The U.S. tourism industry wants taxpayers to pay people to go on vacation.
Industry lobbyists are circulating a plan in Congress and at the White House that would dangle $4,000 tax breaks in front of Americans to get them to begin traveling and spending money at hotels, theme parks and other tourism businesses.
The idea has already attracted one important booster: U.S. President Donald Trump, a hotel owner himself.
The “Explore America” tax credit is one of a host of proposed subsidies that tourism industry lobbyists are pitching to policymakers as the early contours of a new economic stimulus package begin to take shape in Washington.
Between Congress and the Federal Reserve, the federal government has committed trillions of dollars to stop the economic free fall caused by the novel coronavirus pandemic. But they will have to spend even more to help pull the hard-hit tourism industry back to its feet, said Tori Emerson Barnes, a lobbyist for the U.S. Travel Association, whose members include the Walt Disney Co. and Comcast Corp.’s Universal Parks & Resorts, among many others.
“Right now, our businesses need relief. But ultimately, we’ll need recovery,” she said.
But some say that if taxpayers are going to spend more money supporting tourism, then the aid needs to do more than preserve profit margins.
Congress should require that further aid to the tourism industry include conditions that ensure improvements for front-line workers, such as job security, better wages or benefits like paid sick time, said Wendi Walsh, an officer with UNITE HERE, a union that represents workers at hotels, airports and casinos across the country, including thousands at Disney World.
“I think we really need to move from incentives to requirements to get these companies to do the right thing,” Walsh said.
The tourism industry is one of the worst-paying professions in the United States. A study by researchers at Florida State University last year found that leisure and hospitality workers earned an average of $311 per week — less than half of the $710 a week economy-wide average. And the gap has been widening over time; the same study found that, for every $1 increase in economy-wide wages, leisure and hospitality wages grow just 81 cents.
The industry lobbies hard against laws that would force it to pay higher wages or provide more generous benefits.
In Florida, for instance, the Florida Restaurant & Lodging Association is raising money to fight a proposed amendment to the state Constitution that will be on the ballot this fall. If approved by voters, the measure would lift to the state minimum wage, currently $8.56 an hour, to $10 an hour next year and to $15 an hour by 2026.
Contributions so far range from $100,000 from the National Restaurant Association to $5,000 from Red Lobster Hospitality LLC, the Orlando-headquartered seafood restaurant chain that is majority owned by a San Francisco private-equity firm with a $15 billion portfolio.
With the amendment looming, a few of the industry’s largest players have acted themselves. In 2018, unions at Disney World negotiated a new deal with the giant resort to raise starting pay to $15 an hour by 2021. Universal Orlando followed suit last year by announcing it would go to $15 an hour by the time it opens its new Epic Universe theme park, although that opening, initially set for 2023, has been delayed until at least 2024 by the coronavirus pandemic.
There is no doubt that COVID-19, and the widespread shutdowns and shelter-in-place orders meant to slow the spread of the disease, have devastated the tourism industry. The leisure and hospitality sector cut more than 8 million jobs in March and April — roughly half of its jobs — before bringing back about 1.2 million workers in May.
Those cuts have fallen hard in tourism-dependent Florida — and especially in Orlando, where much of the regional economy essentially disappeared when Disney and Universal closed down. The unemployment rate in metro Orlando was 16.2 percent in April, the worst in the state.
But tourism businesses have also been some of the biggest beneficiaries of the emergency rescue spending that the federal government raced out the door earlier this year to slow the sudden economic spiral.
Wyndham Hotels & Resorts Inc., which turned a $22 million first quarter profit, has estimated that 95 percent of its franchisees applied for emergency small business loans. Disney, which turned a $520 million quarterly profit, expects to save $150 million though a new coronavirus-related tax-credit program. And between airline bailout grants and loans and various tax breaks, Miramar-based Spirit Airlines Inc., which lost $28 million in the first quarter, expects more than $500 million in aid — and potentially more than $1 billion.
Meanwhile, companies ranging from Carnival Corp. to Marriott International Inc. have collectively been able to issue billions of dollars in new debt after the Federal Reserve pledged to buy up corporate debt — using up to $75 billion in taxpayer money.
But now that businesses are beginning to reopen across the country, tourism executives are turning their attention to how to get people traveling again — especially when unease about job security and coronavirus infection is likely to make many reluctant to spend money or congregate in crowds.
“I think there’s a recognition that travel overall is going to need to be stimulated, and that will take dollars,” Jon Bortz, the chairman and CEO of Pebblebrook Hotel Trust, told Wall Street analysts last month. Bortz is also the chairman of the American Hotel & Lodging Association, an industry lobbying group, and one of a number of hotel executives who have met with Trump to discuss stimulus spending.
That’s where the “Explore America” tax credit would come in. While lobbyists are still working on the concept with officials in Congress and the Trump Administration, early drafts envision an income tax credit worth up to 50 percent of a household’s spending on expenses like airfare or rental cars, hotel rooms, tickets to attractions and meals in restaurants that are at least 50 miles away. The tax credit would be capped at $4,000 per household and it would apply to travel expenses through the end of 2021.
Emerson Barnes, the U.S. Travel Association lobbyist, said the concept is modeled after a tax credit for first-time homebuyers that Congress created during the 2007-09 housing bust and financial crisis. The idea, she said, is to “really kind of push them [consumers] over into making the decision to travel.”
Hotel lobbyists are also pushing for a new tax break to offset the cost of more stringent cleaning and sanitation standards. One proposal — sponsored by Orlando Democratic Rep. Stephanie Murphy — would let businesses get tax credits worth up to $25,000 per location to cover the cost of things like employee training and cleaning products.
Tourism interests also want to give tax breaks to corporations that spend money on meals and entertainment. They want the federal government to pay above-market market rates for government travel. And they want incentives to underwrite corporate meetings, conventions and trade shows.
With the odds rising that Congress could agree to another round of stimulus spending before the end of July, companies and interest groups like Park Hotels & Resorts Inc., which used to be a division of Hilton; amusement park operator Six Flags Inc.; and the International Association of Venue Managers — whose members include the Orange County Convention Center — have all hired new D.C. lobbyists in recent weeks to work on COVID-19 and stimulus issues.