By Alexander Behne
A new municipal tax aimed at short-term accommodations — hotel rooms and bed-and-breakfasts — will also apply to rentals made through the popular lodging app Airbnb.
The tax, which will apply to any place offering stays of less than 30 days, replaces a voluntary three-per-cent levy that most hotels in Ottawa have been charging their guests since 2004. The funds gathered by this levy — usually totalling between $8 million and $9 million per year — are turned over to the Ottawa Tourism and Convention Authority for what’s called “destination marketing” — an assortment of initiatives to attract more visitors to the city.
Michael Crockatt, CEO of Ottawa Tourism, says the new tax will ensure that “all the members of the accommodation sector are contributing to that common destination marketing effort.”
He added: “The accommodation sector and really most participants in the tourism sector agree that the most important thing to be doing is to be promoting and developing the destination as a whole, because if we are successful as a community in doing that, all the participants in that industry really stand to benefit.”
Airbnb is to the hotel industry what the disruptive ride-sharing app Uber is to the taxi industry: Airbnb accommodations are much cheaper than their traditional counterparts, and the company itself isn’t subject to many of the taxes that hotels must pay.
The City of Ottawa legalized Uber’s business model in a bylaw that took effect in September 2016, despite cries from taxi companies and unions that they were being unfairly undercut.
The hotel industry has been similarly concerned with Airbnb’s arrival in the marketplace, and with the app-based company’s avoidance of some fees and regulations faced by traditional accommodation businesses.
Some cities across Canada — particularly Toronto — have also become concerned with the impact Airbnb is having on rental housing supplies because many landlords are choosing to devote more of their units to Airbnb guests than to tenants seeking long-term accommodations.
Municipal officials are currently studying a range of issues posed by Airbnb’s presence in Ottawa.
Airbnb has stated, however, that it supports collecting and remitting destination marketing taxes on the rentals booked through its service.
Alex Dagg, Airbnb’s public policy manager for Canada, said in a written statement that currently “Airbnb has agreements in more than 300 jurisdictions globally to collect and remit hotel taxes… We are committed to working with cities like Ottawa, to develop smart, easy-to-follow regulations that support home sharing – including regulations around taxation.”
The company already remits the 3.5-per-cent tax on lodging in Quebec, following an agreement signed in August. Those funds are given to the province’s tourism offices.
Steve Ball, president of the Ottawa-Gatineau Hotel Association, says that just about every major market imposes on hotels some sort of destination marketing fee for short-term lodgings. These taxes usually meet with little resistance, because they are paid exclusively by visitors to the city, not its residents.
“Nobody likes to hear about new taxes,” he says, “but this one is probably what I would characterize as somewhat painless, in that it’s taxation almost like a user tax, against the travelling market. It’s only on hotel rooms… The goal is to focus on the visitor.”
Ball says the OGHA will use the additional revenue to, among other things, support legacy events stemming from this year’s Canada 150 celebrations, which brought record numbers of tourists to Ottawa.
“The one we’d love to bring back would be La Machine, of course,” he said, referring to the highly popular event that featured giant robotic characters playing out a chase drama through the streets of the capital. “That was wildly successful.”
Increased revenue from the taxes will also mean more “long-term, sustainable funding,” says Ball. Major events could be booked months or even years in advance with the confidence that marketing funds will always be available down the road to draw in the crowds.
“One of the real benefits is the stability,” echoes Crockatt, “the knowledge that there’s a certainty, a clarity that we know that all of the participants in the accommodations sector are really contributing to the marketing efforts.”