Orbitz, Expedia Seek Congressional Help In Fight On Room Taxes
TRAVEL CRITIC
By Martin Vaughan
Dow Jones Newswires(Updates with positions from hotel trade association, union)
WASHINGTON -(Dow Jones)- Online travel booking firms including Orbitz Worldwide Inc. (OWW: 6.13, -0.01, -0.16%) and Expedia Inc. (EXPE: 21.41, -0.27, -1.25%) are asking Congress to resolve in their favor a legal dispute with cities and counties over hotel occupancy taxes.
The online firms are seeking to add a provision to economic stimulus legislation pending in the U.S. Senate, that limits their exposure to the taxes.
The firms have battled lawsuits from cities including Houston and Louisville, Ky., claiming that the companies underpaid hotel bed taxes. The online firms have been quietly lobbying for Congress to step in since last year, but the controversy broke into the open when the provision turned up this week on a Senate Finance Committee staff draft list of possible items being considered for a stimulus bill.
Local government groups representing cities, counties and officials who control local government purse strings immediately launched a counter-attack. The groups wrote senators Wednesday that the online firms’ lobbying was “nothing more than efforts to preempt state and local taxing authority.”
Hotels, too, have joined the fray, lobbying alongside local governments to block the online firms’ efforts. The online booking firms “should not be allowed to manipulate the tax law to provide themselves a competitive advantage,” the American Hotel and Lodging Association wrote in a December letter to the Senate.
The provision favored by online travel firms is unlikely to be included in an initial jobs and stimulus bill Senate Democrats are unveiling next week, according to a Senate leadership aide. But Democrats plan to move more than one bill this year aimed at spurring the economy.
The dispute revolves around how much the online booking firms should pay in hotel occupancy taxes, which municipalities use to promote tourism. The online firms claim they owe taxes only on the discounted amount they pay hotels for the rooms, not on the full amount paid by the customer.
For instance, if an Orbitz customer pays $100 for a room booked on the firm’s Web site, and Orbitz negotiates an $80 room rate with the hotel owner, the online firm pays tax on the $80 discounted rate. If the tax rate was 5%, Orbitz would pay $4, rather than $5 if the tax was assessed on the full price paid by the customer.
Hotels say that gives the online booker a pricing advantage, which makes the customer less likely to book on the hotel operator’s own Web site. The same room, if booked on the hotel site, would be subject to a $5 tax in the example cited above.
The online firms have received backing for their effort from Sens. John Ensign (R., Nev.) and Ron Wyden (D., Ore.), according to lobbyists and congressional aides. Those senators’ offices did not respond immediately to requests for comment.
Senate Majority Leader Harry Reid (D., Nev.) is also sympathetic to the position of the Internet travel firms.
The proposed legislation has gone through several drafting changes, but one version would prohibit a state or locality from imposing a hotel occupancy tax on the fees that travel agents, online or otherwise, collect from customers. Another version being considered would let each state set a uniform policy on hotel room taxes, reducing the uncertainty for online operators who face thousands of separate municipal tax regimes.
Online travel firms contacted for this article referred questions to an industry trade group, the Interactive Travel Services Association.
“It is imperative for Congress to step in and lay out some parameters for how these issues should be resolved,” said Andrew Weinstein, a spokesman for the group. “It’s not good for tourism when travel companies are forced to litigate with local municipalities rather than bring in more visitors.”
The group’s members include Orbitz, Expedia, Travelocity, and Priceline.com Inc. (PCLN: 195.35, -6.33, -3.14%).
Local governments counter that the revenue they lose because online firms don’t pay tax on the final consumer price hurts their efforts to promote tourism.
“It’s totally disingenuous to say that what the online travel companies are seeking is a tax break for job creation. This will cost jobs, not create them,” said Lars Etzkorn, program director at the National League of Cities.
The Center on Budget and Policy Priorities, a liberal think-tank that has criticized the online firms’ position, estimates that as much as $650 million in annual taxes are at stake in the dispute.
The online firms counter that the litigation from municipalities threatens their entire business model, the loss of which would cost the U.S. tourism industry $1.147 billion annually, according to Weinstein. They also have won backing for their legislation from Unite HERE!, the hotel and casino worker union.
“Simply put, online travel companies put heads in beds, filling hotel rooms that would have gone empty,” Unite HERE! wrote in a December letter to senators.
Copyright © 2009 Dow Jones Newswires
Posted on: Sunday, January 31, 2010 at 10:04 pm 
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