"Our industry is already grappling with a 20% decrease in hotelrevenue over last year, in November alone," says John Fitzpatrick,president and CEO of the Fitzpatrick Manhattan Hotel and thechairman of the Hotel Association of New York City, in a preparedrelease. "This tax increase, on top of the 14.54% our customersalready pay" in the form of other state and local taxes in additionto the room tax--"is a lump of coal in a holiday stocking that willdrive visitors away. The net result will be reduced revenue for thecity and the state and increased job losses at hotels and thebusinesses we support."

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In the release, the association cites an analysis conducted bySean Hennessey, CEO of Lodging Advisors. Hennessey's data projectedthat even a 1% increase on the hotel tax would cause a loss of morethan $533 million in room sales and associated visitor spending,3,716 jobs in the hotel industry and businesses supported by hotelsand more than $162 million in wages at hotels and businessessupported by hotels.

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"This tax would make New York City's combined hotel rate thesecond highest in the country after Houston," says Hennessey in arelease. "Instead of generating new revenues, any increase in taxescould have the opposite effect. More taxes on top of astrengthening US dollar could divert tourists and travelerselsewhere or cause them to shorten their stays."

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Council member Lewis Fidler, who introduced the bill, says in astatement that the tax increase could raise $80 million for thecity by the end of FY 2010. "Asking foreign tourists to pay $2.62 anight on a $300 hotel bill is insignificant, especially when youconsider that we could use the $80 million generated to pay for1,000 new police officers and more." On a per-night room charge of$300, the tax hike would represent an additional outlay of $2.62,he says.

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While not taking a position on the proposed legislation, DanielLesser, senior managing director and industry leader of valuationand advisory services for CB Richard Ellis' hospitality and gaminggroup, points out that generally speaking any increase in travelexpenses can have an impact on business. However, he notes that therecession so far hasn't caught up with Manhattan tourism fromoverseas. "You walk through Times Square and you hear a lot offoreign accents and see a lot of shopping bags," he tellsGlobeSt.com.

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Going forward, Lesser says New York hoteliers have gotten ahandle on managing prices in a way they didn't after 9/11, whentravel-oriented websites set the pace with discounts. "The hotelsrealized that they have to take control of their own destiny" whenit comes to room rates, he says. "And they've done a good job ofholding the line."

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Lesser also tells GlobeSt.com that concerns about an impendingoversupply are mitigated by the fact that many of the rooms in thepipeline may not get built. "There are projects that are coming outof the ground and have their financing in place, and then there arethose that exist only in somebody's wishful thinking," he says."Those that don't have their financing right now aren't going toget done."

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.