Hotels Grumble at Plans to Hike Orange Bed Tax : Lodging: The expected increase in will hurt a sagging industry, some say, but others predict no significant impact.

Nelson Lafayette, sales manager at Orange’s Ramada Inn, is a desperate man.

Business at the 143-unit motel was off 10% in April, and May isn’t shaping up much better. And as reservations at the Ramada have fallen, so have room rates--from an average of $45 a night in 1992 to $34 now--as the motel tries to lure guests.

Lafayette sees only more trouble on the horizon if, as expected, the Orange City Council votes today to raise the transient occupancy tax--the fee levied on guests at hotels and motels--from 8% to 10%. The increase in the so-called bed tax is designed to bring in $400,000 during fiscal 1993-94 for the cash-strapped city.

“I might have to reduce room rates to keep a competitive edge,” Lafayette said. “Right now, we have a 5% edge over Anaheim,” which levies a 13% bed tax. “It’s a good sales tool for us with the tour operators.”

The tax that cities collect from guests has long been unpopular in the travel industry. Yet hotels and motels take advantage of the small price variations among municipalities to sell corporate accounts and persuade tour operators that one city has a price advantage over a neighboring one.

“It’s a dogfight out there,” said David Philp, manager of hospitality consulting at Kenneth Leventhal & Co. in Newport Beach.

“Another 2% at, say, a $70-a-night rate isn’t going to kill a business,” Philp said. “But a big company booking blocks of rooms might consider a city with a 7% rate,” he said, compared to Orange’s proposed 10%.

Analysts and hoteliers note that in Orange County, where the bed tax ranges from as low as 6% in Tustin to 13% in Anaheim, tour operators, meeting planners and even individual travelers can easily do some comparison shopping and perhaps save a few dollars by staying a few miles down the road.

For a room renting for, say, $80 a night, the tax would bring the tab to $90.40 in Anaheim, compared to just $84.80 in Tustin. Though that $5.60 difference might not matter to an individual vacation traveler seeking convenience, it would mean savings of nearly $300 for a tour operator booking 50 rooms.

Hotel executives are quick to use any advantage they have.

One of those is Michelle Manire, general manager of the 451-unit Doubletree Hotel in Orange, which plays host to numerous football and baseball teams playing at nearby Anaheim Stadium. Manire says she just took a 1994 corporate booking away from Anaheim, largely because of Orange’s lower bed tax.

Her ability to snag other lucrative bookings would be hampered, Manire said, if the city boosted its bed tax.

“At 8%, we are one of the lowest-taxed cities in the surrounding area. Garden Grove and Fullerton are at 10%, and Santa Ana is at 9%,” she said. “Don’t think for a minute that meeting planners don’t know it.”

Others argue that taxes are just one component travelers take into account when booking a room. Room price, hotel location, quality and variety of amenities also affect a traveler’s decision about where to hang his or her hat.

“Raising taxes doesn’t add a dollar-for-dollar loss. It just factors into an equation,” said Bruce Baltin, director of PKF Consulting in Los Angeles. “A tourist coming once to Disneyland probably won’t check, but someone considering holding a meeting at a hotel--they will note it, and it will enter into the equation.”

“If this happened during great economic times,” Baltin said of the tax increase, “it would probably have less impact. But now all of Southern California is overbuilt with hotel rooms because of the recession.”

The city of Orange’s hotel and motel managers, as well as owners, say they are against the tax, yet there has been no outcry. For example, not a single hotelier spoke out at a public hearing April 27 on the proposed increase.

One reason is that the Orange Chamber of Commerce is supporting the tax increase, noting that city officials have promised to spend some of the additional revenue to promote local hotels.

“We think there is great potential,” said Brent Hunter, executive director at the Orange Chamber of Commerce. “We think we can get greater value out of the (Anaheim) stadium and the new arena, since many of our hotels are closer to these facilities than most of the Anaheim hotels.”

By contrast, when the Brea City Council considered raising its bed tax from 10% to 11% in 1992, reaction was swift. The Brea Chamber of Commerce and the owners and managers of the city’s five hospitality establishments met with the council and pointed out that neighboring La Habra has no occupancy tax at all.

“We said we would not be able to survive if the city raised its occupancy rates,” recalled Namu Patel, owner of Brea’s Hyland Motel. He estimated that Brea already loses 15% to 20% of its potential hotel customers to La Habra.

La Habra’s lack of a bed tax, however, didn’t save its largest motel, a Best Western, from going into receivership in March. Now run by R&R; Hospitality Group, a hotel management company based in Pasadena, it has been renamed La Habra Inn.

The new management hopes to increase business by publicizing the lack of a hotel tax.

“I can see the ad lines, ‘Tax Free in ‘93,’ ” said Jerald Oates, the motel’s new manager. “People can save 10% of the cost of staying in a motel. I think it’s a heck of a sales deal, and I plan to use it.”

Many travel consultants, however, argue that bed taxes, unless they approach the level of New York’s 21%, usually do not affect travelers’ plans.

“It’s all relative,” said Thomas Nulty, president of Associated Travel Management in Santa Ana. “While it’s certainly a step in the wrong direction, it’s probably not so much money that it will deter them from travel.

“I haven’t had any corporate accounts ask about taxes yet, but there has been more and more of a focus from business travelers on the overall cost of travel. The more they become aware of the costs of travel, they’re going to (ask).”

Hotel Rates in a Tight Market

The city of Orange is proposing an increase in the bed tax--the fee levied on guests at hotels and motels. Hoteliers, who in many cases have already cut room rates to draw tourist and convention business during the recession, are concerned that a tax increase would drive away guests. The county’s average daily room rates by region, January through March: Anaheim: 1992: $85.42 1993: $86.30

South County: 1992: $65.71 1993: $63.01

John Wayne Airport: 1992: $74.81 1993: $75.43

North County: 1992: $62.86 1993: $61.14

Overall Average: 1992: $78.98 1993: $79.18

Bed Tax Varies From Town to Town

The tax paid by guests in Orange County hotels ranges from a low of 6% in Costa Mesa and Tustin to a high of 13% in Anaheim. How much various cities charge: Anaheim: 13% Stanton: 11% Dana Point: 10% San Juan Capistrano: 10% Fountain Valley: 9% Newport Beach: 9% Irvine: 8% Orange: 8% Tustin: 6% Costa Mesa: 6%

Source: City of Orange. Researched by JANICE L. JONES/Los Angeles Times