Eye on Hospitality: Hotels and Restaurants Hopeful About Tax Reform

Eye on Hospitality: Hotels and Restaurants Hopeful About Tax Reform https://wahospitality.org/wp-content/uploads/2018/01/shutterstock_614260049.jpg

By Paul Schlienz

Congress just passed the most far reaching tax reform package since 1986, and restaurants and hotels are generally optimistic about its effects on their ability to do business.

Following is a roundup of commentary from hospitality industry leaders.

“Overall, tax reform is going to be very good for us,” said Arne Haak, the chief financial officer with Ruth’s Chris Steak House. “The 35 percent [tax rate] is going to drop significantly for us.”

White Castle’s Vice President Jamie Richardson’s echoed Haak’s comments.

“It’s the biggest good thing for small business in three decades and a generation,” said Richardson. “So it’s so important because hard working Americans are going to be able to keep more of their hard earned dollars.”

Because of the tax reform, Darden Restaurants increased its earnings expectations for its current fiscal year and will spend $20 million from its tax savings on workforce investments to retain its best employees.

“One of the best investments we can make is in our people,” Darden CEO Gene Lee said. “During the remainder of fiscal 2018, we will invest approximately $20 million in initiatives directly benefiting our workforce. This investment will strengthen one of our most important competitive advantages – a results-oriented culture – as we continue to improve on the guest experience, and position Darden and our brands for long-term success.”

Theoretically, lower taxes should encourage increased spending—as frequently happens when consumers get some extra cash in their pockets. Hopefully, this will happen starting in March, when workers start seeing changes in their paychecks thanks to the new tax structure.

“We think the stimulus being put into the economy should be positive,” said Lee. “It should be different than the Bush tax cuts [in 2001] when everybody got $600 to $800. This goes into their cash flow weekly.”

Lee, however, sounded one note of caution.

“For restaurants, this is not going to be a windfall,” Lee added. “We still need to compete.”

Hotels, too, generally take an upbeat view of the tax reform.

“We applaud the passage of the tax reform legislation which is aimed at reenergizing the economy through tax cuts for businesses and individuals,” said David Kong, president and CEO of Best Western Hotels & Resorts. “As taxes decrease, small business owners will have more resources to reinvest in their businesses, resulting in a stronger economy overall. With key indicators such as the stock market on the rise, the travel and tourism industry will be one of many sectors to see a direct benefit.”

Hilton CEO Chris Nasetta hopes tax reform will drive hotel room demand and increase cash flow for shareholders.

“It is going to be good for the economy,” said Nasetta. “It is going to be good for our business — I think it is going to be good for our industry.”

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