With the state's No. 1 industry battling a year of double-digit declines in visitor arrivals, tourism officials yesterday blasted state lawmakers for approving a nearly 28 percent tax increase on Hawai'i hotel rooms.

The head of Hawai'i-based Outrigger Enterprises said tacking on 2 percentage points to the transient accommodations tax over the next two years may discourage visitors to the point that the state won't even reach its goal of increased revenue.

"It's sort of like kicking your best industry when they're down," David Carey said. "It sends a terrible message."

Carey said the industry has cut jobs, reduced expenses and cut prices to visitors to keep afloat in the declining economy. "We're suffering already."

At Starwood Hotels & Resorts, Keith Vieira, senior vice president of operations for Hawai'i and French Polynesia, said that move could cost more people their jobs, discourage tourism and ultimately reduce tax revenue for the state.

"We are a leisure destination and no one has to come," Vieira said.

Carey is wondering about the wisdom of raising taxes instead of cutting government spending. "I'm not confident that it will raise the revenue that they think." If fewer people come to Hawai'i, Carey said, the effect could reduce not only the transient accommodations tax revenue, but general excise tax as well.

The bill would raise the current 7.25 percent accommodations tax by 1 percentage point this year and another percentage point next year.

CUTTING PRICES

State tourism liaison Marsha Wienert said the move is counterproductive to the state and businesses working hard to cut expenses to survive in troubled economic times.

"We all recognize the need to balance the budget," she said, but questioned if taxing visitors more will help.

"In these trying times, when we are fighting for every visitor that we can attract to the Islands," Wienert said, hotels, restaurants, retailers and others have reduced their rates.

After the state and industry just spent millions of dollars over the past six months trying to convince visitors that Hawai'i is a good-value vacation, this news will reverberate nationally and internationally as would-be travelers read the headlines about Hawai'i raising tourist taxes.

"We're terribly disappointed," she said.

In the state Senate, five of 25 voted no. In the House, 14 of 51 voted no.

UP TO GOVERNOR

Starwood's Vieira said "an increase in taxes is absolutely the wrong thing to do while airlines, hotels and wholesalers are all lowering their rates."

He said it sends a confusing message to consumers who are deciding between Hawai'i and competing destinations. "It also sends a message that we want visitors to pay more at a time they are looking for more value."

Instead, Vieira said, the state should be finding ways to attract more visitors, which would increase tax revenue for the state. He added that the tax increases "will hurt our economy more and could result in further layoffs and job eliminations."

"We should not be putting our economy at risk," he said.

It's not clear whether Republican Gov. Linda Lingle will veto the tax increase passed by the Democratic-controlled state Legislature. Wienert would only say: "The governor has been very vocal in her opposition to increased taxes."