I thought I would enjoy a vacation in the desert at a Palm Springs hotel, but when I noticed something called "occupancy tax" at $19.44 a day, I changed my mind. I think I've finally accepted the resort fee at $20 a day, but I don't remember the occupancy tax. Is this something new?
Answer: Don’t start dozing off just because we mentioned taxes. Pay attention because you may become increasingly annoyed as you read this until you’re sputtering with anger. And you should never go to sleep angry.
Transient occupancy taxes, or TOT, date to the 1940s, said Srikanth Beldona, a professor at the University of Delaware who runs the school’s hospitality business management program.
The idea in the beginning was to use them to support tourism, and some or all of these taxes were to go to, say, convention and visitors bureaus to help with the cost of promoting a destination.
Over the years, the lines have blurred in some places, and where those taxes go — maybe to tourism or maybe to a general fund — is not always obvious to those who pay them.
But what is clear is something each of the four occupancy tax experts I spoke with told me: It’s easier to levy a tax on someone who doesn’t live in the hotel’s jurisdiction.
That’s partly because you, the hotel dweller who is forced to pay the tax, may grumble a bit, but you pay it and then you leave town.
Or, said another way, you’re not sticking around to vote against the person or persons who legislated/engineered the tax.
And taxes are inevitable. “The taxes are … the cost of doing business,” said Rob Stephens, general manager of Avalara MyLodgeTax, which provides tax-compliance solutions for the vacation rental industry. “Everyone has to pay it. It’s mandated by law.”
As Americans, we’re accustomed to them, and we also generally understand that taxes vary from jurisdiction to jurisdiction.
If you were to stay in a hotel, say, in certain parts of Houston, you would pay as much as 17%. In San Francisco, you’d shell out 14% plus 1% to 1.5% (depending on location) as an assessment for tourism improvement districts. In Palm Springs, you may pay as much as 13.5%, depending on the hotel.
Paying that tax is an irritation, but we’re used to it. What we’re not used to — because airlines stopped doing this years ago — is seeing the taxes at the end of the booking process.
For instance, I just tried booking a hotel in Anaheim — a nice chain hotel that was showing a rate of $179 a night for a stay Feb. 25-28. The cost of my three-night stay: $537. Not terrible.
But on about Step 3, I saw that taxes are going to add $96.37 to my bill, making my total $633.37, which means I’m really paying about $211.12 a night.
Because leisure travelers tend to be price-sensitive, finding a $32-a-night add-on is about as much fun as discovering too late there’s a whoopee cushion on your chair as you sit down for a formal dinner with the queen of England.
Online travel agencies that book hotels find themselves between a financial rock and an honesty hard place. They want their rates to look competitive (and, of course, be competitive), so not every online agency is forthcoming about those taxes.
Each online agency operates a bit differently. For instance, Suiteness, which books suites in select cities, includes the tax at the front end of the booking process.
“We do it because we want to be transparent,” said Robbie Bhathal, the chief executive of Suiteness. “We just don’t feel sticker shock is something that we like in our pricing.”
Of course, if you’re paying $3,000 a night for the presidential suite at the Four Seasons for a Feb. 25-28 stay in Las Vegas, the sticker shock of $1,125 is probably just a small jolt, not full electrocution.
Suiteness offers a guide to the taxes on its blog, plus a chart that shows where the rates are highest.
Other online agencies wait until later in the process to tell you the full tab. They’ll show you a price and tell you it doesn’t include taxes and fees, but they won’t tell you the total until much, much later.
And when it comes to resort fees, sometimes they don’t tell you at all — unless you dive deeply into the fine print.
If you’re still awake, this is the part where you should be steaming mad.
Resort fees often are tacked on, hotels say, as a way to cover the cost of Wi-Fi or the use of the pool or a bottle of water or a host of other goods and services that used to be bundled with the room rate.
These resort fees, readers, are not mandated by law. They’ve not been levied by a legitimate taxing organization. They are financial sleights of hand.
In a report issued this month, the Federal Trade Commission said its analysis found “that separating resort fees from the room rate without first disclosing the total price is unlikely to result in benefits that offset the likely harm to consumers. Hotels could eliminate these costs to consumers by including the resort fee in the advertised price.”
It’s not saying that hotels shouldn’t levy fees, and we’re not saying that either. Instead, the report says, the problem “is how the price of bundled services is disclosed to consumers: hotels that bundle services with the room, thus requiring all consumers to buy them, should include the cost of the services in the advertised room rate. ...
“This analysis has not found any benefits to consumers from separately disclosed mandatory resort fees that could not be achieved by first listing the total price and then disclosing the resort fee.”
The total cost is information the consumer needs — “an apples-to-apples of total pricing,” said William Blecker, a co-founder of AlltheRooms.com, a search engine for finding accommodations that includes Airbnb and vacation rentals, which generally don’t charge resort fees.
Hotels, Blecker said, “are the Wild West. There’s very little consistency.” (He also dislikes the inconsistency of star ratings, which are not regulated in the U.S., as they are in some European countries.)
It may be that the online travel agencies will band together and put their collective foot down and demand transparency, Blecker said.
Or it could be the FTC.
We may not be able to stop taxes, and we may not be able to stop resort fees either. They may be a necessary evil. But as travelers, we deserve to have transparency in booking.
The airlines, whose taxing issues are far more complex those of a hotel room, were forced to move to a full-fare disclosure in 2012. If they can do it, why can’t hotels?
Such disclosure would, Beldona said, move us closer to what hospitality was meant to be, a “solicitous entertainment of guests,” as Webster describes it, not the springing of unwelcome surprises.
Chief Justice John Marshall was credited with saying, “The power to tax involves the power to destroy.” To which we might add, “And the failure to disclose a tax or a fee ramps up the power to annoy.”
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