Traveling to London? Beware the VAT game

September 22, 1996|By Christopher Reynolds | Christopher Reynolds,LOS ANGELES TIMES

London lodgers, beware.

Despite government efforts to keep room-rate quotations uniform, scores of hoteliers are playing games in the way they quote prices -- games that could easily boost an unaware traveler's expenses by more than $20 a day.

Taxes are the core of the problem. American hotels, which face widely varying tax rates from city to city, long ago rejected the idea of including taxes within their quoted rates.

Thus, an American traveler is reconciled to the idea that, if he reserves a $100 room in Los Angeles, he will later discover that his bill is $114, swollen by the local bed tax of 14 percent.

But in England, all hotels are required by the government to assess their guests the same nonrefundable 17.5 percent Value Added Tax (VAT).

As a result, most hotels for years have built the VAT into their advertised rates. Thus, when a traveler reserves a $100 room in London, he is actually paying the hotel $85.10, while it passes $14.90 in taxes to the government.

Under the "guidance" language attached to the U.K.'s 1987 Consumer Protection Act, hoteliers and retailers are instructed that "all price indicators you give to private consumers, by whatever means, should include VAT."

But more and more hotels in England are excluding that tax from their price quotes and probably misleading thousands of consumers every year.

At the British Tourism Authority in New York, officials acknowledge that the practice defies the spirit of the law, but say "there's not a lot we can do about it, because the VAT regulations are so loosely written."

Many of those omitting the VAT rates are chain hotels headquartered in the United States or five-star properties at the high end of the price scale.

But the numbers are growing in the middle range. Among 20 smallish, under-$250-a-night hotels, five excluded the VAT from their quoted prices: the Willett, the Dorset Square Hotel, Five Sumner Place, Hazlitt's and L'Hotel. Among three new hotels with rates over $250 -- Covent Garden Hotel, the Leonard Hotel and the London Outpost -- the VAT was ignored.

This, obviously, makes rates look lower than they really are. The hotels' literature usually mentions somewhere in smaller print that VAT is excluded, but these brochures don't always say the VAT is 17.5 percent. It's easy to imagine an inattentive vacation-planner comparing a VAT-inclusive price with a VAT-exclusive price and being deceived. If you stay five nights at a $200-a-night hotel (VAT excluded), that deception could cost you $175.

Ed Perkins, editor of the Consumer Reports Travel Letter in the United States, calls the practice of excluding VAT "outrageous." Patricia Yates, editor of Holiday Which? (the British counterpart of the Consumer Reports Travel Letter), calls this trend "a slippery slope," and suggests that VAT-excluding hoteliers are "sailing close to the wind legally."

Hotels that cater to Americans are among the most common offenders. When I called operators for Inter-Continental, Marriott and Sheraton to ask about London lodging rates, not one mentioned taxes until I asked.

Bottom line: If you're looking for a London hotel, always ask about taxes. And if you find yourself talking to a hotel that excludes the VAT, complain.

Pub Date: 9/22/96

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