‘This is a huge loss of revenue for the CNMI’

The Marianas Visitors Authority has recently discovered that over 40% of tourists from a specific market have been opting to stay in Airbnb’s that are not part of the Hotel Association of the NMI and are therefore not required to pay the CNMI’s Hotel Occupancy tax. This, MVA fears, is a huge loss in revenue for the CNMI.

During an MVA board meeting last week, acting chair Gloria Cavanagh shared that MVA recently discovered that a large chunk of visitors coming to Saipan have been opting for Airbnbs instead of HANMI hotels.

“We found out that for a particular market, only 57% were actually staying at a HANMI hotel. That means 43% are staying at guest houses, Airbnbs, which may or may not be paying the Hotel Occupancy Tax. These are buildings that was supposed to be for rent or were once rental units that are now being used as transient accommodations but they’re still licensed for rental instead of licensed for these types of accommodations that should be paying hotel occupancy tax,” she said.

This is a concern for the CNMI because HANMI hotels are required by law to pay Hotel Occupancy Tax which is, in turn, used in the CNMI’s efforts to revive its tourism industry. Currently, 80% of the CNMI’s Hotel Occupancy Tax is transferred to MVA.

“Some 43% don’t stay at HANMI hotels, that’s big, that’s potentially 43% of the hotel occupancy tax that we receive now in that particular market, gone. It’s a huge loss of revenue for the CNMI and hopefully with our earmarks for 2024 budget, it’s going to be a huge loss as far as promoting dollars for MVA,” Cavanagh said.

Cavanagh explained that because there is no clear definition of what a “transient accommodation” pursuant to the law that governs the collection of Hotel Occupancy Tax, Airbnbs may or may not be paying the tax which is a loss for the CNMI.

“The definition of a lodging or transient accommodation was a little bit lose so I think what we need is legislation to tighten the definition of who actually should be paying this hotel occupancy tax or this transient accommodation tax. We’re looking at recommending tightening the definition. We do have some writeups on it and it’s something that we and hopefully the Chamber of Commerce and HANMI can go out and get someone to champion it in the legislature to push this along and have it passed,” she said.

Cavanagh noted that the possibility of Airbnbs not paying hotel occupancy taxes is also a huge concern now that MVA is expecting a huge drop in the number of Korean tourists coming to the CNMI.

“Basically, we’re looking at a 33% drop on Korean market arrivals or seats coming in in November and about a 27% drop in December. We only have two markets that are recorded and that’s Japan, which is currently very small, and we have the Korea. So, when you have Korea and it drops 33% from one month to another, that’s a lot and we need another market. It’s not just for the hotels or the hotel occupancy tax, but it’s also for collections for GRT and also CPA,” she said.

Cavanagh added that another concern is that with the increase in landing fees recently adopted by CPA, it will be a challenge to even fill the seats expected in the following months.

“CPA has its expenses, whether it;s divided by five people or 10, it makes a huge difference. And now that we have raised fees by 90%, it makes a huge difference especially since we were already at 30% higher than Guam. Now we’re at 150% higher and that’s what we’re looking at come Oct. 1. Because we have a drop in the number of seats, it’s now a matter of how are we going to be filling these seats as fares will be higher,” she said.