, which could take effect in July, could reduce the number of tourists at a time when lava-related downturns are beginning to emerge, Hannemann said. It also could widen the tax gap between what alternative accommodations and other lodging properties are required to pay, he said.

Hannemann said tourism is still up overall in 2018, but natural disasters have contributed to a recent year-over-year decline.

“With the Kilauea volcano images headlining news stations nationwide we continue to prepare for the worst,” Hannemann said. “This leads us to reiterate that while we have enjoyed record visitor arrivals for a sustained period, given what we are experiencing, this phenomenal growth is starting to slide and we must be prepared to weather any future economic downturns through competitive pricing against other destinations.”

Jerry Gibson, area vice president of Hilton Hawaii and vice president and managing director of Turtle Bay Resort, said he fears if the bill becomes law, which would follow January’s 1 percent TAT increase, it could cause some tourists to rethink whether they can “really afford to come.”

“If we tip the scale, our greatest economic driver is in jeopardy,” Gibson said.

Gibson also expressed frustration that state lawmakers have not reached a taxation agreement with Airbnb and other hosting sites for alternative accommodations.

“Disparity between legitimate businesses and gray businesses will grow because they are not subject to the same taxation or rules and regulations,” he said.

WIA President Rick Egged said the organization opposes ambiguity in the bill’s current version, which “defines resort fees as virtually anything that a hotel charges, which is not what TAT was meant to cover.”

Ige, who supported an earlier version of the bill, which expanded TAT only to mandatory resort fees, has not shared his position on the broadened version.