Sep. 13, 2006 - Miami-Dade to sue Orbitz, Expedia over bed-tax dollars

Miami-Dade County plans to sue Expedia, Orbitz and other online travel agencies, claiming the websites are costing the public significant amounts of hotel taxes.

The litigation would add to the legal woes facing the popular travel sites, which account for about half of the country's hotel bookings.

The sites negotiate wholesale rates with the hotels, then charge travelers higher prices for the rooms. The hotels collect the taxes directly from travelers, but only on the wholesale rates.

Governments across the country claim this practice robs them of hundreds of millions of dollars.

"We need to go after these companies that are making a profit on the backs of Miami-Dade taxpayers and visitors to the region," Joe Martinez, chairman of the county commission, said in a statement. On Tuesday, the commission approved Martinez's motion ordering county lawyers to file the litigation.

A spokesman for the websites said the lawsuits are based on a faulty reading of the online travel industry's business model. And he dismissed the lawsuits as more likely to benefit trial lawyers than taxpayers.

"I think that a lot of the cities have been sold a bill of goods by class-action plaintiff firms that there is some sort of pot of gold at the end of this litigation rainbow," said Art Sackler, executive director of the International Travel Services Association.

The trade group representing the online travel industry contends the spread between what sites pay hotels and charge travelers -- typically a 20 percent difference -- represents a service fee that should be exempt from the lodging taxes hotels pay local governments.

In the past two years, jurisdictions in California, Illinois, North Carolina, Georgia and, most recently, Florida's Leon County, have taken the sites to court. So far, no court has ordered the sites to pay lodging taxes on their sales, Sackler said.

Miami-Dade's entry into the fray could be good news for a Miami litigator leading the Leon case. Trial lawyer Tod Aronovitz filed the Leon litigation as a federal class-action suit on behalf of all Florida counties. He eventually would need the counties' endorsement of the lawsuit.

Aronovitz said he has met with Miami-Dade lawyers at their invitation and reviewed the case with them. He said he declined an invitation to speak before the commission Tuesday. Jeff Ehrlich, an assistant county attorney, said Miami-Dade had no plans to hire outside counsel for its suit but that joining the Leon litigation is a possibility.

Orange County opted to file its own lawsuit in state court against the travel sites. County Attorney Tom Drage said he was pursued by litigators eager to sign Orlando's home county to their litigation.

"One firm told us they would put one million dollars of their own money into it. They obviously saw this as being pretty lucrative types of lawsuits," he said.

Martinez said he hoped the county could handle the court fight itself: "We have 120-something attorneys. I'm sure they'll do a great job."

He said he pursued the litigation out of concerns hotel taxes aren't keeping pace with rate hikes at Miami-Dade hotels. Hotel taxes subsidize the AmericanAirlines Arena and the new Carnival Center for the Performing Arts and would be used to build a baseball stadium in Miami.

The 6 percent tax added to hotel bills generated $58.7 million last year, up 16.5 percent from the year before. Room rates increased 12 percent between 2004 and 2005, with per-room revenues up 19 percent, according to Smith Travel Research.

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