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Artful Dodgers: Quoted Hotel Rates May Not Include Tax

Hotels: Establishments that cater to Americans are most likely to exclude mention of the VAT. When booking a room, ask about taxes.


London lodgers, beware.

Despite government efforts to keep room-rate quotations uniform, scores of hoteliers are playing games in the way they quote prices--games that could easily boost an unaware traveler's expenses by more than $20 a day.

Taxes are the core of the problem. American hotels, which face widely varying tax rates from city to city, long ago rejected the idea of including taxes within their quoted rates. Thus, an American traveler is reconciled to the idea that, if he reserves a $100 room in Los Angeles this month, he will later discover that his bill is $114, swollen by the local bed tax of 14%. But in England, all hotels are required by the government to assess their guests the same nonrefundable 17.5% Value Added Tax (VAT).

As a result, the majority of hotels for years have built the VAT into their advertised rates. Thus, when a traveler reserves a $100 room in London, the hotel takes $85.10 and passes $14.90 in VAT revenues on to the government.

Under the "guidance" language attached to the U.K.'s 1987 Consumer Protection Act, hoteliers and retailers are instructed that "all price indicators you give to private consumers, by whatever means, should include VAT."

But more and more hotels in England are excluding that tax from their price quotes and probably misleading thousands of consumers every year. At the British Tourism Authority in New York, officials acknowledge that the practice defies the spirit of the law, but say "there's not a lot we can do about it, because the VAT regulations are so loosely written."

Many of those omitting the VAT rates are chain hotels headquartered in the United States or five-star properties at the high end of the price scale. But the numbers are growing in the middle range. Among 20 smallish, under-$250-a-night hotels named in this week's story package on London lodgings, five excluded the VAT from their quoted prices: the Willett, the Dorset Square Hotel, Five Sumner Place, Hazlitt's and L'Hotel. Among three new hotels with rates over $250--Covent Garden Hotel, the Leonard Hotel and the London Outpost--the VAT was ignored.

This, obviously, makes rates look lower than they really are. The hotels' literature usually mentions somewhere in smaller print that VAT is excluded, but these brochures don't always say the VAT is 17.5%. It's easy to imagine an inattentive vacation-planner comparing a VAT-inclusive price with a VAT-exclusive price and being deceived. If you stay five nights at a $200-a-night hotel (VAT excluded), that deception could cost you $175.

Ed Perkins, editor of the Consumer Reports Travel Letter in the U.S., calls the practice of excluding VAT "outrageous." Patricia Yates, editor of "Holiday Which?" (the British counterpart of the Consumer Reports Travel Letter), calls this trend "a slippery slope," suggests that VAT-excluding hoteliers are "sailing close to the wind legally."

Hotels that cater to Americans are among the most common offenders. When I called operators for Inter-Continental, Marriott and Sheraton to ask about London lodging rates, not one mentioned taxes until I asked. With Hilton International, the game was even trickier. A Hilton operator quoted me 210 pounds per night at the London Hilton on Park Lane, and 150 pounds at the London Gatwick Airport Hilton. When I asked about VAT, the operator first seemed confused, then disclosed that the Park Lane Hilton's rate excluded the tax, but the Gatwick Hilton rate included it. "It varies from property to property," she said.

What do the VAT-excluding hoteliers say for themselves? Some, including Five Sumner Place manager Tom Tyranowicz (whose hotel started quoting rates without VAT three years ago), maintain that "there's no particular reason at all" and say they've never had a complaint on the issue. Others say only that they do this because their competitors are doing this, which may be true but isn't exactly a nourishing explanation. Still others follow the path traced by a Marriott spokeswoman, who noted that as a general rule, the chain likes to separate government-mandated charges from its own rates. Also, she acknowledged, "you try to quote your room rate in the most favorable light possible."

At Hazlitt's, a mid-price hotel in the West End that has excluded the VAT from its rates since opening 10 years ago, house manager Lisa Wood says that's done because "we have many business clients staying here [about 75% of all guests], and anyone who stays on business can actually claim back their VAT," usually by using a tax-refund service such as Euro VAT Refund, based in Culver City. (This is not easy, however: Those refunds go to corporate entities, not individuals; among various requirements, the company must spend about $200 per quarter in VAT tariffs.)

Bottom line: If you're looking for a London hotel, always ask about taxes. And if you find yourself talking to a hotel that excludes the VAT, complain.

Reynolds travels anonymously at the newspaper's expense, accepting no special discounts or subsidized trips. To reach him, write Travel Insider, Los Angeles Times, Times Mirror Square, Los Angeles 90053; telephone (213) 237-7845.

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