Federal rules against ‘drip pricing’ pour cold water on Saskatoon hotel tax

The creation of an accommodation tax came up at City Hall Tuesday, but the city is having an issue with its own version of the tax. Keenan Sorokan reports.

Discussion of implementing a hotel tax was part of a recent committee meeting at City Hall, but it turns out there are complications with the city’s own version of the tax.

Some hotels in Saskatoon charge a voluntary destination marketing fee (DMF). The four per cent additional charge on a hotel stay is voluntary for participating hotels, and not all hotels pass the fee on to customers.

“It affects Saskatchewan harder than other parts of the country because we don’t have that mandatory tax there,” City Manager Jeff Jorgenson said during Tuesday’s governance and priorities committee meeting at City Hall.

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That fee is meant to fund tourism initiatives to get more people staying in Saskatoon hotels. Destination marketing fees made up roughly 71 per cent of Discover Saskatoon’s (formerly Tourism Saskatoon) operating revenues in 2024.

But recent interference from the federal government has diminished those revenues.

Competition Bureau Canada has cracked down on so-called “drip pricing,” where companies advertise low rates before adding parking fees, resort fees or an accommodation tax.

The competition bureau views DMF as a form of drip pricing because many consumers are unaware the fee is voluntary, as opposed to enforced by provincial legislation.

Class action lawsuits have been launched against hotel chains with consumers feeling the charge is being treated as mandatory and not voluntary.

Hotel giant Marriott International recently changed its booking system and came under the scrutiny of Canada’s competition bureau.

Until its website is fixed to make fees more transparent, the competition bureau has prohibited Marriott from collecting DMF in voluntary environments, like Saskatoon, where six hotels have stopped collecting the fee.

“The impacts are quite large given Marriott’s dominance in our market and in others. The current state is that those Marriotts are unable to participate in our current voluntary DMF program,” Discover Saskatoon CEO Stephanie Pocha said.

“This is what we’re facing in the reduction of revenues to the demand generator that is Discover Saskatoon.”

Saskatoon Destination Marketing Hotels Inc, which represents 25 hotels using DMF, feels the city should be providing more reliable funding for tourism.

“Stable civic investment is not about replacing hotel funding,” Vanessa Kosteroski, the group’s chair said. “It’s about sharing responsibility for a system that benefits the entire city.”

Jorgenson disapproves of the current model because some hotels do not charge the fee, making Discover Saskatoon more reliant on fewer hotels.

“It’s a very unfair market because the ones who are voluntarily participating are carrying water for everybody... even those who are not remitting,” he said.

“There’s no question in the administration’s position; Saskatchewan should follow the model of other provinces and either have a provincial tax or enable municipalities to levy that surcharge.”

Saskatchewan stands alone

Saskatchewan is the only province in Canada without some form of accommodation tax or mechanism to allow cities to levy an additional charge to solely fund tourism.

Amendments would need to be made to The Cities Act to allow for an accommodation tax, which Saskatoon has identified as one way to pay for the incoming downtown event and entertainment district.

Saskatoon city administration has been lobbying for years for Saskatchewan to implement the tax — which could also be applied to short-term rental stays, bed and breakfasts or campgrounds — to generate more revenue.

Groups like Hospitality Saskatchewan, the Canadian Taxpayers Federation and others lobbied against an accommodation tax, saying there are other ways to pay for infrastructure, and cautioning the slippery slope another tax lever would create for municipalities.

The province sent out an online survey in 2024 gauging interest in an accommodation tax.

On Tuesday, the city’s government relations officer said the act, which was reintroduced with amendments aimed at increasing transparency and reducing red tape on Nov. 25, 2025, is actively being discussed. However, there is no mention of an accommodation tax as part of the amendments.

“The act’s open, so it’s an opportunity,” Mike Jordan said.

Ottawa collects roughly $23 million annually from its accommodation tax while Winnipeg collects roughly $18 million annually, though both cities saw pushback from local hoteliers after implementing the fee.

“It does generate sufficient revenue to do the things you need to do with it. The question is, what do you use it for?” Jordan said.

As the city waits for further updates on potential changes to The Cities Act, city councillors and administration are eager to see the creation of another revenue tool.

“Business or tourism entities lobby against the tax but then come back asking for additional funding from the city,” Jorgenson said. “That’s why we’re saying, ‘I think there’s something else there.’”

“I’m glad that there might be a way forward to begin that process again, and hopefully there won’t be any hiccups this time,” Ward 9 Coun. Bev Dubois said.

The province said The Cities Act is regularly reviewed, and despite an accommodation tax being floated, it was “not identified as a priority for the province to amend in this legislation review cycle.”