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More Taxes - Is It What US Travel Industry Really Needs?

Airlines clash with other tourism businesses over ad campaign

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Jun 09, 2008

Airlines are battling hotels, theme parks, rental-car companies and other travel businesses over a plan to make many overseas visitors pay $10 each to bankroll a national advertising campaign.

The dispute is over the Travel Promotion Act, a bill the tourism industry is pushing in Congress that would create a $200 million-a-year marketing campaign aimed at persuading more travelers to visit and spend money in the United States.

Half of the money would come from the $10 fee, which would be imposed on travelers living in countries where they do not have to obtain a visa to enter the U.S. But that idea has sparked sharp criticism from the airline industry.

What the airlines say

Airlines say the $10 charge would amount to a tax on air travel. And though the airlines - like other travel companies - would benefit from publicly subsidized advertising that lures more free-spending tourists to this country, "we feel strongly that that promotion should not be done at the expense of passengers," said Elizabeth Merida, a spokeswoman for the Air Transport Association, the industry's main lobbying group.

The industry isn't being purely altruistic in defending its passengers from higher taxes. Buckling under sharply higher fuel bills, the airlines themselves are scrambling to extract as much money as possible out of passengers without driving them away from air travel altogether.

Just last week, the International Air Transport Association, which projects that airlines worldwide will lose a combined $2.3 billion this year, called on all governments to "refrain from imposing . . . additional punitive taxes."

What tourism leaders say

Tourism leaders - led by Jay Rasulo, chairman of the Walt Disney Co.'s parks-and-resorts division - say the federal government has good reason to help pay for overseas marketing. They argue luring more vacationers from overseas would not only help the country's economy but also improve its image abroad, as positive word-of-mouth from visitors counters negative publicity spawned by the Iraq war.

They also accuse the airlines of being shortsighted in opposing a plan they say would generate more airline passengers.

"It is extraordinarily frustrating to most of the other participants in the travel industry to continually bump into this idiotic, shortsighted point of view," said Steven Hacker, president of the International Association of Exhibitions and Events, which represents convention and trade-show managers. "I think it's safe to say that the airline industry has been practicing stupid for so long, it seems natural to them."

What's at stake?

A publicly subsidized overseas advertising campaign has been described at the tourism industry's holy grail. The Travel Promotion Act is the top priority in Congress of the Travel Industry Association, whose members include Disney, Carnival Corp. and Hilton Hotels Corp.

But opposition from the airlines - some of which are also members of the travel association - has emerged as one of the biggest hurdles.

Both industries are well-financed for the fight. The lodging, gambling and recreation sectors spent a combined $44 million lobbying Congress last year, according to the Center for Responsive Politics, a nonpartisan group that compiles federal lobbying and campaign-finance data.

The airline industry spent $26 million lobbying the federal government in 2007, according to the center.

What's next?

Even if criticism from the airlines doesn't derail the Travel Promotion Act, getting it kick-started in Congress may be difficult with elections looming.

The presidential election could have an effect. The presumptive Democratic nominee, Sen. Barack Obama of Illinois, has signed on as a Senate co-sponsor of the legislation; the expected Republican nominee, Sen. John McCain of Arizona, has indicated he doesn't want the government paying for tourism ads.

Airlines clash with other tourism businesses over ad campaign

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