In their three-page petition submitted to the House Committee on Ways and Means, hotel officials said the measure will have a negative effect on Palau and its economy.
“First of all, if the hotels levy the increased tax directly on the end customers, the price elasticity of demand will drive substantially less potential tourists to Palau,” the petition stated.
“Second, if the hotels absorb the increased tax, the breakeven point of each hotel will become higher. As the price and unit of sales remain unchanged, and the total cost of the business increases by large percentage, the profit margin is greatly reduced. For those hotels with less than 20 rooms, the profit margin will become negative. For those larger hotels with international headquarters, the possibility of investment withdrawal is higher because the profit of the hotel in Palau tends to be lower compared with that of assets located elsewhere,” the petition added.
The hotel officials said the resource that the hotel can receive from headquarters and investors will be less, and the hotel may go out of business.
Once such closures occur, they said, the economy of this island nation will be badly affected.
The petition was signed by Derek Perng, executive VP, Palasia Hotel; Jane Chung, vice general manager, Papago International Resort; Langli Xiao, operations manager, Landmark Marina Hotel; Feng Jui Huang, general manager, DW Motel; Isao Takahashi, Palau Royal Resort; Maggie Tian, general manager, Sea Passion Hotel; Johnny Shyu, president, Airai Water Paradise Hotel; and Jia Chin Su, president, F&B Corporation (Palau Hotel).
President Johnson Toribiong introduced House Bill 8-126 to increase the excise tax on hotel, motel, lodging houses or similar facilities from 10 to 15 percent or $15 of the net room charge per night.
