Tax shock. That's what travelers get when they go to check out of a hotel in New York City and find their $200-a-night room carries a $40.50 tax, the equivalent of 20.25 percent.
The Big Apple holds the dubious distinction of having the highest hotel tax in the nation -- 19.25 percent plus $2 on every room priced at $100 or more a night.
What boosted New York City to this unwanted status is a statewide 5 percent hotel tax enacted in June by the state legislature. In addition, New York City increased its own hotel tax to 6 percent from 5 percent on Sept. 1. Added to these taxes are an 8.25 percent sales tax and a $2 bed tax. All but one-quarter of a percent goes to general revenue funds with the fraction designated for convention and tourism promotion.
"The new hotel taxes make New York City a very uncompetitive destination," said James F. Marquart, president of New York State Hospitality and Tourism Association.
"Legislators believe a hotel tax doesn't hurt their constituents," he added. "But from what I have seen in some reports, close to 40 percent of the people who stay in New York City hotels are from New York state. The legislature had to fill a budget gap so it [voted to] put the tax on rooms. Unfortunately, the lodging and tourism industries are not strong lobbies.
"We already are seeing a drop in New York City occupancy figures and anticipate the rates will continue to drop into next year," he continued. "Because of the lower hotel occupancy, hotel income will decline and the tax revenue will be lower than expected. I think there's a chance that the tax will be repealed. It's adverse to economics."
Meeting and convention planners could choose to skip New York in favor of cities with lower hotel taxes, Mr. Marquart suggested. He said the tax will affect leisure travel, causing vacationers to reduce the length of their stays.
Of New York City's 47,000 hotel rooms, about 90 percent are taxed at the higher rate, Mr. Marquart said. Rooms under $100 are taxed at 14.25 percent plus $2.
After New York City, the cities with the highest hotel tax rates are Columbus, Ohio (15.5 percent); Seattle (14.1 percent); Atlanta, Cleveland and four Texas cities: Austin, Dallas, Fort Worth and San Antonio (13 percent).
"As taxes approach one-fifth of the hotel bill, they can have a devastating effect on the convention and tourism business," said Donald J. Walter, executive director of the National Association of Exposition Managers in Indianapolis. "Hotel taxes seem to be going up everywhere. The hardest thing to do is to determine what the breakpoint is" -- at what point people decide to stay away or shorten their stay.
"The original purpose of the hotel tax was to help fund convention and tourism bureaus," Mr. Walter explained. "It was a dedicated tax. We feel a minimum of 50 percent of the tax should go back to exposition centers. As a matter of policy, we won't meet in cities that don't do that."
While the taxes appear to be with us, make a point of asking what the hotel tax is the next time you make a reservation. It won't ease the pain when you pay your bill, but at least it won't come as a surprise.