Page 460 - FY 2021-22 Proposed Budget

Spotlight: Transient Occupancy Tax

Transient Occupancy Tax (also known as Hotel Tax or TOT) is levied on rooms
rented for 30 days or less, and is paid by guests. TOT revenue is correlated
with room rates, occupancy and hotel room supply, though in recent years it
has been impacted by the rapid growth of online home-sharing platforms. This
revenue category experienced the most dramatic impact from COVID-19,
since travel and hospitality virtually stopped, and will be the last to fully
recover. CBRE Hotels research forecasts an average national occupancy level
of 44.4 percent during first half of 2021, and then 55.7 percent during the
year’s second half, but occupancy levels for Los Angeles may be much lower.

As shown in the chart below, TOT revenue dipped in the aftermath of the
September 11 terrorist attacks, then rebounded by more than 30 percent by
2004-05, only to decline again during the Great Recession in 2008-09 and
2009-10. During next nine years we have experienced an average year-over-
year growth of 11.4 percent. That growth was completely reversed in two
fiscal years. The actual receipts in 2019-20 were $253.5 million which is 20.5
percent or $65.4 million lower than 2018-19, and 2020-21 will see a 65
percent drop from there before beginning to recover in 2022.

Transient Occupancy Tax Receipts
Fiscal Years 2003 to 2020

$340

$290

$240

$190

$140

$90

428