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Marriott CEO: Override Hogan's hotel tax veto

Your Dec. 27 editorial "The hotel tax flap" poses the following question: "Isn't keeping balanced and predictable laws — maintaining a 'level' competitive playing field — part of promoting a 'business friendly' atmosphere?"

Yes, I believe a level playing field is essential in promoting "Open for Business," which includes tax parity for everyone booking hotel rooms in Maryland.

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Marriott has deep roots in Maryland, having been headquartered here since the 1950s, and in large part we credit our success to the state's world-class workforce.

Unfortunately, in May Gov. Larry Hogan missed a prime opportunity to demonstrate that Maryland is truly "open for business" — our business, in particular — when he vetoed a bill of vital importance to the state's hoteliers.

Senate Bill 190, which passed the Maryland legislature with strong support last session, would have ensured that everyone involved in booking Maryland hotel rooms pays sales tax on a level playing field. Instead, the governor preserved what amounts to a taxpayer-funded subsidy to online travel companies such as Expedia, Travelocity and Orbitz, leaving the state's hotels at a competitive disadvantage.

Today, a consumer can pull up the websites of Marriott or a number of online travel companies to book a hotel room. To their credit, OTCs are the default choice of some travelers and have come to control a segment of the booking marketplace.

Contrary to popular belief, though, these websites do not negotiate with hotels to pass deals on to consumers; they are merely an alternative booking option. For the same room type, on the same night, at the same hotel, OTCs almost always offer the same rate as the hotel itself.

Hotels collect Maryland's 6 percent sales tax from guests based on this retail room rate, and then remit that sum to the state. OTCs do not. While they take the same total amount of money from consumers, OTCs only remit sales tax based on the pre-negotiated discount rates (akin to wholesale prices) they pay hotels for the rooms they book.

OTCs pocket the difference, making extra revenue above the cut hotels pay them by choosing to remit taxes on a lesser sum than the full amount they charge consumers.

This translates to an estimated $3 million to $5 million in lost tax revenue for Maryland each year. While short-changing the state, this windfall also provides OTCs with an unwarranted financial advantage over hotels.

OTCs make none of the tangible investments in physical infrastructure, supplies or employees that the brick-and-mortar hotel industry does every day. Every dollar not remitted to the state by OTCs is therefore available for their marketing budgets, drowning out hotels' direct outreach to customers.

Senate Bill 190 would have clarified existing law to ensure OTCs remit sales tax based on the retail room rates they charge consumers, as hotels do. This overdue code update is needed to reflect the emergence of Internet travel booking, to guarantee that everyone in the business of booking hotel rooms in Maryland pays taxes similarly, and to enable hotels to finally compete for Internet booking traffic on an equal footing with OTCs.

Mr. Hogan clearly recognized the unfairness of the current situation. This made his decision to ultimately veto Senate Bill 190 that much more disappointing for hotel companies, a number of which, in addition to Marriott, also call Maryland home.

There will be an opportunity for a veto override vote when the General Assembly reconvenes in January, and Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch should exercise this option.

As wide majorities of both legislative chambers already recognized with their "yes" votes on Senate Bill 190, this would promote fairness and a competitive landscape for hoteliers in Maryland, who support some 25,000 jobs in the state. It would also be an important step toward a modern and balanced tax code that is essential to a business-friendly atmosphere.

Arne Sorenson, Bethesda

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The writer is president and CEO of Marriott International Inc.

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