Ottawa can now tax hotel stays, Airbnb rentals — but will it?

Raising of anti-abortion flag at Ottawa City Hall prompts backlash

The Ontario budget this week opened the door for the City of Ottawa to impose a tax for travellers staying at hotels, bed and breakfasts and home-sharing services such as Airbnb, but Ottawa's mayor said the city needs to first hear from hoteliers.

"Philosophically I don't have a difficulty with it," said Mayor Jim Watson. "We're not going to move unilaterally unless there's support from the hotel industry." 

"It is a bit of a divisive issue," he acknowledged.

Currently, many members of the Ottawa Gatineau Hotel Association collect a "destination marketing fee" on rooms. Those levies, worth about $8 million yearly, end up with Ottawa Tourism, which relies on the money to market the city.

Watson said some outliers who don't collect the fee receive the benefits of marketing campaigns without contributing anything.

"A tax, obviously, would capture all of those."

Ottawa Tourism seeks stable funding

The "transient accommodation" tax power, which the City of Toronto requested for itself, would give municipalities the power to impose the tax not just on hotels but on any short-term accommodation, including Airbnb.

Watson said if he were to go down such a route, he's more interested in targeting those who run several Airbnb rentals as a business and not individuals who rent out a room once in a while.

"They're paying nothing right now in terms of taxation or fees to Ottawa Tourism, to help with the tourism industry. So, I think fairness would dictate that there has to be a level playing field," said Watson.

Ottawa Tourism, meanwhile, is mainly concerned that the budget for marketing the city as a destination remain stable and predictable, whether that's through the current levy or a new municipal tax.

"Both models are not without their own risks, but we work within a system and an industry here in Ottawa that sets us up for success in that we have engaged hotel partners and a very supportive mayor who understands the importance of the tourism industry and who is willing to work with us to get things done," said Jantine van Kregten in a statement.

Ottawa Tourism wants to see details of the Ontario legislative change, and consult widely.

Hotel tax 'not going to solve the bigger problem'

The Ontario government sees giving municipalities the authority to tax short-term accommodation — but only if they want to — as a way for them to raise money for services in their communities.

The government intends to amend the Municipal Act to allow a municipal council to design the tax itself, set the rate, and decide which types of accommodation to tax. Cities would still be required to share the revenues with tourism organizations, such as Ottawa Tourism, that right now collect the marketing fee.

Regional governments and counties wouldn't get the new taxation power.

The Association of Municipalities of Ontario has been urging the provincial government to give other Ontario cities the same taxation tools Toronto gets through its City of Toronto Act.

But its executive director said Ontario municipalities need to close a $4.9 billion gap each year to keep up services and fix infrastructure.

"This is going to be helpful, but it's certainly not going to solve the bigger problem," said AMO's Pat Vanini.

The Ottawa Gatineau Hotel Association could not be reached for comment.