|The tax could lead to fewer tourists visiting Piazza Navona and other Rome venues.|
Travelers heading to Italy will have to bring a few extra euros with them, thanks to new hotel taxes in certain cities. In Rome’s hotels, guests must pay an extra fee of three euros ($4.2) per person per night in all four- and five-star properties, and two euros ($2.8) per person (excluding children under two years of age) per night in properties rated three-star and under (excluding youth hostels). Guests will be charged the fee for a maximum of 10 nights—meaning that two weeks in Rome will cost a family of four an additional 120 euros (or $172).
In Florence and Venice, meanwhile, the tax is one euro per person per night per star (with maximums of five euros per person and five nights), so a family of four staying in a four-star hotel for a week will get an extra 80-euro (or $120) surcharge when they check out.
To help relieve the extra burden on travelers, several tour operators have offered to absorb the tax for 2011 and into 2012. We spoke with several to see how this policy can help agents and their clients, and how it might impact the profits of the operators themselves.
“We’re absorbing city fees as they roll out throughout Europe,” says Steve Born, vice president of marketing for Group Voyagers, the company that markets and sells the Globus family of brands within the U.S. “We’re going to continue to absorb them. There’s no [additional] charge for Globus, Cosmos or Monograms travelers.”
Marc Kazlauskas, president of Insight Vacations, feels that the tax can prove harmful to Italy’s tourism scene: “To tax tourists before they get there makes no sense. These taxes are quite high and could equate to hundreds of dollars,” he says. “People will feel it’s too expensive and they’ll tell their friends. It’s an unfair levy on travelers who want to see destinations.”
Absorbing the tax will impact the company’s bottom line, he acknowledges, “but we stand by our pricing. If a customer pays in full, we can’t go back and ask for additional funds.” Insight will absorb the cost for now and start factoring it in future packages.
Paul Wiseman, president of Trafalgar Tours, says he and his team were disappointed because the industry was not consulted about the tax situation before the law was passed. “We had no ability to plan or communicate the tax to our clients in our marketing material, and thus we felt that it was the right thing to do,” he says. Ultimately, the Trafalgar team decided that they would absorb the costs and “protect our customers.”
Diana Ferro of Perillo Tours feels the same, adding that while she hopes hotels will take the initiative in lowering prices to compensate for the tax, she doubts such a move would happen. Going forward, the taxes will be incorporated into the overall costs for the company’s tours for 2012; the taxes, she notes, represent less than 1 percent of the average overall tour cost.
Central Holidays, as of press time, has not yet announced whether it will absorb the hotel tax, although Chief Operating Officer Gianni Miradoli acknowledges that if competitors take that step, it may need to do so as well. One problem with the extra tax, Miradoli notes, is that until it is included in the tour cost, the tour operator cannot factor it into commissions to agents.
Promoting the Value of Tours
Born feels that by taking the burden on themselves, tour operators can promote the value of traveling in a group rather than independently. “We see it as the cost of business,” he says. But the tax can be a useful revenue stream for the cities, he notes, and while the cost per night isn’t significant, it can quickly add up. “It’s one of the benefits of going with a tour operator—so someone’s in the middle to help with surprises.”
Wiseman agrees and notes that there is a benefit to the travel agents as well, who, rather than having to explain why their clients will have to pay hundreds of extra dollars, can use it as a tool to keep the clients happy. Kazlauskas points out that clients going on escorted tours know the price before they leave, and they know it in U.S. dollars. “With an FIT, you pay as you go, and if the price goes up, you pay more.”
“This is a copy point about the value of touring,” Born says, adding that agents should emphasize that traveling with a tour operator will save clients money when situations like these arise. “If clients see that an agent saves them money or makes it go farther, it further validates their relationship. You can use it as another example of that value.”
Wiseman says that Trafalgar’s prices are locked in for 2012 and that the company will review the situation for 2013. “The danger is that more cities will start these tax programs and at some point the financial burden will become overwhelming,” he notes. “But let’s hope that is not the case.”