The Tourist Tax Conundrum: A Misguided Fear in an Industry Under Pressure

The hospitality industry, reeling from the effects of a global economic slowdown, war, and Brexit-induced uncertainty, is sounding alarm bells over tourist taxes. UKHospitality’s dire predictions – 12 million fewer visits and 33,000 job losses in England alone – have been seized upon by critics as evidence of the folly of introducing such levies. However, closer examination reveals a more nuanced picture.

Tourist taxes are not new; they’ve been in place for years in many European destinations, including Amsterdam, Barcelona, and Venice. These cities have seen consistent increases in visitor numbers over the past decade, despite hefty overnight charges in some cases. For example, Amsterdam’s 12.5% overnight tax is part of a broader effort to manage visitor numbers and direct revenue towards sustainable projects.

Manchester’s £1-a-night levy, introduced through a business improvement district with local hospitality businesses’ backing, has generated £10.5m in its first three years, ringfenced for cultural initiatives. This demonstrates that tourist taxes can provide a valuable source of revenue for local authorities and businesses to invest in community projects and infrastructure.

However, they also risk deterring visitors from destinations that impose levies, driving them towards rival areas with more hospitable policies. The evidence on whether visitor numbers decline when tourist taxes are introduced is mixed at best. A study by Bangor University found no evidence to suggest tourist taxes deter visitors, while an investigation into Manchester’s levy found “no significant impact” on hotel occupancy rates.

Local leaders and business owners often take a more pragmatic view of tourist taxes than national trade bodies. For instance, Allen Simpson, chief executive of UKHospitality, has denounced Edinburgh’s new 5% tourist tax as already having “damaging effects” on the city. However, his concerns are at odds with those of Edinburgh Tourism Action Group, which represents the city’s tourism industry and says it’s “too early to draw any meaningful conclusions” about its impact.

This complexity requires careful consideration and nuanced policy-making. By dismissing tourist taxes outright as a deterrent to visitors, trade bodies risk overlooking their potential benefits – and underestimating the resilience of the tourism industry in the face of economic headwinds.

As Zoe Billingham, chief executive of IPPR North, notes, “With climate change and other uncertainties in the world, I would expect visitor numbers in the UK to increase – that’s not just domestic holidays, but also people from other countries coming here.” This is a realistic assessment of the global tourism landscape, where destinations are increasingly competing for a shrinking pool of visitors.

Policymakers should focus on creating a more sustainable and equitable model for tourism growth. By doing so, they can ensure that the benefits of this vital industry are shared more widely – not just by central government, but also by local communities and businesses.