1. Money

How Hotel and Travel Taxes Affect Your Bottom Line

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Pay attention to hotel taxes and event fees on your invoice.

Image © flickr.com/spine

Taxes and service fees have been a part of the hospitality industry for a long time. So long in fact, that it is easy to overlook the impact they can have on your event planning budget. Depending on the size of your event, it is possible to save thousands of dollars by simply selecting a different state or city to host your function. This article takes a look at hotel and travel taxes, and how they affect event planners and tourists.

Behind the Tax Rates
Travel taxes originated as a way to offset the tax burden of residents. The concept is pretty simple: Pass the tax burden off to visitors because they don’t elect local candidates and most of them won’t be around long enough to complain. It seems like a popular initiative, but as these taxes continue to rise, more travel-related associations are analyzing them in detail.

Every state and city sets their own rate for taxes on hotel beds, rental cars, and entertainment contracts. 20 years ago there was not as much discrepancy in rates between the primary tourism markets, so very few planners bothered to compare the taxes. Today however, particularly in this era of decreased spending, saving 10% or more across every hotel room can make a big difference.

Sales Taxes and Discriminatory Taxes
There are two tax percentages to evaluate when comparing prices between destinations. The first is sales tax, which of course is added to the sale of every tangible item you purchase. Regional sales taxes are determined by adding the state and local tax rates. Discriminatory taxes are special tax rates applied to a category of sales. This is where you’ll find taxes on hotel rooms and rental cars. Because sales and discriminatory taxes vary so widely, it is not always easy to track the “least taxing” locations.

Best and Worst Travel Tax States
Every year, the Global Business Travel Association (GBTA) ranks the highest and lowest travel tax burden for their list of Top 50 Travel Destination. Here is a look at their findings for 2012…

Lowest Travel Tax Burden Cities
Fort Lauderdale, FL
Fort Meyers, FL
West Palm Beach, FL
Detroit, MI
Portland, OR

Highest Travel Tax Burden Cities
Chicago, IL
New York, NY
Boston, MA
Kansas City, MO
Seattle, WA

Florida, who has 3 out of the top 5 lowest rates, has always been careful to consider any ramifications that increased taxes might have on their lucrative tourist industry. Thus, it is no surprise they are well-represented at the top. Portland offers a unique cost benefit to travelers as they don’t charge any sales tax.

Interestingly enough, the highest taxed cities include some of the most popular destination for business travel. New York, Chicago, and Boston play off their prominent status to make the most from their tourist traffic. In some cases, event planners have no choice but to travel to these cities because they are such important hubs for business.

How Much Can You Save?
The average amount of single day taxes paid by travelers in the least expensive markets is around $22. Compare that to the most expensive locations, where visitors can expect to pay $36 per day. That is a difference of $14 per person for every day.

If you were hosting a conference with 750 people over 3 days you could potentially save $31,500 in taxes by choosing one of the cheaper destinations. And this number does not even include the money you can save by avoiding the inflated prices of large metropolitan areas.

Of course meeting and conference planners do not always have the liberty to choose what city or state they will host an event in. The real takeaway here though is that a different zip code can make a big impact on your event’s budget. This fact is particularly important when comparing prices because tax rates are not always defined in hotel proposals.

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