Ga. ruling is a setback for Expedia
By Dennis Schaal
IHG luxury brand
returns to Russia
InterContinental Hotels & Resorts
is re-entering the luxury market
in Russia with the planned 2010
opening of the 203-room InterContinental Moscow Tverskaya.
The hotel is being built on the
site of the former Minsk Hotel and
will be the centerpiece of a new office and retail development.
InterContinental’s parent, IHG,
has seven properties in Russia.
EasyCruise arranged its first GDS
distribution deal, agreeing to
display content to U.S. and U.K.
agents through Amadeus Cruise.
The cruise line, which offers cruises through the Greek islands and
Turkey, said it plans to “actively
target the travel agency distribution channel” to reduce its dependence on direct bookings.
Giza project gets
MGM Grand Hotel
advances on Hill
MGM Mirage plans to put the
MGM Grand name on a 550-room
resort hotel being developed by an
Egyptian firm near the pyramids.
The hotel is expected to open in
Backers of the Travel Promotion
Act reintroduced the bill in the
House with some 20 co-sponsors.
A resort near the pyramids will bear the MGM
2013 as part of the New Giza development with a residential area,
three hotels, restaurants, shopping and a golf course.
Court taps trustee
in Joystar case
With a state Supreme Court decision in hand, the
city of Columbus, Ga., plans to go after Expedia
.com for back hotel taxes, possibly dating as far
back as 2000.
In a 4-3 ruling for the plaintiff that could have
wider repercussions in the state and beyond, the
Georgia Supreme Court on June 15 affirmed a
lower state-court ruling that Expedia.com “
henceforth” must remit to local hotels or the city a 7%
hotel-occupancy tax on the full room rate, including service fees, when taking merchant-model hotel bookings for properties in Columbus.
The lower-court order, which is subject to some
modifications, also provides that Expedia separately break out its service fees and all hotel taxes either
when the merchant-model booking occurs, when
the traveler occupies the room or at both times.
While the dollar amount at issue in the Columbus market is not believed to be large, the Georgia
ruling could affect the outcome of similar litigation in the much bigger Atlanta market and elsewhere.
And in a watershed development tied to the
Columbus litigation, Expedia confirmed to Travel
Weekly that Expedia.com has been remitting taxes
on the full retail rate for Columbus merchant-hotel bookings over the last few months.
Although Expedia dropped
out of the Columbus market prior to the injunction, it complied
with the injunction on bookings
that were already in the pipeline
pending its appeal to the Georgia Supreme Court.
Consumers prepay merchant
model bookings, but Expedia
is invoiced for the taxes by its hotel partners only
after occupancy. Since some of those occupancies
occurred after the court issued the injunction, Expedia was obligated to pay taxes on the retail rate.
That is an apparent first. The online travel agencies have faced assessments in numerous jurisdictions, but no money is known to have changed
hands based on taxes for the retail rate.
Expedia spokeswoman Katie Deines said that in
Anaheim, Calif., for example, Expedia is appealing a hearing officer’s finding that it owes $17.7
million, but in that case, it won the right to appeal
without having to pay the tax in the interim.
In Georgia, following the decision by the state’s
highest court, Expedia’s legal options now include
requesting a rehearing by the state court or, in a
less likely scenario, petitioning the U.S. Supreme
Court regarding any federal issues raised in the
state court decision.
Trip Tomlinson, a lawyer with Pope, McGlamry,
Kilpatrick, Morrison & Norwood, which represents Columbus in litigation against Expedia and
separate actions involving Expedia Inc.’s Hotels
.com and Orbitz, said that once the case is returned
to the trial court, Columbus would seek Expedia
transaction records through discovery and try to
collect hotel taxes going back several years.
The Georgia court held that Expedia is a third-party tax collector because of the contracts it has
with hotels and therefore must remit taxes on the
full retail rate and not the net rate, as Expedia
Tomlinson predicted the ruling would affect litigation against online travel agencies by the cities
of Atlanta and Rome, Ga., with the latter seeking
class action certification, because the Georgia Supreme Court analyzed state and local laws, which
must be consistent with state statutes.
“I think this decision will go a long way in governing what is going on in those cases,” said Tomlinson, whose firm is not involved in the Atlanta
and Rome cases.
The city of Columbus, seeking enforcement of
a local hotel occupancy tax ordinance, initiated
litigation against Expedia Inc. on May 30, 2006,
alleging that Expedia’s tax remissions to the hotels
must be based on the full room rate or “charge to
the public” and not on the net rate that Expedia
negotiates with hotels.
That led to the trial court issuing a permanent
injunction Sept. 22, 2008, which ordered Expedia
to pay taxes on the room rate in merchant-hotel
sales and to break out taxes and service fees to the
In ruling for the city, the Georgia Supreme Court
did not rule on whether Expedia was a hotel operator, a key issue in a torrent of litigation throughout
the U.S. Instead the court held that regardless of
whether Expedia is a “hotel, motel or innkeeper,”
it is an “entity” that collects taxes and therefore “is
required to remit tax payments belonging to the
In a statement, Expedia noted
that “the court specifically stated
that it was declining to determine whether Expedia is ‘an
innkeeper or operator’ subject to
the requirement to collect taxes
under the city’s hotel-motel occupancy excise tax.”
Expedia added the ruling was “contrary to the
decisions of five United States federal courts that
have interpreted 16 ordinances and determined
that the online travel companies were not subject
to the relevant local occupancy tax ordinances applicable to hotel operators.”
The Travel Promotion Act is back in the House.
The state’s Supreme
Court ruled Expedia
must remit taxes on
the full room rate.
In the Senate, the bill moved to
the floor for debate and the consideration of amendments, setting the
stage for a final vote within days.
Passage is considered likely, as the
bill has 46 Senate co-sponsors.
Shangri-La to add
new Moscow hotel
The U.S. Bankruptcy Court in Fort
Lauderdale set a July 20 creditors’
meeting and appointed a trustee,
Soneet Kapila, to oversee the liquidation of Joystar, the bankrupt
host agency. Creditors have until
Oct. 19 to file claims. Forms are
available at any federal bankruptcy court or from the link at www
Travelocity ‘evaluating this decision’
Travelocity spokesman Dan Toporek noted that
the OTA was not subject to any litigation involving Columbus but added that “we are currently
evaluating this decision to determine next steps
for the business as a result.”
Travelocity, like other OTAs, has exited the Columbus market for merchant hotel sales.
“In general, though, yesterday’s ruling is a bad
day for Georgia tourism,” said Art Sackler, executive director of the Interactive Travel Services
Association, which represents OTAs. “The courts
have effectively rolled up the welcome mat to an
industry that helps pump millions of dollars in
revenue into the Georgia economy.”
“Those who will be impacted most will be the
hoteliers and their employees and other businesses that rely on online travel companies to help
drive tourism within their communities,” Sackler
The Georgia Supreme Court directed the lower
court to modify its injunction, which “requires”
Expedia to remit taxes in the future, to reflect the
possibility that Expedia could change its business
Shangri-La signed an agreement
with China Huaming International
Investment Corp. to manage a hotel in Moscow, which will be the
group’s first property in Russia.
Set to open in 2012, the 400-
room hotel will occupy the top
floors of a 42-story tower in the
Park Huaming Business Centre, a
new, multipurpose development.
Biz travel groups
are talking merger
expands in Canada
Cruise Holidays will start recruiting
in July for Canadian home-based
franchisees, who will have the
option of being an independent
contractor for a storefront Cruise
Holidays. The firm’s franchise program for U.S.-based home agents,
SeaMaster Cruises is being rebranded as Cruise Holidays.
The National Business Travel Association said its board unanimously voted to “continue pursuing” a merger with the Association
of Corporate Travel Executives,
confirming industry speculation
about a possible link-up of the two
groups. The NBTA said its Board
supported the outline of a potential structure for a merger process
“previously drafted by members of
the ACTE Board.”