State’s hotel tax rate could be among highest in nation
A proposed $5 per night fee for hotel rooms in Oklahoma as part of House Bill 1010 would place Oklahoma City and Tulsa among the highest-taxed hotels in the nation. However, even with this tax hike, overall rates likely will remain below national averages.
Hotel and tourism industry officials spoke out against the proposed increase, which still must be approved by the state Senate and submitted to Gov. Mary Falling before it would take effect.
Staff Writers David Dishman and Steve Lackmeyer report on Page 1C.
Hoteliers across the state are protesting a plan to increase the hotel room charge by $5, a move they say will hike Oklahoma City and Tulsa’s tax rates for lower-priced hotels to some of the highest in the nation.
The increase was among an array of revenue measures passed by the House of Representatives late Monday aimed at increasing teacher and state employee pay. The measure still needs approval by the state senate and signing by Gov. Mary Fallin.
Opposition to the tax is being voiced by the Oklahoma City Hotel Association, the Oklahoma Hotel and Lodging Association and the Oklahoma City Convention and Visitors Bureau.
Jeff Penner, director of the Oklahoma City Hotel Association, said Tuesday the increase will change Oklahoma City from the 71st-most expensive check-out rate at hotels with room charges under $100 to the most expensive check-out rate in the country.
“What a way for the state to cut into something that should be the city’s revenue to invest locally to generate even more tax across the board,” Penner said. “A common misperception is that ‘visitors pay this tax, not us.’ Wrong. A huge percentage of our business comes from our local businesses paying and from our own citizens.”
Authors of the bill did not respond Monday night to complaints about the rate hike, but during the Monday night debate they said the hike would not apply to religious camps like Falls Creek and to school groups, which are exempt from paying taxes.
The legislation indicates the $5 will be charged by innkeepers to customers unless the lodging is an
extended-stay rental in which lodging is provided to a guest for more than 30 consecutive days.
While initial criticism of the bill states the increase will rank Oklahoma City as charging the highest hotel tax rates in the country, the math is a bit more complicated.
The tax will have a greater effect on lowercost hotel and lodging businesses because the fee is $5, regardless of the base rate of the room.
“It’s a regressive tax,” Penner said. “You could go downtown to the Skirvin and pay $185 and pay five bucks on that. You could go three miles south, spend $35 for a night, and you’ll spend $5 on that.”
Currently, city and state taxes are charged for hotel rooms in Oklahoma, and an additional occupancy tax is charged in most cities. Oklahoma City hotels charge a rate of 14.125 percent for its combined taxes on rooms. Adding a $5 fee would effectively raise the tax rate to 19.125 percent for a $100 room, with a higher percentage the cheaper the base cost of the room.
“In Oklahoma, you don’t have many $200 and $300 room rates,” Penner said. “The majority of hotels will suffer greatly.”
Average rates are lower
However, average daily rates for Oklahoma hotels remain lower than national averages, according to data compiled by STR Inc. in conjunction with the Oklahoma Hotel and Lodging Association. The U.S. average daily rate was $127 through August 2017. In Oklahoma City, the rate was $79 with a rate of $83 in Oklahoma City and $81 in Tulsa. These low rates are for great hotels, Carrier said.
“The optics of it may be worse for us than the actual effect,” Carrier said. “We have top-quality hotel properties and our (average daily) rates are lower than other cities are.”
Carrier said the lower overall rate might not always be enough to deter convention planners from choosing other cities with lower tax rates that sometimes lead organizations elsewhere.
“When a convention meeting planner looks at this and sees we have a 14 percent tax plus a $5 tax, they see it starts to get expensive,” Carrier said. “Because we have a low cost will help us, but they may not get past the tax.”
The Oklahoma Hotel & Lodging Association also is urging lawmakers to kill the room charge, arguing the increase could be devastating to towns bordering other states.
“The Oklahoma Hotel & Lodging Association is not against generating state revenue to fill voids, but we are against such a regressive tax increase,” association Chairman Bryan Davis said.
The association believes the addition of a $5 lodging tax in addition to the room rate, state sales tax, city and county sales tax, and a city lodging tax on hotel rooms would be devastating to local economies.
Hotels in border areas of the state especially stand to lose tremendous business.
Those traveling into or through Oklahoma will easily decide to spend the night in Texas, Arkansas, Missouri, Kansas and New Mexico, rather than pay some of the highest rates in the nation, Davis said.
“A $5 lodging tax in rural areas of Oklahoma will cripple any tourismgenerated revenue in those areas,” Davis said. “Travelers will choose to push through to other states, affecting not only the hotel industry but restaurants, attractions, and local travel and tourism.”