New Research: The Rising Price of Hotel Tax Compliance

This sponsored content was created in collaboration with a Skift partner.

According to Skift Research, profit margins across the U.S. hotel industry were 4% below 2019 levels in June 2025, signaling continued challenges for the operating environment in an uncertain economic and geopolitical climate, despite steady domestic travel demand.

“While top-line performance has shown steady recovery, surpassing pre-pandemic levels, bottom-line metrics continue to reflect the structural and operational challenges faced by the industry in the post-pandemic world,” wrote Pranavi Agarwal, Skift senior research analyst.

In today’s lodging industry, any operating function that takes attention away from optimizing the customer experience can become a competitive disadvantage. A new report from Avalara, “Checked In, Taxed Out: Benchmarking Tax Compliance in the U.S. Lodging Industry,” is based on a survey of 500 senior-level hotel executives, hotel management leaders, and short-term rental hosts who handle their own financial operations and tax strategies. The report highlights why lodging tax compliance should be a top priority in today’s industry.

According to the Avalara study, 40% of hotel operators reported spending between 50 and 100 hours per year solely on trying to achieve and maintain compliance. Despite this, nearly half of respondents (​​44%) feel only “somewhat confident” in their current compliance status, and 45% feel only “somewhat prepared” to adapt to new or updated lodging tax requirements moving forward.

The most time-consuming and challenging aspects of compliance included understanding local tax codes, filing monthly/quarterly returns, managing different rates across locations, and registering properties across jurisdictions.

With these roadblocks standing in the way, hotel operators expressed uncertainty and confusion regarding backend issues, which have a ripple effect on other financial reporting functions that will likely impact the customer experience.

Nearly half of the respondents (44%) from the hotel sector reported that their approach to tax compliance still involves manual or semi-manual processes, citing hesitancy about new technologies. Among those not currently using AI-powered compliance tools, top concerns cited include accuracy and/or reliability (47%), uncertainty about how the technology works (34%), and the costs of the software or implementation (33%).

Some companies also worry about the impact that implementing automated technology will have on their employees. However, by automating simple or repetitive manual tasks, AI technology for compliance enhances employee efficiency and satisfaction by allowing them to focus on strategic work.

Hotels understand the vital importance of maintaining tax compliance, but the complexity and inconsistency of rules across a hotel portfolio make it harder than ever for them to achieve it. Trust and cost issues, as well as a lack of understanding about the technology, are currently hindering adoption rates, as many providers opt for a “wait-and-see” approach to its implementation.

Yet any hesitation in a hyper-competitive environment represents a critical opportunity cost. The benefits of exploring and implementing the latest methods and technologies to streamline and optimize tax compliance for hotels far outweigh the risks.

“The cost of doing nothing is only growing,” said Nicole Rogers, lodging general manager at Avalara. “Hotels that continue to rely on manual or outdated methods are sacrificing time, agility, and a critical competitive advantage, while regulations become more dynamic and operating margins become tighter. The sooner hotels make the shift, the sooner they free up teams to focus on growth, guest experience, and profitability.”

Download “Checked In, Taxed Out” here.

This content was created collaboratively by

Avalara and Skift’s branded content studio, SkiftX.