Wednesday, March 25, 1998

Tourism bills make
big changes for marketing

The hotel room tax would
grow to 11.5% but there are major
differences in the House and
Senate versions

By Russ Lynch


A proposal to change the way Hawaii tourism is promoted and to guarantee annual funding for marketing is moving steadily through the Legislature, but there are significant differences between House and Senate versions yet to be resolved.

Passage of the Senate version by the House Committee on Tourism yesterday means at least that the hotel room tax will be raised to 11 percent or more, hotel room rentals will be exempted from the general excise tax, and a fixed percentage of the room tax income will go directly to tourism marketing.

The committee, however, declined to tax time-share rentals, something the Senate had inserted. And several members questioned how what was planned as an 11 percent room tax had suddenly become 11.5 percent.

There are also House and Senate differences over how much of the room tax income should be allocated to the counties.

The Senate version, agreeing with the House that hotel room income should be subject only to the room tax, set the level at 11.5 percent.

"Nobody asked for it. It came from nowhere," said Rep. Galen Fox (R,Waikiki). He and committee chairman Romy Cachola (D, Kalihi) said they realized the figure had gone up only after the House Finance Committee had approved it.

That and other differences seem headed for resolution in House-Senate conference committee.

Meanwhile, however, it is clear that the Legislature will provide dedicated funding for tourism and it will be much more than past allocations.

The bills agree that three percentage points of the room tax should go to tourism promotion. Based on last year's figures that would be more than $60 million a year. The current budget calls for $25 million this year plus a special $3 million appropriation for the Miss Universe pageant.

Dedicated funding has long been sought by the Hawaii Visitors & Convention Bureau, which has had to go hat in hand to the Legislature every year.

The HVCB says that is a time-consuming and uncertain process that doesn't allow much long-term planning.

The bills would set up a new tourism authority, with members selected from government, the tourist industry and the general public. There would no longer be a direct appropriation to the HVCB but the bureau, along with any other interested organizations, would be able to bid for a marketing contract awarded by the authority.

Tony Vericella, HVCB president and chief executive officer, said the organization is more than ready to do that and he believes it has the strongest chance of getting the work.

"We will prove to the people that we indeed should be the marketing arm for the state," Vericella said in a recent interview.

The HVCB favors the idea of a broadly aimed tourism authority, setting the state's policy on tourism for years ahead, with a strong emphasis on accountability, he said.

The HVCB was part of a 46-member coalition set up to pursue implementation of the Economic Revitalization Task Force recommendations. The coalition supports the new structure and the higher room tax.

The Hawaii Hotel Association, also a member of the coalition, supports the 11 percent room tax provided the general excise tax exemption comes with it.

Not everyone in the industry agrees, however. Richard Kelley, board chairman of Outrigger Hotels & Resorts, said the tax will hurt Hawaii tourism.

Already, fewer visitors are coming to Hawaii, they aren't staying as long and aren't spending as much money while they are here, he said.

"This is not a time to drastically increase taxes," Kelley said.

The Economic Revitalization Task Force recommended an increase of only 1 percentage point in the room tax, to 7 percent, but left the 4 percent general excise tax in place.

The Hotel Association's position is that either way hotel room income would be taxed 11 percent.

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