Are low taxes on travelers in California a positive or negative factor for the state’s real estate market?

  • A positive factor. (55%, 23 Votes)
  • Not a factor at all, or negligible. Something like that. (45%, 19 Votes)
  • A negative factor. (0%, 0 Votes)

Total Voters: 42

Cities in California sweep the list of centrally-located U.S. cities with the lowest travel taxes for the out-of-towner. Orange County, San Diego, San Jose, Burbank and Ontario impose the lowest taxes on travel-related services such as lodging (transient occupancy) and transportation, according to research by the Global Business and Travel Association (GBTA).

On the other end of the spectrum, Portland, Boston, Minneapolis, New York and Chicago ranked among cities with the highest taxes aimed directly at travelers. [For more information about the research on travel taxes in U.S. cities, see GBTA article GBTA Reveals Best and Worst Travel Taxes in Top 50 U.S. Destinations.]

first tuesday take: Low taxes on travelers equals perks for California. Tourists get it, and the venturing business traveler and conventioneer greet low bed taxes with pleasure (which is just as well since they have to cope with the high 7.25% California statewide sales tax).

For the residents of the cities involved, these low bed taxes on visiting out-of-towners are a blessing indeed. This low tax structure creates a competitive advantage over peer cities in other states by presenting an extra-friendly travel environment.

Investors in hotel property and nearby commercial buildings directly benefit, and they can vouch for this. While many commercial properties in California sit mired in negative equity, the hotel market and related hospitality business show definite signs of growth in demand, occupancy rates and new starts in 2010 and the first quarter of 2011. [For more information on progress in the California hotel market, see the July 2011 first tuesday article, Welcome to the Hotel California.]

So the first tuesday myth buster busts again: California is certainly not anti-business territory. Not only do low local traveler occupancy taxes attract out-of-state businessmen (and even out-of-country ventures since four out of those five cities on the list have an international airport) with fledgling funds to arrange meetings and conventions here, it delivers demand for California hotels, transportation services, entertainment, local dining and other visitor attractions. The added business appears to generate local tax revenue well beyond any loss experienced by the reduced transient occupancy taxes. [For more information California’s anti-business myth, see the September 2009 first tuesday article, Closed for business? The anti-business mythology of the Golden State.]

Ahem … and let’s not forget the potential for job creation these businesses possess – absolutely vital for the growth of real estate. The ripple effect from the services demanded by travelers runs into the bedroom communities that supply the labor for the hospitality industry. [For more information on the link between employment and real estate, see the first tuesday Market Chart, Jobs move real estate.]

So who among the city brokers have lined up space and formulated plans to woo travelers to stay and buy into the best geography in the world (aside fromthe ocean-side beaches of Rio de Janeiro)?

RE: “The worst US cities for travel taxes” from the Economist