By HUNTER BISHOP
Tribune-Herald staff writer
While Gov. Neil Abercrombie is floating a hike in the hotel room tax as one way to raise state revenue, the visitor industry is panning the proposal.
Late last month, Abercrombie submitted a bill to raise Hawaii’s room tax — also called the transient accommodations tax, or TAT, from 9.25 percent to 11.25 percent on Hawaii hotel rooms and other short-term rental operations such as bed-and-breakfasts.
Hawaii legislators helped close budget deficits by raising the room tax in 2009 in two steps from 7.25 percent to 9.25 percent, the current rate. That increase was supposed to be temporary and currently is set to expire in 2015, but the governor’s proposal would amount to a third hike in the TAT over the last four years and make the temporary tax hikes permanent.
State Budget Director Kalbert Young told a Honolulu newspaper that the administration is trying to spur discussion of how the state will continue to maintain tourism infrastructure and its marketing brand, as well as other parts of the budget that are not tourism related, such as public sector health and retirement funds.
“It doesn’t sound good to us,” said Nancy Roberson, who operates the Waipio Rim bed and breakfast with her husband Steve, who is treasurer of the Big Island Bed & Breakfast Association. Taxes are already high, she said, especially when adding the 4.166 percent general excise tax. “It’s coming out of the guests’ pockets, which keeps us from raising our rates.”
The Hawaii Tourism Authority issued a statement Friday saying it also opposes a TAT increase.
“An increase to the TAT would negatively affect Hawaii’s competitive position in the marketplace by putting an additional tax on our visitors,” said HTA president Mike McCartney. “This could cause us to lose momentum in the significant gains in visitor arrivals and spending experienced over the past three years. We need to ensure the continued success of our industry for the state’s economy to be sustainable.”
The discussion comes as Hawaii tourism is booming. Nearly 8 million visitors — a record number — came to the islands in 2012, spending $14.3 billion, also a record.
The statewide Hawaii Lodging & Tourism Association, which represents properties with 48,000 rooms in Hawaii, prefers that the 2 percent temporary tax end in 2015 as first planned with no new additional taxes.
George Szigeti, HLTA president and CEO, said growth has come about by a tremendous amount of hard work by business, the state and counties, communities and many different organizations. “It hasn’t been by accident. It’s taken a lot of hard work.”
Szigeti noted that visitor count improvements are largely geared toward Oahu. “We need to get our Neighbor Islands back up to par and we’re going to work hard to to get more people out to the Neighbor islands,” he said. “Raising these taxes doesn’t help.”
The HLTA’s website mentions New York City, Washington, D.C., San Francisco, Chicago, and Seattle as having the highest room taxes, but notes that they are “business destinations,” where travelers are not paying the hotel tax themselves but charging it to their businesses.
Coupled with Hawaii’s general excise tax, guests currently pay 13.416 percent of their room bill in taxes, which would rise to 15.416 percent if Abercrombie’s proposal were adopted by the state Legislature.
“In resort destinations like Hawaii, our competitors’ tax rates are often lower,” the HLTA site said, citing San Diego and Orlando as examples. “The cost of doing business and the tax rates (in Hawaii) are increasingly making it more difficult to be competitive and for businesses to be profitable. These (mainland) destinations also have lower room rates due to lower costs of doing business, thus leading to even lower rates for customers.”
But San Diego and Orlando also charge sales tax in addition to the room tax. With Abercrombie’s proposed increase, Hawaii’s combined General Excise Tax and TAT would fall below San Diego’s combined 18.5 percent rate (8 percent sales tax, 10.5 percent room tax, according to the San Diego Tourism Authority), and more than Orlando’s combined 12 to 13 percent rate (6 to 7 percent sales tax, 6 percent room tax, according to the Orlando Tourism Bureau).
Guests have not complained much about the tax at Waipio Rim, Roberson said. “Worldwide travelers are used to it,” and room taxes in other resort areas are often higher. “We can’t complain. We’re almost completely booked into next year.”
But Lorna Jeyte, proprietor of Kilauea Lodge, said, “Mainland people feel like they’re getting gouged.”
Jeyte suggested that if there’s going to be a tax on tourists and guests, it should be a separate charge dedicated to improving bike paths, or similar projects that would allow them to feel they are really benefiting something.
The state Department of Taxation reported that the TAT generated $323.9 million last fiscal year, which is distributed largely to the Hawaii Tourism Authority for tourism promotion activities and proportionately to each of Hawaii’s counties to help pay to maintain tourism infrastructure.
But Jerry Gardner, president of the Hawaii Island Bed & Breakfast Association and owner of Art and Orchids Bed and Breakfast in Keaau, said a TAT increase “doesn’t really help to attract more tourists here.”
“We really have to be careful to explain it to our guests because it becomes a large unexpected expense.”
Gardner’s advice to the state? “Don’t do it.”
Email Hunter Bishop at email@example.com