ATLANTA – The new tax on hotel and motel stays will drain away more than $200 million in business from the lodging industry, and the biggest impact will be outside of Atlanta, according to industry economists.

Lawmakers voted to add a tax of $5 per night to vacation and business travelers to raise money for road repairs as part of a transportation-funding bill passed during this year’s legislative session. The lodging tax was added as a substitute for a proposed tax on rental cars that was jettisoned in the wake of complaints that it would harm Georgians needing a temporary ride while their own vehicles were in the shop.

But the hospitality industry didn’t have time to raise an outcry or present data on the hotel tax impact because legislative negotiators added it at the last minute. Industry leaders didn’t have time to stop it from passing, and they are unlikely to keep it from becoming law because Gov. Nathan Deal has said he intends to sign it. So, now they are bracing for the sting when it takes effect.

Adding the tax will cause hotels to lose more than $130 million just in Savannah and Atlanta, according to an analysis by PKF Hospitality Research, a well-known tourism-consulting firm. Only those two cities were calculated because PKF routinely tracks their hotel stays, and it could plug the tax into its existing economic models and historical data, according to Jamie Lane, senior economist with PKF.

The firm did the study on its own and not at the request of any client.

“We just did it because we felt that it would be meaningful,” he said.

The study found that the impact will be more pronounced in Savannah because more of its hotels are lower prices. An additional $5 is a more jarring 6.6 percent increase when added to a $76 room charge compared to a 3.4 percent rise to a $148 charge, the report showed.

Other Georgia cities also have a greater proportion of lower-priced rooms than Atlanta and will also take a bigger hit, Lane said.

“A $5 tax in Augusta and Brunswick will have a bigger impact because those room rates are smaller than in Atlanta,” he said.

Atlanta may have the world’s busiest passenger airport, but hospitality is still a big business in other Georgia cities. In Savannah, visitors spend $2.3 billion, responsible for 24,000 jobs, according to an Armstrong State University economist.

Since that spending is on more than just lodging, the impact of lost, price-conscious conventions could also hit restaurants and shops.
“This lost demand brings with it a reduction in other spending (food, beverage, retail, tourist attractions, car rentals, etc.) as well as forgone general sales and use taxes and hotel/motel tax receipts (which in aggregate can range from 14.0 to 16.0 percent of room revenues),” the PKF report said.

Savannah has seen the number of its visitors rise 10-14 percent each of the last three years. And two-thirds of them are coming from out of state, according to Joseph Marinelli, president of the Visit Savannah marketing organization.

“Savannah has been known for a long time as one of the best value destinations along the East Coast,” he said.

Follow Walter Jones on Twitter @MorrisNews and Facebook or contact him at walter.jones@morris.com.

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