Ottawa’s B&Bs push back against proposed 4% hotel tax

B&Bs

After an outcry from bed and breakfast owners who say a mandatory four per cent hotel tax could drive them out of business, a city committee voted Tuesday to buy more time to look at exempting small operators from the proposed tax.

The finance and economic development committee decided to refer the issue to full council on Dec. 13. Committee members want staff to find out whether exempting establishments with fewer than four rooms – the so-called “Alberta model” because that province has a similar provision in its hotel tax law – would apply to people who rent rooms on platforms such as Airbnb as well as owners of traditional B&Bs.

Mayor Jim Watson said extending the exemption to Airbnb would cost up to $300,000 annually in lost revenues from the tax, which is meant to fund Ottawa Tourism’s efforts to attract more tourists to the capital.

“The reason why we have things like the Grey Cup and the NHL Outdoor Classic is because we have Ottawa Tourism marketing these events to come to Ottawa,” he said, adding he has “sympathy” for owners of small B&Bs who fear the new tax would be too much of an administrative burden.

“No one wants to pay more in taxes – I get that. There’s still a number of questions that need answers, and we have a week to get them.”

The city announced last week it was set to introduce the tax, which would apply to all hotels, motels, hostels, B&Bs and room-sharing services such as Airbnb as of Jan. 1, 2018.

Several Ontario municipalities have considered similar moves after the province allowed them to implement mandatory accommodation taxes in the 2017 budget.

The tax would replace a voluntary three per cent “destination marketing fee” that about half the city’s hotels have been charging guests for several years. Under the current model, which raises about $8 million a year, the Ottawa Gatineau Hotel Association collects the fees and gives the money to Ottawa Tourism to promote the city as a travel destination.

Industry support

The new tax has the support of most industry groups, including Ottawa Tourism, the OGHA and the Ottawa Chamber of Commerce, and Airbnb told OBJ last week it was open to the proposal as well. The city estimates the tax would raise up to $12 million annually, money that would continue to go toward Ottawa Tourism’s marketing efforts.

But several owners of small B&Bs told the finance and economic development committee the tax would simply mean more paperwork for operations that already run on a skeleton staff and have thin margins.

“Our industry is a dying industry.”

“Our industry is a dying industry,” said Richard Gervais, owner of the King Edward Bed and Breakfast.

They also questioned how much say they would have over any marketing decisions at Ottawa Tourism and the hotel association, which does not accept members that have fewer than 50 guest rooms.

George Neufeld, co-owner of Ashbury House Bed and Breakfast in the Glebe, said he’d get “zero benefit” from the tax because most of his clients are referred by other guests and Ottawa Tourism’s marketing efforts have little impact on their decision to visit the capital. He called on the city to exempt B&Bs and cut the tax from four to two per cent.

Carol Waters, co-owner of the two-bedroom Australis Guest House in Sandy Hill, questioned the effectiveness of the tourism campaigns the tax is supposed to fund. She said many of her guests only book a night or two because they don’t think there’s enough to do in the capital to warrant a longer stay.

“They don’t know about Ottawa,” she told OBJ after the meeting. “How (is Ottawa Tourism) going to spend that money?”

Ms. Waters, who has helped run the B&B since 1980, said it’s getting harder for small operators like her to make ends meet, and an additional tax on guests would only make things worse.

“Someone like me, I’ve been (in the business) 38 years, I’d think of retiring,” she said. “I don’t want that extra burden.”

Council will also consider a 60-day phase-in period for accommodations of 10 units or less to give smaller operators more time to implement the tax.

From the archives