DOUBLING TOURISM REVENUES BY 2015 (2006)

Since the downturn in the tourism industry experienced after 9-11, the hotel industry has continued to recover each year, but has not yet achieved the occupancies or revenue per available room (RevPAR) as in the peak year of 2000. Many hotels do not achieve year-round occupancies of 65% or even 60%, which is a rough indication of sustainable profitability. The increasing supply of accommodations in certain communities is one of the many factors influencing occupancy. The BC Yukon Hotel Association (BCYHA) has undertaken a comprehensive study of the financial viability of the industry, with preliminary results made available to government in December 2005. Later in 2006, Phase 2 of the study will be complete, with an emphasis on providing industry analysis on a region-by-region basis.

The Premier’s goal of doubling tourism revenues to $20 billion annually by 2015 is an ambitious objective, and the hotel industry wants to contribute to achieving this goal. However, several key issues are emerging that, if not addressed, will undermine the doubling of tourism goal.

Continued pressures by various local governments and other eligible entities to increase hotel room taxation are a source of constant distraction. The usage of these tax revenues needs to be limited to specific tourism marketing to ease some of the pressure.

Financial viability pressures are increasing faster than revenues. While the industry is most appreciative of the government’s recent Corporate Tax reduction, we wish to explore with government the possibility of implementing a PST/social service tax exemption for in-room consumables similar to other manufacturing industry exemptions. The key points are:

• Fairness – Hotels are treated differently than other industries.
• Competitive Situation – Alberta and Washington State have no tax on hotel room consumables.
• Hotel operational costs (labour, insurance, marketing, etc.) are growing at a greater pace than revenues. This situation is seriously limiting investment and enhancement of hotel infrastructure.
• With the government objective of growing tourism revenues to $20 billion by 2015, without changes in financial viability of hotels, achieving this objective is doubtful.

The current legislation needs to be amended to ensure the same rules and regulations are applicable for the Hotel Industries in relation to PST exemptions under the following implementation schedule:

· In terms of control, and to quantify the issue, we would like to see a maximum exemption of $200 per hotel room, per year.

· The exemption would have a sunset-clause, dated to 2015, to coincide with the government’s tourism goal.

· Operators would agree to re-invest the exempt tax funds back into capital upgrades in preparation for the Olympics, to help generate increased room revenues.

The Chamber believes that within 2 years, the exemption would be paid back to government with an average room rate increase of at least $5/room sold. (Most importantly, this is revenue neutral for the government, as the 8% hotel room tax would off-set the 7% Social Service Tax Exemption.)

THE CHAMBER RECOMMENDS

That the Provincial Government amend the current legislation to ensure the same rules and regulations are applicable for the Hotel Industry in relation to PST exemptions as outlined above.