U.S. Lodging Tax

HVS - What Lodging Taxes Tell Us About the Great Recession (PDF Download)

HVS Convention, Sports and Entertainment analyzed lodging tax revenue across the country to assess the health of the lodging industry. Changes in taxable room revenue show the rate of recovery from the Great Recession. We expect that the lodging industry will continue to grow more quickly than the economy for the next two years. Information is drawn from the data base used in the second annual HVS Lodging Tax Study, which was published in August of this year.

HVS Taxable Room Revenue

In the United States, a hotel guest will almost always find a variety of taxes and fees listed at the bottom of his bill at checkout. For example, a visitor to Boston will pay a 6% room occupancy excise tax to the City of Boston, a 2.75% tax for financing the Boston Convention Center, and 5.7% room occupancy excise tax to the State of Massachussetts. In other states, such as Maine, accommodations for hotel guests are simply taxed at the normal sales tax rate. The table to the right shows the distribution of total lodging taxes in the 150 most populous cities in the United States.

A hotel owner collecting room tax is legally obligated to report his total taxable sales to the government agency which levied the tax. As a result, lodging tax revenue closely mirrors the performance of all types of lodging facilities in a market. Cities and counties which collect lodging taxes generally report tax revenues in their Comprehensive Annual Financial Reports, or in their annual budgets. Since lodging tax rates are public knowledge, dividing the reported revenue from a lodging tax by the local rate provides a good estimate of the total taxable room revenue in a given city or county. HVS calculated taxable room revenue each year since 2003 for 48 cities, and each year since 2007 for a total of 117 cities. 

Taxable room revenue provides an accuate, simple indicator of the health of the lodging industry. Both increases in room rates and increases in room occupancy result in higher taxable room revenue. This approach has two advantages compared to studying lodging tax revenue alone: it enables 1) comparison of the relative size of the lodging industry in cities with varied lodging tax rates, and 2) analysis of changes in the lodging industry over time in individual cities, independent of tax rate changes. 

Cities and counties in the United States are not required to use a particular time frame in their annual financial reports. Of the 117 cities studied in this analysis, seventy (70) used the standard July 1-June 30 fiscal year, twenty (20) used a January 1-December 30 fiscal year, and twenty-six (26) used an October 1- September 30 fiscal year. GDP in the United States dropped most sharply beginning in September 2008 during the recession of 2007-2009. The deepest trough of the recession therefore falls in FY 2009 for cities which report based on a June-July fiscal year, but is split between FY 2008 and FY 2009 for cities reporting based on a January-December or October-September fiscal year.

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