Travel Promotion Act (TPA) An Oxymoron?

The soon to be enacted Travel Promotion Act (TPA) is being heralded by many in the industry and beyond as the elixir that will take inbound tourism to new heights with benefits that include an additional $4billion in new consumer spending per year along with 40,000 new jobs besides millions in taxes that will reduce the deficit by over $400 million within 10 years.

The fact that the bill envisages, on the surface, no new tax on US taxpayers with most of the monies raised by taxing foreigners (particularly the ones who currently provide the bulk of US tourist dollars) seems to have made the bill not just palatable but positively delectable. Proponents of the bill have also continually pointed out that other western countries have concerted government directed spending geared towards "promoting travel" as a reason for such a measure while also noting that the US's "share" of international tourism declined through most of this decade. There are arguments that point to potentially contradictory outcomes.

For starters the European Union, from where a significant chunk of inbound tourists emanate, intends to retaliate against the $10 tax with a tax of their own directed at US visitors. European travel leaders at trade shows such as ITB have repeatedly expressed frustration with the US's complicated entry procedure for its ostensibly visa-free entry in the post 9/11 era starting initially with fingerprinting (initially 2 digits and later all ten) to photographs which only got magnified with the introduction of ESTA, a once every two year electronic registration requirement for "visa-waiver" countries for tourists intending to travel to the US.  The contrast with European entry for American visitors could not be more stark: no forms (not even customs) much less photographs or worse a fee/tax. In essence, the addition of a $10 fee together with the compulsory
filling up of an (electronic) form converts visa-free countries into
de-facto visa-required countries.

Many European tour professionals speak of clients not wanting to bother with going through the hoops to visit the US and choose to go elsewhere. It is unlikely that a government sponsored initiative is going to persuade them otherwise since the underlying factors remain and arguably will get worse. Saying that the US does not spend any money on tourism is not entirely accurate either as many states and scores of major corporations are present in full force at major tourism exhibitions.

The American Society of Travel Agents recently noted that the industry faces a relentless tidal wave of  tax and fee proposals 
from a multitude of sources – federal, state and local  – including
hotel occupancy tax proposals that will challenge the industry and our
ability to respond.  It is unclear how this tax, albeit on foreigners, is going to mitigate the challenges the travel industry faces in terms of costs regardless of whether it effects the changes in mindsets overseas or not as the $10 fee on them is going to be $10 less spent within the US. 

Lastly, there was a Federal government agency as part of the Department of Commerce, the USTTA, that sought to promote tourism
to the US that was disbanded in 1994. In its aftermath, tourism did not
decline and the US's share of tourism in the 90s kept pace with similar
developed nations. It is unclear how a new similarly tasked agency can produce a contrary outcome.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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