New York City has seen an incredible explosion in hotels charging resort fees in 2017. In May 2016, fifteen hotels in the City charged resort fees. Today in July 2017, a whopping 42 hotels in New York City charge scam hotel resort fees. This 180% increase has drastic implications for the fair collection of taxes from New York City hotels.
What is a resort fee? A resort fee is a separate not advertised, mandatory fee that a guest is forced to pay in order to receive the key to his room. This fee is charged at the hotel in addition to the base advertised room rate. In cities like New York, it is often called a “facility fee” or an “urban fee.”
Hotels claim a resort fee provides a service, alleging that it goes to pay for things like access to the business center or local calls from your room. However, there is no exchange of service with a resort fee. If there was, a guest could deny the charge if he did not want to use the services allegedly provided. A guest can never deny the services and get out of paying a mandatory hotel resort fee. Since a guest is forced to pay the fee, resort fees are the equivalent of a second room rate. Basically, hotel resort fees allow the hotel to lie about their advertised price, so hotels love them. Hotels can use resort fees to lure in customers who think they are booking a much lower rate than they actually are. It also allows hotels to pay less in taxes since they are splitting their room rate into two parts.
How does it work? The forty-two hotels in New York City with resort fees advertise one low price, say $100. In reality, to get the key to his room, a hotel guest will be forced to pay an additional say $35 per day that the hotel considers a resort fee. This allows the hotel to lie about their advertised rate – they can say it is $100 instead of $135 dollars – and it also allows the hotel to cheat the City of New York out of essential taxes. The advertised room rate of $100 is subject to the hotel occupancy tax of 14.75%. The $35 second room rate / resort fee is only subject to the NYC sales tax of 8.875%.
How much money is the City of New York loosing per day on this hotel scam? $24,181.91 per day. That’s $169,273.37 per week. $677,093.48 per month. In total, New York City loses $8,826,397.21 in tax revenue per year because of the hotel resort fee scam.
How is the City losing more than 8 million dollars a year in tax revenue because of the hotel resort fee scam? Hotels want to be able to lie about their advertised room rate to lure in customers. When a few bad hotels start this atrocious practice, others quickly join so that their room rates are close to their competition. With 42 hotels in New York City now engaged in this questionable practice, there are massive consequences to tourism and taxes in New York.
Tourists are confused and offended by hotel pricing and are turning instead to home shares like Airbnbs. Many local governments have taken up regulating Airbnb as they should. Yet to regulate Airbnbs and not address hotel resort fee scams that drive tourists to home shares is hypocritical. Hotel resort fees directly contribute to the problem of proliferating home share popularity. Resort fees also allow hotels to cheat the city of essential tax revenue that could be used on affordable housing initiatives. Any city considering regulating home shares like Airbnb needs to address the hotel resort fee issue in the same bill. To ensure fair is fair, and that the city gets the units and taxes deserved for affordable housing, both home shares and hotels should be taxed, advertised and regulated similarly.
Hotel resort fees federally fall under the purview of the Federal Trade Commission (FTC). Seeing as President Trump earns $66,168 per day on hotel resort fees from three of his hotel properties, it is highly unlikely there will be any federal action on this issue. In good news, 46 state attorney generals have joined together to investigate hotel resort fees. This is multi-state litigation that could take years. In the meantime, cities like New York are losing tax revenue every single day. Local governments need to take action now to end this scam and make sure they are getting all the tax revenue they deserve to support essential city programs.
How does this work scam work exactly? In short, hotel resort fees allow a hotel to break up its room rate into two parts. One is advertised, one is not. The advertised rate is subject to the hotel occupancy tax of 14.75%. The second hotel rate, that the hotel calls a resort fee, is only subject to the NYC sales tax of 8.875%. The city is losing 5.875% of taxable revenue on every second hotel rate / resort fee in the city. In a city the size of New York, this quickly adds up to over 8 million lost dollars a year.
For a more detailed look at how hotel resort fees cheat taxes in New York City, note that there are five components to how a New York City hotel room’s advertised rate must be taxed to reach 14.75%.
1) NYC Hotel Room Occupancy Tax Rate - $2 per room + 5.875%
2) New York State Sales Tax for Hotels – 4%
3) New York City Sales Tax for Hotels - 4.5%
4) MCTD (Metropolitan Commuter Transportation District) sales & use tax – 0.375%
5) New York State Hotel Unit Fee (aka Javits Center fee) - $1.50 per unit per day
All combined, hotel rates in New York City should be taxed at 14.75% per day plus $3.50. That is clearly the law and that is how hotels have been taxed for quite a while in New York City. With creative new hidden second room rates / resort fees, hotels are now able to split their price and only pay the hotel occupancy tax on the advertised rate. The second half of the room rate, the hotel says, is not subject to the hotel occupancy tax since they claim it is providing a service (though, as we clearly know, it is not). So what is the second half of the hotel’s room rate taxed at? The New York City Sales Tax of 8.875%. How?
1) New York State Sales Tax for Hotels – 4%
2) New York City Sales Tax for Hotels - 4.5%
3) MCTD (Metropolitan Commuter Transportation District) sales & use tax – 0.375%
The $3.50 – the Javits Center tax fee of $1.50 per room and the hotel occupancy base of $2 per room – is moot as that is being charged once per room. By advertising one rate but charging yet a second room rate / resort fee when a guest gets to the hotel, 42 NYC hotels that charge scam hotel resort fees also eliminate 5.875% of taxes off of the split off cost of every room.
For example, The Hudson Hotel in Manhattan has a room on July 30, 2017 advertised for $120 per night. When a guest gets to the hotel, she will learn the hotel also has a facility fee / resort fee of $29.95 plus tax. The hotel’s total advertised room rate should be $149.95 but they are able to reduce their advertised cost by 20% by charging a scam resort fee. That’s an immoral and deceptive consumer practice to begin with, yet the hotel is also clearly working to cheat New York City out of taxes.
If you click for further information before booking, you see that the $120 is subject to the hotel occupancy taxes of 14.75%. There is also a surprise un-advertised resort fee whose pre-tax value is 29.95. The facility fee / resort fee / second room rate is only taxed at 8.75% and the city is collecting $2.66 off this $29.95. In reality, the 29.95 should be part of the advertised room rate ($120 + $29.95, so total taxed advertised room rate should be $149.95).
The Hudson Hotel is cheating the City of New York out of $1.76 on each hotel room booked. The Hudson Hotel has 1,250 rooms. The City of New York is losing $2,200 from the Hudson Hotel per day. That is $15,400 per week, $61,600 per month and $803,000 per year – from just one hotel – that the city is losing in essential tax revenue due to scam hotel resort fees.
The Hudson Hotel has long had the resort fee scam in Manhattan but it has spread far beyond them to over 16,000 rooms in the City. Other hotels want to look, but not actually have, rooms that are priced just as low! The exact breakdown of just how much New York City is losing from scam hotel resort fees per hotel is profiled in the table below. Please feel free to contact firstname.lastname@example.org with any further information - or of course if any of these hotels decide to get honest and stop charging resort fees. Click here to download the NYC Resort Fees spreadsheet.
|Hotel Name||Resort Fee Pre-Tax||Resort Fee With Current Sales Tax Rate||Resort Fee With Hotel Occupancy Tax Rate||Fee Difference||Number of Rooms in Hotel||Loss Per Day to City in Tax Revenue||Loss Per Year to City in Tax Revenue|
|The Avalon Hotel||$20.00||$21.78||$22.95||$1.18||100||$117.50||$42,887.50|
|Crowne Plaza Times Square Manhattan||$27.23||$29.65||$31.25||$1.60||795||$1,271.81||$464,211.08|
|Dream Downtown - Dream Hotel Group||$9.14||$9.95||$10.49||$0.54||316||$169.68||$61,934.70|
|Dream Midtown - Dream Hotel Group||$9.18||$9.99||$10.53||$0.54||221||$119.19||$43,504.65|
|Fifth NYC - An Affinia Hotel||$25.00||$27.22||$28.69||$1.47||209||$306.97||$112,043.59|
|The Franklin Hotel||$12.00||$13.07||$13.77||$0.71||50||$35.25||$12,866.25|
|Gardens NYC - An Affinia Hotel||$25.00||$27.22||$28.69||$1.47||132||$193.88||$70,764.38|
|The Gregory Hotel||$28.00||$30.49||$32.13||$1.65||132||$217.14||$79,256.10|
|The Highline Hotel||$18.12||$19.73||$20.79||$1.06||60||$63.87||$23,313.65|
|Hotel 32 32||$13.76||$14.98||$15.79||$0.81||106||$85.69||$31,277.00|
|Hotel 48Lex New York||$20.00||$21.78||$22.95||$1.18||116||$136.30||$49,749.50|
|Hotel Hayden New York||$16.33||$17.78||$18.74||$0.96||122||$117.05||$42,721.53|
|Hotel Mela Times Square||$30.00||$32.66||$34.43||$1.76||232||$408.90||$149,248.50|
|Hotel Hudson New York - Morgans Hotel Group||$29.95||$32.61||$34.37||$1.76||1,250||$2,199.45||$802,800.39|
|Innside New York NoMad - Melia Hotels International||$19.00||$20.69||$21.80||$1.12||313||$349.39||$127,525.98|
|The James New York - The James Hotels||$30.00||$32.66||$34.43||$1.76||114||$200.93||$73,337.62|
|The Knickerbocker Hotel||$30.00||$32.66||$34.43||$1.76||330||$581.62||$212,293.13|
|Le Parker Meridien - Starwood/Marriott||$15.00||$16.33||$17.21||$0.88||730||$643.31||$234,809.06|
|The Mave NYC||$20.14||$21.93||$23.11||$1.18||72||$85.19||$31,095.15|
|The Michelangelo Hotel||$35.00||$38.11||$40.16||$2.06||178||$366.01||$133,594.56|
|Nylo New York City||$29.99||$32.65||$34.41||$1.76||291||$512.72||$187,141.54|
|Paramount Times Square||$25.00||$27.22||$28.69||$1.47||597||$876.84||$320,047.97|
|Park Central New York||$31.00||$33.75||$35.57||$1.82||761||$1,385.97||$505,879.51|
|Park Lane Hotel||$33.00||$35.93||$37.87||$1.94||628||$1,217.58||$444,415.74|
|Radisson Martinique on Broadway||$15.00||$16.33||$17.21||$0.88||532||$468.82||$171,121.13|
|The Redbury New York||$28.00||$30.49||$32.13||$1.65||261||$429.35||$156,710.93|
|RIU Plaza New York Times Square||$12.00||$13.07||$13.78||$0.71||647||$456.31||$166,552.99|
|The Roosevelt Hotel||$25.00||$27.22||$28.69||$1.47||1,015||$1,490.85||$544,160.15|
|Shelburne NYC - An Affina Hotel||$25.00||$27.22||$28.69||$1.47||325||$477.34||$174,230.47|
|Viceroy Central Park New York||$25.00||$27.22||$28.69||$1.47||240||$352.50||$128,662.50|
|Warwick New York||$25.00||$27.22||$28.69||$1.47||426||$625.69||$228,375.94|
|The WestHouse New York||$45.00||$48.99||$51.64||$2.65||170||$450.08||$164,277.38|
|The William Vale Hotel||$2.00||$2.18||$2.30||$0.12||183||$21.05||$7,681.42|
|Wyndham New Yorker||$29.00||$31.57||$33.28||$1.70||1,083||$1,845.16||$673,483.86|
|Yotel New York||$25.00||$27.22||$28.69||$1.47||669||$982.59||$358,646.72|
The sales tax rate for hotel resort fees in NYC is currently calculated at 8.875%
The hotel occupancy tax rate for hotel rooms in NYC is calculated at 14.75%
This table is based on 100% occupancy
There are 365 days in the year
New York City loses $8,826,397.21 annually - over eight million dollars - due to hotel resort fees.
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