Houston is trying to figure out how to collect taxes on third-party hotel bookings. City officials tell the Houston Chronicle that the city is losing up to $2 million annually in taxes linked to reservations made on sites like Travelocity and Expedia. The issue is whether online travel companies that buy what used to be called distressed inventory, then sell those rooms to consumers at a mark-up, should pay hotel-occupancy taxes (HOT) on the price difference.
Houston hotels remit 17 percent in HOT based on the price at which they sell rooms. As in other cities, these taxes go to retire debt or to keep the general fund operating. No doubt the city needs the money, so thereÃ¢€â„¢s a reason to pressure the third-party sites. Those sites, meanwhile, say the mark-up represents a service fee and so is not subject to HOT.
The issue is whether the city or the hotel companies, which already have a track record in right-sizing their relationship with online travel agencies, should wield the pressure. I favor the latter. The third-party sites are surely benefiting from this, but so are the hotelsÃ¢€”and the people who book the bargain guestrooms. Lest we forget: the city benefits, too. If costly litigation against the third-party sites leads to a decrease in hotel business, everybody loses.