As part of an effort to fill a gaping hole in the Big Apple's budget, the City Council might increase the hotel room tax.
The proposal, which would assess an additional 0.875% of the room rate, is supported by many council members. On the other hand, it produced howls of protest from the Hotel Association of New York City and NYC & Company.
The measure, introduced Dec. 9, has a good chance of quick passage. The council could act as early as Dec. 18.
The tax hike would be effective in March, and the council estimated it could generate $80 million by June 2010, the end of the city's fiscal year.
Its supporters described the proposal as a change of less than one percentage point and called the increase "insignificant" for travelers. Its detractors described it as a 20% increase and decried it as a "tremendous blow" to the city's economy.
It is nearly a 20% increase in the city's room tax, which currently is at 5%, but it would be a 6% increase over the average 14.5% in total taxes and fees that hotel guests pay in New York now.
The 14.5% average comprises a basket of state and city taxes, including a city hotel occupancy tax of $2 per night and a $1.50 Javits Center surcharge, calculated as a percentage of the city's average room rate of $300. Increasing the city hotel tax by 0.875 percentage points would add about $2.63 to the cost of a $300 room.
Christine Quinn, City Council speaker, said that in the current economic climate, "everyone will need to pitch in to help keep New York City running, including the many visitors who take advantage of city services like police or transportation."
The measure's sponsor, Councilman Lewis Fidler, said, "Asking foreign visitors to pay $2.62 a night on a $300 hotel bill is insignificant. ... but it is significant to New Yorkers.
"We're advocating that some of the money be used to hire more police, and I'd venture that tourists would like that, too," Fidler added.
Bobby Bowers, senior vice president of operations for Smith Travel Research, said he doubted the proposed increase "in a market like New York" would matter much to individual tourists or corporate travelers. He said it could matter for group business. Meeting planners are expected to scrutinize every extra cost and may shop among cities, said Bowers. On the other hand, he noted, hotels could adjust pricing if necessary.
Bowers summed up by rating the hike a 2 on a scale of 1 to 10, with 10 being catastrophic.
The Hotel Association of New York City has quite a different take on the matter. Joseph Spinnato, the group's president, said the tax increase would "strike a tremendous blow to the city's visitor industry and the city's already reeling economy."
The hotel association said the hike would result in a loss of more than $533 million in room sales and associated visitor spending; a loss of 3,716 jobs in the hotel industry and businesses supported by hotels; and the loss of more than $162 million in wages paid by hotels and businesses supported by the hotels. Sean Hennessey, CEO of Lodging Advisors, compiled this data, said the hotel association.
"Our industry is already grappling with a 20% decrease in hotel revenue over last year, in November alone," said John Fitzpatrick, president and CEO of the Fitzpatrick Manhattan Hotel and the chairman of the Hotel Association. "This tax increase ... is a lump of coal in a holiday stocking."
NYC & Company CEO George Fertitta said, "NYC & Company, in partnership with the Hotel Association and the 350,000 workers in the tourism industry, would make it clear to supporters of the hike that an increase in taxes would adversely affect one of the few industries that is propping up New York City's economy during these turbulent economic times."
Critics, worrying that one increase could lead to more, recall the early 1990s, when meeting planners kept events out of New York because of hotel taxes. The taxes topped out at 21.25% in 1991.