Nov. 20, 2003 – The territory's hospitality industry came out unequivocally on Thursday against the Senate majority's approval of the governor's proposal to raise the hotel room tax to 10 percent from the current 8 percent.
"We must recognize that today travelers have many choices in vacation destinations," Brian Young, acting president of the St. Thomas-St. John Hotel and Tourism Association, said in a release issued jointly by his group and its St. Croix counterpart. "The U.S.V.I. is already perceived as an expensive destination, and every additional dollar counts.
"Their protest will be a silent one — they just won't come," Young said.
Fred Laue, president of the St. Croix Hotel and Tourism Association, said that "St. Croix in particular cannot afford to add to the cost of a vacation." He added: "With utilities, labor and airfare the highest in the Caribbean, it does not stand to reason that this move will help bring economic recovery to our island."
The Senate Finance Committee unanimously approved the governor's proposed 2 percent surtax on hotel and time-share occupancy, and the measure was on the agenda for Thursday's Rules Committee session. Proponents have said the measure would generate $3 million in new revenue for the General Fund. Majority senators said on Monday that they would offer an amendment in the Rules Committee to earmark that revenue for the Tourism and Advertising Revolving Fund.
On Monday, Sens. Louis Hill and Roosevelt David spoke in favor of the measure. Hill noted that the territory's tourism competitors spend much more on advertising and said there is evidence that "every one dollar spent on tourism advertising earns three dollars in return." David said the measure should be incorporated into the also-pending bill creating a V.I. Tourism Authority, which, assuming it is approved by Rules, is scheduled to be taken up by the full Senate session along with the FY 2004 budget.
In the hotel associations' release, Beverly Nicholson, executive director of the St. Thomas-St. John group, said the hospitality industry "is convinced that our legislators at heart believe they are making the best decisions for the Virgin Islands." But she added that consulting with the private sector would have been prudent. "We understand the financial crisis our territory faces, but we just cannot attempt to fix our problems at the expense of the No. 1 economic contributor to the territory," she said.
Nicholson said visitors who spend five nights in the territory currently pay more than $50 in departure and room taxes. "We should be reminded of the lesson learned from increasing the landing fees earlier this year," she said. "We must be sensitive to the overall cost of a vacation in the Virgin Islands."
The Port Authority increased landing and passenger fees at both airports by 25 percent last Feb. 1 and felt immediate backlash as major airlines reduced flights and American Eagle halted service between St. Croix and St. Thomas entirely. American, which has long provided the territory's largest airlift, ceased its ground operations, contracting them out to American Eagle and laying off employees. In August, the VIPA board reversed itself, rescinding the increases effective Oct. 1.
"You just don't raise taxes in an economically depressed situation," Laue said.
"The Virgin Islands has struggled to regain market position post-911," Young said, "and just as we begin to see the light at the end of the tunnel, a tax increase would be an albatross to the tourism industry." He said the territory would be better served by maintaining the room tax at its current level in an effort to expedite full recovery of the industry.
Laue also said the hospitality sector is concerned about the cost of having brochures and other materials redone to reflect a change in costs.
Nicholson noted that as things stood on Wednesday, there was no assurance that additional revenue derived from an increase in the room tax would go for advertising and promotion of the territory as a visitor destination. If public officials feel that it is necessary to increase the tax, she said, "then we should at the very least ensure that this money is used as an investment in tourism development."
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