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States and cities are going to lose a lot of tax revenues from hotels due to the pandemic. The question is how long will the drought last?

State and local tax revenue from U.S. hotel operations will drop by $16.8 billion in 2020, according to a report from Oxford Economics, released by the American Hotel and Lodging Association (AHLA) on Thursday.

The report serves as another sign of the impact the coronavirus pandemic has had on the larger economy, this time from the hotel industry.

Larger states were among the hardest hit in the report, with California, New York, and Florida all losing above a billion dollars in state and local tax revenue. The other state crossing the billion threshold was Nevada, likely due to the state’s reliance on hotels for tourism and leisure activities.

The release notes that the tax impacts in the report “represent the direct tax revenue decrease from the severe drop in hotel occupancy, including occupancy, sales, and gaming taxes.” However, the tax impacts do not include the potential side effects on property taxes supported by hotels.

The loss of this tax revenue will likely have major impacts on state and local economies, and it’s already had an effect on some local destination marketing organizations.

Visit Baltimore, the tourism arm for the city, is one example. CEO Al Hutchinson said that the organization announced about a week and a half ago that they would lay off seven full-time employees. In addition, he said the organization let go of 42 part-time employees and furloughed 12 other people. The changes, which take effect July 1, the new fiscal year, were a direct result of lost hotel revenue that helps fund the organization.

However, he said that there are still signs that recovery can take place.

“Based on trends and what we’re hearing around the country, there’s definitely some pent up demand. What we believe is from a hotel perspective, there’s going to be some leisure visitors coming in, maybe some of our regional visitors that may want to come in for a staycation at some of our hotels.”

According to the AHLA, hotels supported one in 25 jobs in the United States prior to the pandemic, a total of 8.3 million. It says that over 70 percent of the industry has been laid off or furloughed due to the pandemic.

“Getting our economy back on track starts with supporting the hotel industry and helping them regain their footing,” said Chip Rogers, CEO of the American Hotel & Lodging Association, in the release.

Other signs of the impact of the pandemic on the hotel industry include recent layoffs by industry giant Hilton, as well as the influx of new cleaning standards.

Here is a Breakdown of Covid’s Impact on Taxes And Hotels

Download (PDF, 466KB)

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Tags: coronavirus, coronavirus recovery, hospitality

Photo credit: Hotel Del Coronado in Coronado, California. Oxford Economics says that California will be hit the hardest in lost tax revenue from hotels in 2020. Armandoartist / Wikimedia

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