ax reform is the hottest legislative topic in Washington as Congress lurches toward its holiday break. As I write this, passing a bill and getting it to the president’s desk before Christmas is certainly not a done deal. Time is running extremely short.
The details of the legislation are evolving daily. So, it’s impossible to say with certainty whether the eventual final package is good or bad for a particular industry.
But a November study by the American Hotel & Lodging Association estimated that “tax cuts could generate $131.7 billion in economic activity for hotels and related industries over the next 10 years.”
“Tax cuts will stimulate the economy and are expected to generate a boost to hotel industry operations, cause additional guest spending at restaurants and stores in the travel destination, and increase hotel capital investment—all benefiting the broader national economy,” the AHLA said.
As Congress continued to move the ball down the field on tax reform, AHLA president and CEO Katherine Lugar reiterated support for tax reform, which she believes will be especially helpful to the three out of every five hotels that are small businesses. She makes a great point.
AAHOA, the Asian American Hotel Owners Association also weighed in.
“Tax reform, done correctly, will have a generational impact on our economy and our industry. This is a legacy-defining moment for lawmakers and President Trump. Lower taxes and a simpler, fairer tax code for all of America are within their reach. Join me in urging them to get the job done before the end of 2017, and we can all look forward to continued prosperity and growth for years to come,” said Chip Rogers, AAHOA CEO.
Happy days are here again? Not so fast.
Tax reform is only part of the story as we turn the page to 2018 and beyond. The reality is that Trump administration policies regarding travel to the U.S. from abroad are already inflicting significant damage on the U.S. travel industry.
The Global Business Travel Association estimates that the U.S. will lose $1.3 billion in travel-related expenditures in 2017, taking hotels food, rental cars and shopping into account. The organization thinks more than 4,200 jobs could be lost as a result.
Numerous studies have already documented substantial hits to U.S. tourism as foreign travelers have opted to spend their money and time elsewhere this year.
In early December, the Supreme Court upheld the latest version of the Trump administration’s travel restrictions aimed at eight countries. This ruling likely will encourage the president to pursue more restrictions, in fact.
In addition, his aggressive rhetoric about Mexico and his pursuit of a southern border wall is also discouraging travel from Latin America to the U.S.
So, although tax reform is certainly critical for the lodging industry, there are still other policy concerns that could outweigh any benefits. AHLA and AAHOA are right to say that tax reform has the potential to be hugely helpful to hotels. I certainly hope that Congress can get it done. Thousands of independent hotel operators across the U.S. could use the help.
But it’s not all butterflies and rainbows as long as the administration continues to push for overly restrictive rules on foreign travel to the U.S. In his efforts to keep hostile forces out of the U.S., the president is also sending the world a clear message that not all foreigners are equally welcome. Much like the economic crisis in Greece and political instability in the Middle East, when tensions rise, travel typically to and from the U.S. can also decrease.
“We are British Muslims and live in London,” Sabaa Farrukh wrote in a commentary published by The New York Times. “We wanted to visit NYC this summer but decided against it simply because we felt we wouldn’t be welcome there and didn’t want to waste precious holiday time in case there was a problem at passport control at the airport.”
That kind of feeling around the world is terrible for the hotel business, even while tax reform has the potential to be quite helpful.