The Effect of Lodging Taxes on the Performance of US Hotels

The objective of this article is to analyze the impact of lodging taxes on the performance of US hotels by looking at the two key market segments involved. The empirical application conducted on a sample of more than 7,000 observations corresponding to more than 100 urban submarkets from 2013 to 2018 finds that lodging taxes have a more negative effect on hotel performance (RevPar) for group bookings than for transient bookings. As groups usually have greater flexibility regarding the location of events, they can more easily choose a different destination if a tax increase is observed. To prevent this possibility hotels may be more inclined to offer discounts to groups, thereby absorbing some of the tax increase. The results obtained have relevant managerial implications, which are discussed.