HVS study shows competitive nature of lodging taxes

National Report – HVS Convention, Sports, & Entertainment Facilities Consulting (HVS CSE) released its third annual 2014 Lodging Tax Study-USA, which surveyed lodging tax rates and revenues across the United States, tracking trends in lodging tax rates and revenue generation.

In some cities, state and municipal governments formed special districts where lodging taxes and citywide lodging taxes are both levied on travelers. Within these districts, lodging tax rates vary according to geographical location, size or other factors.

One example the report supplies is non-resort hotels on Las Vegas’ Fremont Street, which charge an additional 1.0 percent in lodging taxes to fund construction projects in the city. The report states that revenues from special “district taxes” are often used to support convention center developments that could generate room revenue for hotel properties in the district, feeding into one another.

Lodging taxes are often viewed as a viable method to raise revenues for local governments because a majority of overnight visitors that use lodging accommodations and pay the tax are not constituents.

The report also describes the lodging tax market as highly competitive, where the tax burden is shared between the buyer and seller. Lodging taxes raise the price of accommodations, though a hotel manager may be unable to increase a property’s rates by the full amount of the tax, depending on demand in a region. Due to this, the effects of lodging taxes vary as market conditions change.

All U.S. states outside of Alaska and California impose a sales tax, lodging tax or both on overnight accommodations. (Alaska and California levy their lodging taxes at the municipal level.)

Connecticut has the highest state lodging tax rate at 15 percent, but restricts local authorities from enacting lodging taxes. Oregon has a low state lodging rate at 1 percent, but does not restrict local rates. Hawaii has the second-highest lodging tax rate at 9.25 percent, then Maine at 7 percent.

HVS also researched the total tax rate applied to lodging accommodations in the 150 most populous cities, as determined by the 2010 census. St. Louis topped the list with a lodging tax rate of 21.97 (11.99 percent from city taxes, 5.75 percent from special district taxes and 4.23 percent from state taxes).