Chicago, New York, Minneapolis levy highest travel taxes in U.S.

By Danny King
Chicago, New York and Minneapolis levy the heaviest travel-related taxes on visitors, while Portland, Ore.; Detroit; and Florida cities such as Fort Lauderdale, Fort Myers and West Palm Beach taxed visitors the least, according to a recent report by the Global Business Travel Association (GBTA).

Chicago visitors on a three-day, two-night stay will, on average, pay about $99 in taxes, while New York and Minneapolis visitors will pay about $95 and $89, respectively.

2012 City taxesBy comparison, Portland, which is helped by the fact that Oregon has no state sales tax, will generate $54.42 per visitor in travel taxes, or about 25 cents less than Detroit. The GBTA benchmarked the cities against each other by basing the tax amount on about $650 in hotel, car rental and restaurant expenses in the central city areas. (Click on the image, left, for a larger view of a chart of the top five cities at the high and low ends of the results.)  

Chicago and New York were also the two most tax-heavy U.S. destinations last year, though this year, Chicago's three-day, two-night travel-tax total of $99 was down from $101.25 a year ago. New York's tax total rose to $95 from about $93 last year.

The real impact of visitor taxation on tourism and business travel is debatable, as some cities appear to be immune.

For example, while Chicago's hotel occupancy rate for the first six months of the year was about 5 percentage points below that of the 25 largest U.S. markets, New York's was the second highest, after Oahu, Hawaii, according to Smith Travel Research (STR).

That said, visitor taxation is a topical issue as leisure travelers resume their pre-recession travel habits and travel managers try to best allocate their business-travel resources. With that in mind, many of the metro areas in Florida and California are among the most generous cities when it comes to travel taxes.

In just the past year, some cities have appeared to make some progress in cutting their visitor taxes. Boston, in particular, cut its three-day, two-night travel tax total by about $18, to $69.55, this year, while Cleveland reduced its travel tax hit by about $10, to $73.85.

On the opposite end of the spectrum, Nashville, New Orleans and Indianapolis were among the U.S. cities in which government entities got more aggressive with their travel taxes.

"Certain cities will always be popular destinations," said Joseph Bates, the GBTA's vice president of research. "But considering Chicago is 81% more expensive to visit than Fort Lauderdale, travel managers might think about hosting events in cities with more favorable tax rates."

Not surprisingly, convention and visitors bureaus (CVBs) representing the pricier cities downplayed the results.

'Just one facet'

"Taxes are just one facet of the whole picture," said Melvin Tennant, president and CEO of Meet Minneapolis, that city's CVB. "When you include other travel-related factors and expenses, such as convenience stemming from the city's light rail and the airport's relative proximity, Minneapolis appears as more of an overall value destination."

NYC & Co. spokesman Chris Heywood said New York is "a capital of business and commerce, a place where business gets done. So it's tough to compare us to other second-tier destinations such as Fort Lauderdale or Portland in that regard." Heywood noted that the city brings in about 11 million business visitors annually.

"Also, you can do more here in a shorter period of time compared to other places," he said.

Meanwhile, representatives of the least-taxing cities trumpeted their destination's value when it comes to business travel. For instance, Detroit's relatively low travel taxes have complemented a recovering auto industry in helping the city's travel industry. Detroit's hospitality industry was especially hurt by the addition of about 1,600 hotel rooms to its downtown inventory just prior to and during the Great Recession.

Since then, Detroit's hotel occupancy has risen from a recession-low 48% to about 65%, according to Michael O'Callaghan, COO of the Detroit Metro Convention and Visitors Bureau.

As for its travel taxes, Detroit benefited particularly from low car rental taxes, which are about a third of those levied by Chicago.

'A much better buy'

"Transportation from the airport isn't as good as some other cities, so we've been diligent about keeping rental-car taxes down," O'Callaghan said. "People are beginning to realize that Detroit's a much better buy for their meetings."

Among the most heavily taxing cities, Seattle moved down to No. 4 from No. 3 last year, while Kansas City was No. 5. Rounding out the top 10 were Indianapolis, Nashville, Houston, San Antonio and Las Vegas.

As for the cheapest metro areas, California's Orange County; Honolulu; Ontario, Calif.; Burbank, Calif.; and Orlando rounded out the top 10.

On average, the largest U.S. metropolitan areas boosted their three-day, two-night travel taxes by 2.3% above their 2011 levels, to $72.01, according to the GBTA.

Hotel taxes per person were up almost a dollar, while car rental taxes remained virtually unchanged.

For hotel and hospitality news, follow Danny King on Twitter @dktravelweekly. 
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