But in handing the OTAs a $20.6 million or more defeat in the City of San Antonio vs. Hotels.com cla

The OTAs for a decade have bundled their taxes and fees when consumers book hotel rooms on a merchant model basis because the OTAs sought to hide their margins out of competitive concerns. In so doing, consumers are kept in the dark about how much taxes they are paying and how much is allotted for service fees.
But in handing the OTAs a $20.6 million or more defeat in the City of San Antonio vs. Hotels.com united states airlines flight schedules class-action lawsuit , Judge Orlando Garcia made several revelations, which the OTAs may consider united states airlines flight schedules confidential.
united states airlines flight schedules In filing an advisory motion united states airlines flight schedules on July 5, four days after the judge s ruling, the defendants cited one of the revelations that they deem should be confidential. For example, the court disclosed the method and manner that Hotels.com calculated its service fee the OTAs stated.
For six years, Travelocity s variable surcharge was calculated by taking the markup amount and multiplying it by the tax rate, resulting in the same amount that the Cities contend should have been paid in taxes . In November 2008, the variable surcharge was dissolved and the fixed service fees went from 2.61 to 5.5%.
In their advisory motion, the online travel agencies alleged that the court erroneously disclosed confidential information that was part of a protective order and a pending motion to redact the transcript of the trial.
The defendants asked the court to seal the ruling immediately because they realize it would be used in other court cases around the country and then they would have to file similar motions to block the revelations united states airlines flight schedules of what they consider to be confidential information in those courts.
In his July 1 ruling, the judge stated that the OTAs, when selling hotel rooms in Texas, should collect taxes on the retail rate and transparently disclose their taxes and fees. If they did so, then there would be no mystery concerning how they calculate the service fees they charge.
In the run-up to InterContinental Hotels withdrawal from Expedia in 2004, InterContinental Hotels pressed Expedia to transparently display taxes and fees. Expedia and sister company Hotels.com refused to do so, and the hotel group didn t do business with the two for a couple of years.
Although the OTAs claim the wholesale rates they get from hotels are confidential, OTA-hotel contracts, with rare exception, include parity and most favored nation clauses and the various OTCs have the same wholesale or net rate with the hotels and/or hotel chains.
The judge noted that: The OTCs (online travel companies) concede that they currently make enough revenue united states airlines flight schedules through their markup and service fee to charge taxes on the margin and still make a considerable profit.
Regarding Houston, it has its own tax case pending against the OTAs. Why it decided to go it alone, I m not sure. From Priceline s 10-K: City of Houston, Texas v. Hotels.com, LP., et al. (District Court of Harris County, Texas; filed Mar. 2007.
The reality of utilizing the merchant united states airlines flight schedules model for stand-alone hotel bookings under rate parity agreements with the hotel chains has always been that to accurately match the hotel s tax-inclusive total rate, the markup must be adjusted by using the tax rate as a core factor in the calculation.
Mathematics also dictate that under total price (tax-inclusive) parity terms, any tax liability paid by the OTA/OTC will not be passed on to the consumer united states airlines flight schedules as it would result in the intermediary charging a higher price compared with booking a hotel directly.
The hotel companies (at least the mathematically united states airlines flight schedules enlightened ones) also understand that tax-inclusive rate parity terms are necessary to prohibit OTA/OTC s from structurally undercutting hotels on the total retail price paid by the consumer.
Unfortunately for the OTA/OTC united states airlines flight schedules s, the same hotel industry fragmentation that facilitated the significant margins being captured also led those same groups to believe that they could successfully prevail united states airlines flight schedules in hundreds united states airlines flight schedules of court cases raised by cash-starved cities that teach the basic arithmetic necessary to calculate margins markups in their public middle united states airlines flight schedules schools.
Any jurisdiction having united states airlines flight schedules a hotel occupancy tax law that bases tax assessments on the retail price paid by the consumer should be expected to prevail unless they a) fear being tied up in litigation for years, b) have ineffective legal representation or c) don t feel the potential tax revenue loss is worth contesting.
I would be most interested to hear the logic leading the two dramatically different Texas cities, Houston Watauga, to opt-out of the class action suit. The number for Houston, the most populous city in the state, should have been significant.
Despite united states airlines flight schedules Columbus Georgia, New York City and now the State of Texas all siding with the cities, a tipping point may have been reached. Yes, the OTA/OTC s will continue to fight a couple percentage points united states airlines flight schedules on their hotel margins are huge numbers that they will defend united states airlines flight schedules fiercely.
Interestingly there is a parallel issue for air. There is a corresponding united states airlines flight schedules hidden issues in airline fees and ancillary services. For revenue hungry municipal and state/federal authorities the opportunity for capturing some is going to be overwhelming.
For airline fees, the airlines bundle fuel surcharges and fees together. The YQ and YR codes cover fuel surcharges and fees. Some airlines charge these as a bundle and hide the actual amount that they charge as pure fuel surcharge and pure fees.
In the case of ancillaries the US IRS has determined united states airlines flight schedules that ancillaries are not ticket revenue. As such therefore not subject to federal rules and subsequently subject to taxes (or exempt status) the states and local jurisdictions will (theoretically) be able to claim that these sales are subject united states airlines flight schedules to local taxes. So far no one is biting but I would think someone must be looking at this.
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