Shooting ourselves in the foot

By The SE Texas Record | Nov 14, 2009

"Fish and visitors stink after three days," said Benjamin Franklin, but some public officials in Texas are even more fastidious.

They seem not to like visitors at all, not even for a day.

Last month, a federal jury in the Western District of Texas decided against 11 online hotel booking services and in favor of 173 Texas municipalities. The jury awarded the cities $20 million for alleged underpayment of hotel occupancy taxes.

Named as defendants in the class-action suit were Expedia,, Hotwire,, Orbitz,,,,, TravelWeb and

The online booking companies purchase rooms at wholesale rates and resell them to consumers for a profit, remitting taxes only on their purchase price – just as traditional offline travel agents and tour operators do. Fees from such middlemen have never been taxed.

Plaintiffs' attorneys also asked for $20 million more in punitive damages, claiming that the booking services were collecting and keeping additional taxes. The jury rejected that claim.

Pending appeal, Expedia, et al. are on the hook for $20 million and those Texas towns hope someday to be $20 million richer. But a substantial portion of any settlement will go to private attorneys who argued the case, and what little remains will be divided among the 173 municipalities. That, in turn, is sure to be offset by declines in tourism resulting from higher prices for hotel rooms in a bad economy.

Which reminds us of another wise old saying: "Penny wise, pound foolish."

Some avaricious public officials have figured out a way to make a little money in the short run and lose a lot in the long run, and we are the ones who ultimately will pay for their myopic cleverness.

Andrew Weinstein, spokesperson for Interactive Travel Services Association, put it best.

"These claims are not based on law, but on the greed of plaintiffs' attorneys."

Personally, we like visitors and think we should be doing everything we can to persuade more of them to come to Texas and stay longer. It's not the visitors that stink, but some ungracious hosts.

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