Las Vegas Sun

October 25, 2014

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Tourism column:

Pay raises, room taxes loom as topics for tourism industry

Two big issues are coming up for tourism organizations in Nevada.

Next week the Las Vegas Convention and Visitors Authority will consider a five-year contract with 350 workers affiliated with the Service Employees International Union Local 1107. Eighty-seven nonunion employees could be affected because the authority generally has given them the same benefits as the union workers.

The new deal includes a 3.5 percent cost-of-living raise over the first two years with an allowance to reopen pay negotiations for the last three years of the deal.

Meanwhile, the Nevada Tourism Commission may consider whether online travel agencies should pay room taxes based on what hotel guests are paying rather than the rate the agency negotiates with a property.

Both are likely to get a lot of attention from industry observers.

The union contract is expected to be considered by the 14-member authority board at its July 14 meeting.

The union ratified the 55-page agreement in April. There were few changes in benefits or policies in the new contract from the previous one, with the proposed pay increase taking center stage.

Under terms of the deal, employees would receive a 1 percent pay increase retroactive to January, a 1.5 percent increase effective July 12 and another 1 percent increase effective Jan. 10, 2010. Increases effective July 1 in 2010, 2011 and 2012 are subject to renegotiation.

The pay increases would cost the authority $78,900 for the retroactive six months and $199,600 for 2009-10. For the nonunion employees, the costs would be $24,900 for the retroactive six months and $63,400 for 2009-10.

The total cost would be $366,800.

Authority management wouldn’t benefit from the contract. They’re in the midst of a year-old salary freeze and there are no merit increases or bonuses in the budget approved last month.

The board, which must keep the authority financially responsible, may have second thoughts about whether it should authorize a pay increase while so many other workers are going without.

The board is an unusual beast. It includes representatives of Southern Nevada’s municipalities and Clark County as well as business leaders from top resorts and the Las Vegas Chamber of Commerce.

Mayors and council members are well aware of the pay freezes commonplace in their cities. The resort and chamber reps are experiencing them firsthand.

Recent negotiations between resorts and the Culinary Union to delay pay increases written into their contracts have to be fresh in the minds of everybody involved.

Also noteworthy is that three new board members may be involved. Former North Las Vegas Mayor Mike Montandon, former Henderson Mayor James Gibson and former Boulder City Councilman Mike Pacini were replaced. At this writing, it wasn’t known whether new North Las Vegas Mayor Shari Buck, new Henderson Mayor Andy Hafen or new Boulder City Councilman Cam Walker would take the authority posts or whether other city council members would be appointed.

Montandon and Gibson were members of the authority’s compensation committee reviewing the contract, but it didn’t offer a recommendation since Montandon and Gibson won’t be a part of the debate.

The third member of the committee, Chuck Bowling, a Mandalay Bay executive, has noted the tightrope the board is being asked to walk.

“We’ve taken an oath to be fiscally responsible and today we’ve encountered financial issues we never dreamed we would have to deal with,” Bowling said. “But it’s definitely a balancing act. We’ve got to be good stewards of our tax dollars, yet compensate people as fairly as possible.”

Then, there’s the state issue.

Bowling is the lucky guy who gets to participate in both debates since he is a member of both boards.

The Tourism Commission’s issue is in its early stages and may never come to a vote. If it does, it’s likely months away.

At a recent quarterly meeting, Las Vegas Sands executive Eric Bello raised the issue of whether online travel agencies should pay room taxes based on the rates the guest pays or the rates the agencies negotiate with the resorts. The ante recently was raised when the room tax went up 3 percentage points July 1.

A quick disclaimer: VEGAS.com, which sells hotel rooms to tourists, is a sister company of In Business Las Vegas.

Bello raised the issue after the Georgia Supreme Court ruled Columbus, Ga., was entitled to room tax revenue based on the amount paid by the room’s occupant. The ruling was contrary to five federal court rulings that said because online travel agencies are not innkeepers and serve as an intermediary between the hotel and the customer they are not subject to a higher rate.

Expedia.com, Travelocity.com and Orbitz.com have since dropped listings for hotels in Columbus, steering customers instead to nearby Phenix City, Ala.

But Bello is betting that the online travel companies wouldn’t banish Las Vegas from their sites because it’s so popular with customers. Orbitz.com recently listed Las Vegas as the top-booked holiday destination for the Fourth of July. They wouldn’t really remove every Nevada resort from their lists would they?

Beth Herrington, a lawyer for Orbitz on occupancy tax issues, said most tax ordinances “were written in the Flintstones era, but are being applied in the Jetsons era.”

She says they clearly say that the innkeepers are the ones that pay the tax, not the travel agencies. Since the resorts pay the tax at the rate negotiated by the agency, Orbitz thinks there is no question that the agencies aren’t even a part of the equation.

Bowling takes an adversarial position to Bello, saying MGM Mirage has worked with the online companies as partners that have invested millions of dollars in technology to market Las Vegas and make money for themselves as well as the resort partners and, through the room tax, the state.

Bowling also questions whether the Tourism Commission, which markets Nevada to tourists and manages a grant program to help rural tourism attractions market their destinations, should even be a part of the taxation debate.

But Bello’s raising of the issue is important. Maybe if state lawmakers pay attention to it, they wouldn’t even consider what the commission thinks and they would work to amend the room tax law to make online travel agencies a part of the equation.

Considering the resources the online travel industry has, it would be a tough fight with high stakes, especially if the online travel agencies take Las Vegas resorts off their menus as they did in Columbus.

Missing Michelin

Michelin, the French tire company that publishes a number of city guides highlighting restaurants and hotels, announced it is temporarily suspending publication of its guides for Los Angeles and Las Vegas.

The company told the Los Angeles Times that the suspension is temporary and economically motivated.

The company has shifted its interest to Asia and is doing guides on Kyoto and Osaka, Japan after recently debuting Tokyo, Hong Kong and Macau.

There are no plans for a 2010 Las Vegas edition, and the company said the jury is still out for 2011.

More fees

Just when you thought the fees airlines are charging couldn’t get any worse, along comes United Airlines with a plan to force travel agents who book tickets with customer credit cards to pay the processing fees associated with the transaction.

United officials told Bloomberg News that starting July 20 travel agents would be forced to absorb the costs of tickets purchased with Visa, Mastercard, American Express and other credit cards. Fees typically amount to 2 percent of the transaction.

The airline said that paying the processing fees itself cost United “several hundred million dollars” a year.

On-time departures

Korean Air is saying that 99.86 percent of its flights left on time in 2008, an extraordinary rate if true. That’s up from 99.83 percent in 2007.

The airline, which offers three nonstop trips a week between Las Vegas and Seoul, said it has received reports from Boeing and Airbus, the manufacturers that built most of Korean Air’s fleet, that it had the best on-time performance of any global air carrier.

The airline said it has received on-time reports from the two manufacturers since 2005, and the reports include airlines with 5,000 or more flights a year. On-time performance is calculated by dividing the total number of flights departing within 15 minutes of the scheduled departure time by the total number of actual flights.

Korean Air uses a Boeing 777 jet on its Las Vegas flights, one of the models that ranked first among the global carriers for on-time performance.

Richard N. Velotta covers tourism, technology and small business for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4061 or at [email protected]

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