U.S. District Court Judge Harold L. Murphy has entered a final order approving a settlement agreement of a class action legal suit brought by the cities of Rome and Cartersville, along with Hart County, against a group of online travel companies.

Hotels.com, Expedia, Orbitz, Travelocity and Priceline will be required to make a lump sum payment for local hotel/motel taxes, plus 7 percent interest from May 16, 2011, through November 30, 2012.

The cities of Rome, Cartersville, Rockmart, Cedartown, Dalton, East Point, Warner Robins, Tybee Island, College Park, Macon, Augusta-Richmond County, Alpharetta and Hartwell along with Cobb, Gwinnett, Fulton, DeKalb, Clayton and Hart counties $2,500 each, attorneys’ fees of one-third, and expenses, with any remaining funds to be distributed the local governments on a pro rata basis.

The $2,500 is a fee that is distributed to lead plaintiffs who were willing to step out and put their names on the line as plaintiffs. That money comes off the top of the final amount that the online travel companies pay in later this fall. However, each of the original plaintiffs will receive additional funds as part of the pro rata distribution.

Murphy ordered that any city and county which had not already submitted to Class Counsel, the Rome firm of Brinson, Askew, Berry, Siegler, Richardson and Davis LLP, the list of hotels with physical address, hotel motel tax rate, sales tax rate, and a certified copy of its hotel motel ordinance, to do so by Oct. 15.

Rome City Manager John Bennett was pleased that Murphy had approved the settlement of the case. Bennett said he had hoped the settlement would go for compensation of improperly collected taxes going back to 2005 but that anything the city gets going forward will be more than they’ve received in the past.

Rome, Cartersville and Hart County were the original plaintiffs who argued that the online travel companies ought to be paying local hotel/motel taxes based on the retail rate which the online companies charge their customers, as opposed to the wholesale rate that they negotiate prices from the hoteliers.

Distribution payments to cities and counties are anticipated to be made by the end of this year. Thereafter, payments will be made to cities and counties on a quarterly basis as long as the online travel companies continue to use the Merchant Model of Business.

The other alternative for the online travel companies is know as the Agency Business Model. In that situation the online companies simply acts as agents for the hoteliers and receive a commission or booking fees as is typically the case for traditional travel agents who book rooms through a global distribution system such as Pegasus or Worldspan.

Lori Dover, owner of Travel Leaders of Rome, said that affiliation with national firms such as Travel Leaders has helped the traditional local travel agents compete with the online travel companies and that she is able to compete price-wise for last minute hotel bookings, but she is hopeful the settlement will be another step toward leveling the playing field the traditional small local travel companies.

J. Anderson Davis, the lead counsel for the Rome firm in this case, said he expects the online companies to continue to use the Merchant Model going forward because all the taxes represent are a pass through to the end line consumer and the Merchant Model typically offers the firms a much higher rate of return than traditional commissions or booking fees.

During his statement to the court prior to Murphy’s final approval of the settlement, Davis said he could not estimate how much the precise amount of money the settlement should return to Rome or any other individual community.

However, he did say that statewide, the hotel/motel taxes generates about $3.6 million a year for the state of Georgia, and that Atlanta has reported that it received about a million dollars after it and the city of Columbus settled separately with the online travel companies. That leaves about $2.6 million to be divided among all other cities and counties in Georgia, which levy a hotel/motel tax.