Airlines demand corporate welfare - Page 2

After losing in court, big corporations are pushing city policy makers to exempt them from paying hotel taxes

That implied threat comes from Hotel Council executive director Patricia Breslin, who paints a doomsday scenario if the airlines have to pay the hotel tax on every room they rent. Breslin warns that if the Board of Supervisors does not offer concessions to the airline industry, it could bring about an "economic tsunami" that would hit hotels, restaurants, and city government.

Airline employees occupy an average of 1,050 hotel rooms per night in San Francisco, according to Smith Travel Research, an information and data provider for the lodging industry. Given that the tax is collected by the hotels, Cisneros doesn't have data on how much the airlines should be paying the city. But assuming the airlines negotiate rates of about $100 per night, that would translate into more than $5 million per year.

"We pushed so hard to get them to pay it that they sued us," Cisneros told us.

Breslin said the airlines have been paying about $1.7 million per year in hotel taxes and that sales taxes generated by airline employees bring another $1.4 million into the city, all money that would be lost if the airlines go elsewhere. She said the airlines have threatened to begin putting their employees in hotels in Peninsula cities near the airport, like Burlingame, San Mateo, and even San Jose, to cut costs. Already Mexicana Airlines has stopped using San Francisco's hotels for its employees. Other airlines, such as Virgin Atlantic, United, Cathay Pacific, and Lufthansa, have threatened to follow suit.

Breslin said hotels would be forced to lay off cleaners, servers, and other low-income workers due to the loss of business that would accompany the exodus of airline employees. San Francisco, she argues, would "lose a significant revenue stream" if the airlines lose their appeal.

"It will change the economics of San Francisco," she told us. "This is not a frivolous issue."



Granting the exemption would cost the city millions of dollars, but that isn't the only reason being offered for opposing the gambit. Some city officials simply don't believe the airlines — or their employees, most of whom are union members, many of whom have contracts specifying their accommodations be in urban centers — will abandon San Francisco.

Sup. Chris Daly, who is on the Oversight and Auditing Committee, is against granting the exemption to the airlines. "They blow smoke all the time," he told us, referring to major industries such as the hotel and airline industries. "That's how they get away with not paying taxes."

Cisneros argues the airlines' threat to move their employees into suburban hotels isn't logical, noting that San Francisco hotel rooms are already far more expensive than their suburban counterparts — with or without the hotel tax — and the airlines have always chosen to keep their employees here anyway.

"I just don't think the threat is realistic at all," Cisneros said. "If they were basing their decision on which hotels are cheapest, they would have never been staying in San Francisco."

Recently compiled data and trends in tourism and hotel occupancy rates also suggest that Breslin's warning of a crippling economic backlash are unfounded. According to an August article in the San Francisco Business Times by Ryan Tate, "Next year promises to be by far the most robust for leisure and business travel in San Francisco since the dot-com boom."

He continues, "Convention business will reach more than 900,000 hotel rooms in 2008, well above the 740,000 room nights booked by conventions in 2007." The San Francisco Convention and Visitors Bureau forecasts that overall tourism will top 16 million visitors next year and that visitor spending will exceed last year's record $7.8 billion.