New York Hospitality by Vijay Dandapani

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.

Taxes - an (un)welcome mat for visitors

Some fifteen years ago, the New York Times ran an editorial urging government officials to reduce hotel taxes which at that time gave the city the dubious distinction of numero uno for high hotel taxes. With a slowing economy jurisdictions around the country are quick to sock it to seemingly faceless visitors (supposedly from overseas) whose protests don't reach officialdom. But the correlation between increased taxes and decreased visitation requires constant repetition.

A recent study sponsored by the National Business Travel Association (NBTA) reiterates what the industry knows all too well - that higher taxes are a strong disincentive for travel planners. The article states that "travel taxes are growing in the top 50 U.S. travel destinations, according to a new study of car rental, hotel and meal taxes. The result, it suggests: Meetings decision-makers are scaling back". It goes on to note that "local and state officials around the country wondering how to attract more visitors should look at Florida and California, popular destinations for both business and leisure travelers, (and) that 15 of the top 16 cities imposing the lowest discriminatory travel taxes are in those two states. Cities that disproportionately target travelers for revenue are probably losing market share without even knowing it. Travelers who have been burned by taxes start looking for alternatives. That could mean trading down to less expensive hotels, car or meal options; staying with friends; taking shorter trips; or choosing an alternative destination. The lesson here? If you want travelers to come back to your city, you shouldn't hit them with 'travel tax sticker shock".

Visa intransigence and tourism

The European Commission issued a press release yesterday that essentially rapped the US government for failure to move on visa reciprocity with third countries. Currently, nationals of twelve European member states continue to require a visa to travel to the US unlike members of "old" Europe who enjoy visa-free travel to the US.

The EU has threatened to retaliate against the US by implementing visa requirements for its diplomats unless the rules are revised to allow for visa-free travel to all EU nationals. The failure to amend the rules is of a piece with DHS' Great Wall of China mindset when it comes to tourism. Examples include two recent initiatives that do nothing to make the US more welcoming; one requiring even "Old" Europe nationals (who can come to the US without a visa) to register online beginning next year prior to traveling to the US while another involves the recording of all ten fingerprints for visitors. The palpable sense of exasperation shown by some visitors at any port of entry while attempting to enter the US is in contrast to the entry process at any EU port where no landing cards or customs cards is required for anyone regardless of nationality.

The Nanny state - H.R. 6068 - the bedbug bill.

Some members of the Congress of the United States have seen fit to bring the powers of the federal legislature to bear on hotel owners and operators on the issue of bedbugs by introducing a bill to "establish a grant program to assist States in inspecting hotel rooms for bed bugs". Introduced by George (G.K.) Butterfield, Jr., representative of North Carolina's District 1 along with 6 co-sponsors, the bill if enacted would be called "Don't Let the Bed Bugs Bite Act of 2008".

The Honorable representative submitted as part of his findings that "on February 12, 2008, a thorough inspection of a hotel in Nashua, New Hampshire, found that 16 of 117 rooms were infested with bedbugs;
(2) cimex lectularius, commonly known as bed bugs, travel through the ventilation systems in multi-unit establishments causing exponential infestations;(3) female bedbugs can lay up to 5 eggs in a day and 500 during a lifetime;(4) bedbug populations in the United States have increased by 500 percent in the past few years;(5) in 2004, New York City had 377 bedbug violations and from July to November of 2005, a 5-month span, there were 449 violations reported in the city, an alarming increase in infestations over a short period of time;(6) in a study of 700 hotel rooms between 2002 and 2006, 25 percent of hotels were found to be in need of bedbug treatment; and(7) bed bugs possess all of the necessary prerequisites for being capable of passing diseases from one host to another".

For starters, a perusal of Congress' own account, the incidence of bedbugs has obviously gone down as evidenced by the latest count of incidents in hotels in New Hampshire. But implicit in Congress taking up the issue is that this is a pandemic with health care consequences whereas informed medical opinion shows that a bedbug bite does not result in transmission of any disease even though it can be traumatic to many. This site first commented about bedbugs nearly two years ago (and more recently in March of this year) noted the need to involve the EPA to allow the use of stronger compounds to combat the problem which has been exacerbated by the ease of international travel.

However, for Congress to mandate the provision of grants to "conduct inspections of lodging facilities for cimex lectularius (clinical name for bedbugs) including transportation, lodging, and meal expenses for inspectors;(2) train inspection personnel; and (3) educate the proprietors and staff of lodging establishments about methods to prevent and eradicate cimex lectularius" is arguably a case of legislative overreach. It will only serve to crimp hotels and do little, if anything to mitigate the problem. With the advent of third party review sites and recourse through a hotel brand's main offices customers are reasonably well served. A lodging establishment that does not have an active program to combat bedbugs is unlikely to operate successfully for any sustained period of time as customers are not only likely to vote with their feet by going elsewhere but also seek remedial measures.