Lawmakers Pass Tax Increase on New York Hotel Rooms

The New York City Council has approved by a vote of 46 to five a nearly 1 percent increase in New York's hotel tax, it announced this week. The increase, which will raise the tax on New York hotel room charges by 0.875 percent to 5.875 percent, could take effect as early as March 2009 and will hurt the already ailing New York hospitality industry, according to its opponents.

"The City Council's misguided attempt to raise revenue in difficult economic times is a troubling blow to our industry and the economy of New York," Joseph Spinnato, president of the Hotel Association of New York City, told Crain's New York Business. "Visitors [will] shorten their stays or simply [won't] come. Local firms, which make up 60 percent of a typical New York hotel's business, will take another hit even as they are already reeling from this recession."

While the hotel tax will generate at least $80 million for New York City, which has a $4 billion budget deficit, it will add to a traveler's hotel bill approximately $2.62 per night on a $300 room—an increase that lawmakers say will be inconsequential to visitors and that industry advocates argue will be damaging.

"Someone who is going to spend $2,100 on a hotel is not going to not come because we raise it to $2,120," City Council member Lew Fidler told Crain's New York Business prior to the tax bill's passage. "This difference is not going to chill tourism."

According to an independent analysis, New York visitors currently pay a 14.5 percent tax on hotel rooms; that includes a $2 nightly occupancy tax and a $1.50 per night contribution to a Javits Convention Center capital fund, as well as city and state sales tax. As a result, New York ranks seventh among the 17 most expensive major U.S. hotel markets. When the city's newest tax takes effect, New York will rank fourth, behind Houston, New Orleans and Chicago.