Online travel agencies lost a major case in Texas earlier this month and, after poring over the judge’s findings, at least one hotel distribution consultant says the ruling will set a precedent in how municipalities collect tax on hotel rooms sold through online merchant models.
The heavy-hitting OTAs lost a class-action lawsuit by 173 cities in Texas as defendants in The City of San Antonio, Texas v. Hotels.com, which was initially filed in May 2006 and is one of the longest-running cases against OTAs. The ruling on 1 July declared OTAs must collect taxes on the full retail rate they charge consumers as opposed to the wholesale rate they get from hotels, including margins and service fees.
Robert Cole, founder of RockCheetah and former director of hotel distribution with The Sabre Group, estimates OTAs in the near future will begin evolving their business plans to tweak the merchant model or move away from it all together.
- Read “Ruling could spell end of OTA merchant model.”
The total active U.S. hotel development pipeline comprises 2,967 projects totaling 317,941 rooms, according to the June 2011 STR/McGraw Hill Construction Dodge Pipeline Report. This represents an 11.4% decrease in the number of rooms in the total active pipeline compared to June 2010. HNN LINK
Among the top 10 markets by rooms under construction, Nashville, Tennessee, reported the largest increase, rising 1,505% with 1,365 rooms under construction (compared to 85 rooms in the in construction phase in June 2010). New York reported the largest decrease in rooms in the in construction phase (-38%), though the market currently has the largest number of rooms under construction (5,853 rooms).
We all know transaction volume is up over 2010, but LW Hospitality Advisors last week released some numbers to lend definitive clarity to that assertion. According to the group’s mid-year 2011 sales survey, 65 assets (of more than US$10 million) traded hands during the first six months of 2011 for a total volume of more than US$6 billion.
Other notable highlights:
- 17 major U.S. hotel sale transactions greater than US$100 million occurred in the first half of 2011, compared with 10 during all of 2010, and only five which were consummated during each calendar year 2008 and 2009;
- New York and San Diego are the most active U.S. hotel sales transaction markets with a combined 17 major deals totaling US$3.1 billion, or roughly half of the total dollar volume for the nation so far this year; and
- Pebblebrook Hotel Trust is the dominant player in major U.S. hotel transactions with six so far this year totaling more than 1,500 rooms and aggregate purchases of more than US$500 million. Chesapeake Lodging Trust follows with four acquisitions totaling close to 1,000 rooms for an aggregate amount of just more than US$300 million.
As if the Harmon hotel’s existence hasn’t been shaky enough … the unfinished CityCenter hotel on the Las Vegas Strip is virtually unrepairable and likely would collapse in a strong earthquake, a structural engineer told MGM Resorts International, according to the Las Vegas Review-Journal.
In the report, members of Weidlinger Associates of Marina del Rey, California, said they ran several tests on the building and found missing or misplaced reinforcing steel in columns, beams, shear walls and transfer walls throughout the tower below the 21st floor.
The Harmon, part of the US$8.5-billion CityCenter, was originally designed by the firm of famed British architect Lord Norman Foster as a 47-story hotel and condominium tower. In 2008, building inspectors found structural work on the Harmon did not match plans submitted to Clark County. The construction issues involved improperly placed steel reinforcing bar, commonly known as rebar.
MGM Resorts spokesman Gordon Absher said CityCenter officials forwarded the report by Weidlinger to Clark County and will await direction from the county as to what the next steps are with the Harmon.
Overall business travel transactions increased 10% in the first quarter of 2011, according to figures from the Guild of Travel Management Companies’ quarterly transaction survey. Hotel performed particularly well, with transactions up 15%.
Air travel transactions grew 9%, rail grew by the same amount, while car hire transactions increased 10%.
Compiled by Patrick Mayock and Jason Q. Freed.
