Some Breckenridge owners struggle with new lodging tax
November 26, 2010
With a voter-approved 1 percent tax increase on accommodations going into effect Jan. 1, some Breckenridge lodging owners are concerned about the impression the tax hike will leave on pre-booked guests.
The ballot question, which passed with more than 70 percent of the vote, mandates that a 3.4 percent tax (up from 2.4 percent in 2010) be charged on rooms rented on or after Jan. 1, 2011, regardless of when the rooms were booked. Many rooms booked before the tax increase was approved were sold with the old tax rate, leaving a 1 percent difference that renters and lodging companies will either have to tack on to guests’ bills or absorb themselves after Jan. 1.
One Breckenridge lodging owner said increasing taxes on his clients is unfair and will upset them, but absorbing the difference would be a significant hit for the business.
“To me, it’s a matter of the integrity of the situation,” said Mitch Weiss of Pine Ridge Condo Rentals. “I think going back on the business agreement that was made just doesn’t leave a good flavor in somebody’s mouth.”
But others in the lodging community say they don’t expect a strong reaction from customers.
“Most of the guests are just going to pay, not even blink and not even know there’s a difference,” said Bruce Horri with Beaver Run Resort and Conference Center. “We’re prepared if someone really does scrutinize it and really has a challenge, we’re going to deal with it on a case-by-case basis. But that is not the majority of the business.”
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Horri also sits on the Breckenridge Marketing Advisory Committee, which manages the Breckenridge marketing budget, funded in part by the lodging tax.
The tax is expected to furnish Breckenridge with $740,000 annually, new dollars to fund marketing efforts to draw destination guests to Breckenridge.
With the new funds, the town will have approximately $3 million earmarked for marketing next year from a variety of sources. The additional dollars were intended to put Breckenridge’s marketing spending on par with nearby competitors such as Vail and Aspen.
Making an exception to the tax increase for pre-booked rooms would not only violate the language of the law passed by voters, it would also cost Breckenridge as much as $200,000 in marketing funds next year, according to Town Manager Tim Gagen.
Approximately 40 percent of Breckenridge’s reservations for the remainder of the season are already on the books, representatives of the lodging community said.
Weiss said for his company, absorbing the 1 percent difference for all pre-booked clients could cost thousands.
The lodging community supported the tax increase when it was proposed as a ballot item earlier this year, but members of the community say they didn’t realize how the tax would work for pre-booked guests staying on or after Jan. 1.
“This is something that probably could have been handled better, before the measure was put on the ballot and voted into law,” said Toby Babich, owner of Breckenridge Resort Managers and a member of the Breckenridge Lodging Association. “But nobody really recognized the issue with prior reservations until after it had been voted in.”
The Breckenridge Town Council offered a compromise, suggesting property managers collect full payment on pre-booked rooms before the end of the year so they would not have to pay the increased tax rate. But Babich said few lodging companies will go that route because it will create accounting problems.
With the law approved by voters and ready to go into effect, there are few options available now to improve the tax increase implementation process for lodging companies, Babich said.
“It’s just too late,” Babich said. “We’re about three weeks behind when we should have been talking about this.”
Weiss said he has had customers unhappy about having to pay a higher rate than they were originally quoted, but has not lost any reservations as a result.