Friday, April 9, 2010

New Front on the Old Hotel Chains vs. OTAs Battle: Occupancy Taxes

It appears that a new front is opening in the ever tumultuous relationships between the large hotel chains and the online travel agencies (OTAs).

The major OTAs are currently pressing for legislative relief for future occupancy tax claims by states, counties and municipalities through a proposed bill known as the "Internet Travel Tax Fairness Act" or ITTFA. For those of you interested in a reprise of the old Schoolhouse Rock Saturday morning "how does a bill become law" cartoon, the initial draft of the bill is posted here

Interestingly, the American Hotel and Lodging Association's (AHLA) take on the bill is radically different from that of other smaller, regional hotel associations.

AHLA, which represents all the large chains, has come out as a vigorous opponent of this bill to say the least. AHLA offers a detailed description of their opposition to this bill which is centered on concerns that local hoteliers will see an increase in taxes or, worse yet, be stuck with the entire tax bill. As an aside, AHLA offers that the bill is "written in such a way that it may also exempt the payment of any occupancy tax on rooms booked through online travel companies." We don't believe this is the actual intent of this bill by the OTAs (call us naive, but this simply does not square with what the OTAs are trying to accomplish) whether you agree with that goal or not.

On the other hand, the California Lodging Industry Association (CLIA,) which represents "individually owned lodging properties," has just come out in favor of ITTFA. In a recent press release, CLIA declared that they would fight "with their Online Travel Company friends" to support this legislation.

So, why the disparity in thinking within the hotel industry?

For starters, independent hotels utilize the OTAs in very different ways from the large chains. Independent hotels do not (generally) have the powerful global brand recognition of the large chains much less the global sales forces and loyalty programs such as Hilton HHonors, Marriott Rewards and SPG. As such, they depend on the OTAs for distribution reach - reaching consumers that would not have ever probably stayed with these unaffiliated properties.

Many independent hotels have become much more aggressive in developing their own consumer web business, both directly and via the OTAs. New tools that distribute inventory, develop and implement SEO and SEM strategies, etc. have made these efforts much easier for small hoteliers. The web has become a great equalizer between branded and un-branded hoteliers' ability to reach consumers.

The chains have responded by offering their distribution services for hire - witness the launch of the Autograph brand from Marriott and the resurgence of Starwood's Luxury Collection. HC colleague George Roukas highlights these efforts and the reasons behind them here in a recent article in Hospitality Upgrade magazine.

It will be interesting to see where this bill ends up - the stakes are high.

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