SOMBA K'E/YELLOWKNIFE - The company that owns The Explorer Hotel says there are more downsides than upsides to levying a one-percent hotel tax in Yellowknife.

The company that owns The Explorer Hotel says it has several concerns about the one per cent hotel tax being proposed by the Yellowknife Hotel Association. - Guy Quenneville/NNSL photo

"On the balance, I would say our view is more con versus pro..." said Bruce Alton, chief operating officer for Nunastar Properties. "We understand the rationale behind it, and it does work in other jurisdictions, but we have concerns."

Chief among them: the fact that the majority of customers taxed at The Explorer would be from the NWT, said Alton.

"...if you look at our stats, I think that probably less than five per cent of our guests are tourists (from) outside the NWT. So when you think about it, if you put a tax on the hotel bill, the vast majority are people from the NWT and a lot of their stays are paid for by the government. They're government employees or they might be visiting the hospital and staying (at the hotel). So really you're actually taxing your locals."

The Yellowknife Hotel Association has been lobbying for a hotel tax for several years. More recently, the association – whose members include The Explorer Hotel, Chateau Nova, Arnica Inn, Yellowknife Inn, Capital Suites, Super 8, Nova Court and Coast Fraser Tower – has called on the GNWT to enact legislation allowing individual municipalities to decide whether to adopt the levy or not.

Under a scenario pitched by Jenni Bruce, president of the association, the city of Yellowknife would collect the tax, charge the Northern Frontier Visitor Association an administration fee and release the funds to the association. The association, in turn, would use the money to market Yellowknife as a conference destination.

But Alton's comments to Yellowknifer on Monday are another indication that the largest member of the association has doubts about the tax.

"We're opposed to it," said Jiten Jattan, former manager of The Explorer Hotel, in March 2010. "We're opposed to any tax that going's to affect our guests."

While hesitant to speak in such certain terms, Alton said Nunastar is wary of any additional expense to travellers flying to the already-costly North.

"We all know what the airfares are like. The hotel rates are a lot more expensive than in the south. The cost of travel is so high, and you're adding on another element of cost – you've got to be concerned that you'll ... slow down the people wanting to go (here)."

According to surveys conducted at the hotel, guests who stay for at least two days go on to spend money elsewhere in the city.

"You have this huge multiplier effect of the people coming in and eating, so if you reduce that ... you might be taking dollars out of the economy if there's a threshold point there," said Alton. "Instead, I think we should be looking ways at reducing travel (costs) in order to increase it – getting people to travel up (here) by lowering the costs."

After a high of $140 million in 2006, visitor spending in the NWT fell during the following three years. Last year saw spending increase by $3 million to $111 million, according to data from the department of industry, tourism and investment.

Nunastar Properties was one of five companies that made a written submission about the proposed hotel tax to Michel Miltenberger, the GNWT's minister of finance, following his round-table discussion with industry on revenue raising options late last year.

Yellowknife social justice group Alternatives North also wrote in about the hotel tax. While giving its thumbs-up to the effort, the group also warned the minister about setting a precedent for other groups eyeing a tax.

"We are generally supportive of the concept of enabling local governments to levy a hotel tax," read the group's letter to Miltenberger. "We are of the view that there should be a review after a few years with the prospect of a NWT-wide approach that promotes and encourages regional tourism development. "However, we are concerned with the precedent this may set for other commercial interests to come forward with proposals for specific taxes that should be the subject of the overall progressive scheme of the territorial government."

Alton said Nunastar needs more time and more information to evaluate its position.

"We don't know how much money it would raise. We don't know how the money would be handled and managed. So we would just like to know, before we make a final position statement on it, we'd like to know more about how it would all work."

Bruce previously told Yellowknifer that if a levy been in place in 2008, it would have generated $250,000 in revenue; in 2009, with the economic recession in full swing, $200,000.

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