On Thursday, the transient accommodations tax that Hawaii imposes on tourists staying in hotel rooms will have increased 30 percent in two years.
But total lodging taxes are still low compared to Mainland jurisdictions.
The TAT, also known as the hotel room tax, rises to 9.25 percent Thursday. It was 8.25 percent for the past year and it was 7.25 percent two years ago. Craig Anderson, general manager at the Westin Maui Resort & Spa and chairman of the Maui Visitors Bureau, said: "I don't like it. Any tax that adds costs to the customer is not good."
Taylor Leidheisl, 18, of California, has fun in the sun Tuesday afternoon at Wailea Beach in front of the Grand Wailea Resort Hotel & Spa. Beginning Thursday, hotels will charge visitors more in transient accommodations taxes to stay in their rooms.
The Maui News AMANDA / COWAN photo
Even if the increase adds only $20 or $25 to a guest's overall bill, "it's the nickel-and-dime additions and charges that they don't like," Anderson said.
The appeal of lodging taxes to lawmakers is obvious: The people who have to pay them can't vote against the people who impose them.
However, that obvious appeal may be somewhat illusory. Shane Downey, the director of public policy of the National Business Travelers Association, says it is hard to provide hard evidence that raising hotel taxes directly reduces a destination's tourism business, but the association believes that is often the case.
'Politicians think they can get away with it because visitors don't vote. But they do. Not at the ballot box, but with their pocketbooks.'
- Richard Kelley, head of Outrigger Hotels & Resorts
Seldom do governments lower the taxes they try to stick to outsiders, but Downey could cite one example: "New York City did that. They had very high tax rates in the '80s."
When they were lowered "significantly," New York's hotel business enjoyed a boom. However, New York still has some of the highest lodging tax rates and overall tax rates on travelers. It also ranks at or near the top of Smith Travel Research's list for average room rates, occupancy rates and revenue per available room.
So does Hawaii, which, despite the state's double whammy of general excise tax plus TAT, ranks among the less-taxed places for visitors.
In a 2009 study of the 50 biggest business travel destinations, the National Business Travelers Association found that in central city Honolulu (that is, not near the airport), the average traveler paid $11.44 a night in extra taxes (beyond excise tax) on his room, $7.07 on his rental car and $4.04 on meals.
In San Francisco, the totals respectively were $14.63, $7 and $8.15, while in New York City they were $17.12, $10.59 and $7.19.
Maui isn't big enough to be included in that survey but, at least for room tax, a reasonable approximation would be that a visitor to Maui paid about 50 percent more since in April this year, Maui's average room rate was about 50 percent higher than Oahu's.
There is a wide spread, however. A room in Wailea costs three times as much as a typical room in Waikiki.
As a percentage, Honolulu ranks low in tax impositions on visitors, 11.96 percent of the bill in 2009, compared with a low of 10.05 percent in Burbank, Calif., and a high of 14.25 percent in New York City.
Honolulu's percentage hit is a little higher than Maui's because there visitors (and residents, too) pay an extra half-percent in general excise taxes to finance a yet-to-be-built public rail transportation system.
Anderson said that in the current economic regime the addition to the TAT makes it harder for discounting to attract more business.
Hoteliers don't like to discount, but since mid-2008 they have felt obliged to do so, because the overall downturn in the general economy and in tourism emptied out island resorts.
By offering perks like free breakfasts and cutting room rates, Maui resorts have clawed back some of their occupancy, although nowhere near what it was in 2007. Announcements of the end of the recession don't reflect the reality in the back offices of the resorts, where receipts aren't recovering.
"In talking to my colleagues, I don't think any of us are feeling that robust," Anderson said.
Downey said that the time and money it takes to get to Hawaii are a deterrent - although "we love Hawaii" - so additional taxes add to that disincentive.
In the current climate, increases in taxes, charges and fees "make it harder" to make discounting effective in keeping the tourists coming, Anderson said. "I'm not a fan of the increase in the TAT."
Downey said that part of his job is to try to teach lawmakers that, in reality, higher lodging taxes impose a "hidden cost" on local businesses. This would be less true for Hawaii, but the association did studies in 2008 and 2009. The studies concluded that: "Cities, states or counties with the highest discriminatory travel taxes are likely losing business, and may not even know about it. For example, more and more organizations that host meetings and major conventions are considering the tax burden for their attendees as a factor in the site-selection process."
Anderson said that is his experience. When costing out conventions, chief financial officers make note of the share taxes will take.
Furthermore, the association found that, on the Mainland, businesses spend about half their lodging and car rental money at home - they are bringing in people for business purposes, and the higher taxes that are supposed to soak the outlanders are really soaking them, too.
However, just determining how much is being collected in taxes, still less what effect it will have on competitiveness, was a labor-intensive task for the association. Its report said: "These taxes often include a bewildering combination of charges such as excise, occupancy, transportation, tourism, special, facility and capital improvement taxes, plus a long list of other taxes and fees, frequently imposed by overlapping jurisdictions."
That, at least, is not the case in Hawaii, where the highly centralized government keeps the number of kinds of taxes small, mostly just general excise taxes, transient accommodations taxes, rental car taxes and airport fees, although there has been creeping expansion there, too, with fees for visitors at places like Hanauma Bay and proposals (to be heard on Maui this week) for entrance fees at Iao Valley State Monument.
Until 1993, Hawaii did not have a separate hotel room tax. It was then imposed at 5 percent.
This has grown, in two spurts, to 6 percent in 1997 and 7.25 percent in 1998 (when it was applied to time shares for the first time); where it held steady for a decade; and then to 8.25 percent in 2009 and now 9.25 percent.
Hoteliers have spoken out against increasing the rate, without noticeable effect on state lawmakers.
Last year, Richard Kelley, the head of Outrigger Hotels & Resorts, warned state lawmakers: "Visitors are happy to pay local taxes like everyone else, but when it is clear that they are being singled out and soaked - with hotel taxes, car rental taxes, airport fees, visitor attraction fees, etc. - it is a big turnoff.
"Politicians think they can get away with it because visitors don't vote. But they do. Not at the ballot box, but with their pocketbooks," he said. "And they let the whole world know, flashing information about rip-off taxes on tourists on the Internet."
But the extreme pressure to close a deficit in the state budget that approached $2 billion over a biennium led the Legislature to go to the TAT well for dollars last year and again this year.
The big fight almost every year is not over how high the tax should be, but who gets the money.
From the beginning, the counties and the hoteliers insisted that most of the money be returned to the jurisdiction where it was raised.
This was a bonus for Maui, which with its higher visitor industry price scales, raises more from a percentage room tax.
After a long struggle, the Legislature backed off at the last minute from raiding the counties' share this year.
Of a little more than $100 million expected from the TAT, Oahu expects almost $45 million; Maui $23 million; the Big Island, $18.6 million; and Kauai, $14.5 million.
* Harry Eagar can be reached at firstname.lastname@example.org.