Ottawa eyes 4% hotel and Airbnb room tax

Replacing an existing voluntary levy, the new revenues would bolster Ottawa Tourism campaigns

Whether they choose a traditional hotel room or make use of platforms such as Airbnb, Ottawa tourists may find a new tax on their stays in the new year.

City staff have proposed the new hotel and short-term accommodation tax in a report to the finance and economic development committee. If implemented, visitors would see an extra four-per-cent charge added to the cost of their rooms.

Revenues from the tax would fund Ottawa Tourism, an organization that conducts marketing campaigns and tourism research to raise Ottawa’s profile as a visitor destination.

The proposal stems from changes first introduced in the Ontario government’s most recent budget, which opened up frameworks for municipalities to implement accommodation taxes independently of the province. Similar taxes in Alberta, British Columbia, Nova Scotia, Quebec and Newfoundland are instead mandated at the provincial level.

The concept already exists in the form of a voluntary levy from members of the Ottawa-Gatineau Hotel Association, first instituted in 2004. Ninety per cent of the OGHA’s members participate in the three-per-cent levy on room prices. That agreement expires at the end of this year.

In recent years, the levy has generated more than $8 million.

OGHA president Steve Ball says that in order for hotels to thrive in the globally competitive tourism industry, contributing funds to organizations such as Ottawa Tourism is a no-brainer.

“People don’t travel to stay at a hotel. They travel to experience a destination, to take part in events and see attractions. And then they select a hotel.”

“If you think you can succeed in promoting your municipality… by marketing ‘Come and stay at the Westin!’ or ‘Come and stay at the Fairmont!’, you are going to fail,” he tells OBJ.

“People don’t travel to stay at a hotel. They travel to experience a destination, to take part in events and see attractions. And then they select a hotel.”

Mr. Ball says the levy and ensuing marketing campaigns have had a clear impact on the industry. The levy was briefly halted in 2010 when the HST came into effect, but was restarted in 2014. Since that time, the hotel industry has had back-to-back record years in 2016 and 2017. Even with the hype around Ottawa 2017 celebrations, Mr. Ball says the contributions of the marketing efforts have been undeniable.

“I think you can point directly at success,” he says.

Bringing Airbnb into the fold

The proposed tax stands on the principle that if accommodators are benefiting from Ottawa Tourism’s campaigns, then they should contribute to its funding.

That includes hoteliers that are not members of OGHA and hosts on room-sharing websites such as Airbnb.

The report says that the city has been in discussions with Airbnb and other platforms around implementing this tax. The sharing economy giant has indicated it’s willing to cooperate with the proposal, as it has done with a similar taxes around the world and in the neighbouring province of Quebec.

“Airbnb has agreements in more than 300 jurisdictions globally to collect and remit hotel taxes on behalf of our hosts and guests, and we want to continue to pay our fair share,” said Airbnb spokesperson Alex Dagg in a statement.

“We are committed to working with cities like Ottawa, to develop smart, easy-to-follow regulations that support home sharing – including regulations around taxation.”

Under the proposed guidelines, any accommodation “with a roof renting consecutive
room nights of under 30 days” is susceptible to the tax. A few exemptions do exist, including campsites, long-term care facilities and hospitals.

Mr. Ball says he anticipates a bit of pushback from OGHA members who do not already voluntarily contribute to the levy, but he believes communicating the benefits of the tax will help ease the opposition.

For example, participants receive a seat at the table to voice how they’d like to see Ottawa Tourism spend its funding. They also have access to all of the organization’s resources, including a platform for web-bookings, to which smaller operators may not have access.

The proposal first goes to FEDCO on Dec. 5. If passed, it will go to city council before implementation on Jan. 1.