Associations that have plans to bring conventions to Canada after next April are bracing for a proposed federal tax overhaul that would eliminate the rebate that non-Canadian meeting organizers, exhibitors, and attendees can apply for after paying Canada's 6 percent value-added tax, called the Goods and Services Tax, or GST (a federal component of the Harmonized Sales Tax). The rebate of the GST compensates visitors for the value-added tax imposed on convention and meeting space expenditures, audiovisual, hotel room rates (but not meals, which will continue to be GST-exempt), attractions, other goods and services, and gifts that will be brought back home.
If the law passes, all these items will, in effect, be 6 percent more expensive for non-Canadian groups after its effective date of April 1, 2007. But some meetings-specific elements of the proposed law wouldn't take effect until April 1, 2009, if they were negotiated as part of abefore the proposal was announced on September 26. For example, registration fees that U.S. meeting-goers pay to attend U.S.-organized meetings in Canada (generally conventions where at least 75 percent of participants are not Canadian residents and the sponsor is a nonresident) would still be exempt until that date.
Non-Canadian exhibitors at conventions also would be affected by the proposed law and would no longer receive a refund of the 6 percent tax imposed on exhibit-related fees.
Various hospitality and tourism groups, including the Tourism Industry Association of Canada and the Hotel Association of Canada, testified this fall before government committees to argue against the proposed law, part of an overall expenditure reduction legislation package. The change will then be debated and voted on in both Canada's House of Commons and its Senate, but at press time, Canada's Department of Finance could not provide any timeline for an ultimate decision.
The Tourism Industry Association of Canada, based in Ottawa, is marshaling a coalition of Canadian hotels, airlines, and attractions to seek a compromise on the elimination of the rebate, and the Ottawa-based Hotel Association of Canada is also actively opposing the move. TIAC has published a document that asks to have the government reverse this decision, “A Business Case for Maintaining the GST/HST Visitors' Rebate Program,” which can be found on Meeting Professionals International's Web site, www.mpiweb.org.
Christopher Jones, TIAC vice president of public affairs, says he hopes that a compromise might be adopted that would retain the GST rebate, but relieve the government of administering it by putting that task in the hands of private companies, a common practice in European countries.
Reactions Run the Gamut
One group that won't make it under the April 1, 2009, deadline is the American Society of Association Executives and the Center for Association Leadership, whose annual meeting and expo is slated for Toronto from August 15 to 18, 2009. Amy Ledoux, vice president of meetings and expositions for ASAE, downplayed the new law, noting, “The tax rebate was something people paid attention to almost after the fact when selecting a destination.”
Nevertheless, Ledoux anticipates that the final room-rate negotiations she will conduct in 2008 with Toronto and its hotels will take into account the increased costs to attendees and exhibitors as a result of the elimination of the rebate.
Other planners are also taking it in stride. Says Laurie Sharp, president of Sharp Events, San Francisco, “You just have to educate your attendees, negotiate with your hotel partners, and maybe find creative ways to offset costs.” She advises planners to tailor these elements to their groups. “You have to consider what your audience will bear. There is some breaking point between the appeal of a particular destination and the point of diminishing returns.”
Karen Bertani, director of conferences for the California Separation Science Society, San Francisco, which has two upcoming meetings in Canada for pharmaceutical and biotech scientists, plans to look at such negotiable items as free rooms. “Rather than accept one free room for every 50 booked, we might want one per 40,” she says. She also suggests planners look more closely at Canada's shoulder seasons for enhanced negotiating leverage; for example, winter rates in Toronto or Montréal, she notes, are lower than at other times of the year, while such ski-oriented resorts as Whistler, British Columbia, and Banff and Lake Louise in Alberta should be willing to offer better rates in the summer.
But some are not so accepting. “This would be a terrible decision,” says Mary Russell, president of The Hamilton Group Meeting Planners, in Tustin, Calif., who just completed a meeting at the Toronto Hilton. Hamilton Group handles the meetings of several international telecommunications associations and takes groups to Canada twice a year. “The Canadian hotels have some wiggle room in today's robust economy and can give you a discount to help make up for the rebate,” Russell says. “But it will be most telling when times are bad and every dollar counts. Then you may decide not to go to a destination that charges $5 more per sleeping room. That's when you say, ‘I'd rather go to Chicago.'”
Many international associations tend to visit Canada on a rotating basis to be nearer to their constituencies. The Seventh-day Adventists brought 72,000 attendees to its citywide meeting in Toronto in 2000 and received the appropriate rebate for the value-added tax it paid. But the U.S. dollar enjoyed better buying power in Canada then, and the group has recently rejected another Toronto bid for its 2015 meeting in favor of San Antonio.
“We continue to have smaller meetings in Canada, and they are great experiences,” says Sheri Clemmer, associate meeting planner at the Seventh-day Adventists' world headquarters in Silver Spring, Md. “For the future, I'll put that 6 percent into mysomehow in the upfront negotiations.”
A Buyer's Market?
The proposed law could have profound implications for the country's convention centers. The Toronto Congress Centre just last month announced a major expansion that would virtually double the facility to more than one million square feet of usable space, in anticipation of more business — not less. But the Centre pledges it will counter the new law with a plan of its own. “If [the law] ever did get passed, TCC would consume the 6 percent on behalf of our customers so it would not be an issue,” says Cara Carey, vice president, customer experience, corporate communications, for the Centre.
A statement issued by the Canadian Association of Exposition Management, sent to Canada's House of Commons, asserts that revoking the GST rebate “puts Canadian destinations and thousands of large- and small-show producers and facilities at a serious competitive disadvantage.”
The proposed change couldn't come at a more inconvenient time for Canada's tourism industry. According to the TIAC, international visits to Canada have slumped 28 percent from 2000 to 2005 — from 50 million down to 36 million last year — due to border security concerns, the recent strengthening of the Canadian dollar against other currencies, the rise in fuel costs, and uncertainty over new travel-document requirements. And as of January 23, 2007, all U.S. residents visiting Canada must have a passport to re-enter the U.S. when returning by air.
Add to this hospitality costs in major Canadian cities that are just as pricey as their U.S. counterparts. According to the “Canadian Lodging Outlook,” issued by consulting firm HVS International — Canada, in Vancouver, hotel room rates this year are averaging (in U.S. dollars) about $142 in downtown Montréal, $121 in Québec City, $152 in Toronto, and $147 in Vancouver. This compares with a 2006 average daily room rates of $221 in New York, $136 in San Francisco, $119 in Chicago, and $140 in Boston, according to Smith Travel Research, Hendersonville, Tenn.
“We're hoping the new law is rejected, but if it isn't, we as a sales team will sit down and consider those groups that are tentative and who will be affected by this situation,” says David Ogilvie, general manager of the Westin Harbour Castle Toronto, as well as marketing chairman of Tourism Toronto, that city's convention and visitors bureau. “The key is, we don't want to lose any of that big business.”
Says Tony Pollard, president of the Hotel Association of Canada, of the GST proposal: “The government is trying to save $78 million in rebates, but we may lose $218 million in business that goes elsewhere. Our position on the proposed law is very clear. We hate it.”