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Commission’s bed tax support leaves industry reeling

Three leading tourism bodies have criticised the independent Productivity Commission’s decision to back bed taxes as the most effective way to sustain regional tourism.

Hospitality NZ said it “strongly rejects” the recommendation, Tourism Industry Aotearoa says such levies “will not succeed in making visitors pay their fair share” and Holiday Parks NZ says bed taxes could increase freedom camper numbers, damaging the income of parks around the country.

The commission last week released a draft report identifying new tourism funding methods as one of the top priorities for change in local government funding, and advocating local councils be given the power to implement their own accommodation levies.

“The Government is already considering a legislative change to allow Queenstown Lakes District Council to introduce such a levy following a local referendum,” the report says.

“There is no reason why the option should be limited only to one district – the ability to introduce an accommodation levy would reduce cost pressure in tourism hot spots around the country.”

It is an approach which has been greeted with disappointment by the peak industry bodies, which have lobbied hard against a levy targeting a small part of the tourism sector to pay for improvements which benefit the whole.

“While Hospitality New Zealand recognises the need to generate a sustainable infrastructure funding model for the regions, we strongly reject the recommendation of a visitor levy as a solution,” said Hospitality NZ CEO Vicki Lee.

“Hospitality New Zealand supports the “benefit principle” laid out in the Productivity Commission draft report (“services should be funded by those who benefit from them”).

“In accordance with this principle, Hospitality New Zealand continues to argue that a visitor levy, which is applied solely to the commercial accommodation sector unfairly places the burden and risk on to one sector, which only benefits from a very small percentage of total average visitor spend, with the rest going to activities, retail and a number of other businesses where tourists spend their money – including but by no means limited to airlines, taxi services, petrol stations and supermarkets.

“We maintain, as we have advocated previously, that those who benefit from tourism must contribute, and as such, a levy targeted to those receiving less than ten percent of tourism spend is in conflict with the “benefit principle” recommended in the draft report.”

Holiday Parks New Zealand (HPNZ) chief executive Fergus Brown says the organisation’s 300 member parks oppose an accommodation levy.

Holiday parks account for 36 percent of New Zealand’s commercial accommodation capacity and provide more than eight million guest nights a year.

“Ironically, councils may well use some of the funds raised to provide freedom camping facilities. So holiday parks could face a double whammy – increased costs and more competition from free camping sites,” said Brown.

“The majority of our guests are Kiwis. A new tax on Kiwi holidaymakers, especially those travelling on a budget, will not be popular.”

HPNZ instead supports Tourism Industry Aotearoa’s proposal that central government returns 20 percent of the GST collected from international visitors to local councils to fund tourism improvements. The allocation amount would be distributed through a Trust and determined by the measured level of visitor impact on each authority.

“This is a very sound proposal that would collect the required amount from existing funding, without placing an extra burden on holiday park owners,” Mr Brown said.

Tourism Industry Aotearoa has acknowledged the chronic under-funding of tourism infrastructure in some regions and the need for ongoing investment to sustain the industry, but chief executive Chris Roberts argues bed taxes are a short-sighted fix.

“While this might seem like an easy solution, it will not succeed in making visitors pay their fair share,” he said.

“Last night, for every 100 of our domestic and international visitors, 30 spent the night in commercial accommodation, 7 in an Airbnb or holiday house, and almost all the rest enjoyed free accommodation, mainly with friends or relatives.

“So the Productivity Commission’s solution will fail to reach two-thirds of our visitors, even though they are using the same council facilities as those staying in commercial accommodation. There is nothing fair about that.

“New Zealand doesn’t need new taxes. What we need is to find ways to better share the taxes and charges we already collect.”

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Kate Jackson

Kate Jackson is the editor of Accomnews. You can reach her at any time with questions or submissions: editorial@accomnews.co.nz

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One Comment

  1. From Rayma Jenkins, president of the B&B Association New Zealand

    Bed & Breakfast Association along with many other tourism organisations is very disappointed in the Productivity Commission’s report suggesting that an accommodation levy be applied to raise funds for infrastructure in Tourist Centres.

    Many have written about the small proportion of the income earned from tourism that goes to the accommodation sector, the ease with which it is able to be collected –“the low hanging fruit”- and how it is totally unjust that this is the sector who is going to be the ones responsible for collecting this money and therefore adding to the price to stay in commercial accommodation. Despite the fact that statistics prove many visitors do not stay in commercial accommodation. The proportion of visitors paying will be small.

    It is noted in the report that the rating of property owners is an effective way to raise money and it suggests that continues. Comparing large cities with small communities, it is noted that generally small communities pay higher rates per property. There are not so many ratepayers to fund the same resources and infrastructure in the smaller communities BUT how much of it is to do with the people who are making these decisions? Of course the mayors and councillors wish to retain their elected positions and do not want to face the ire of the rate payers with rate rises.

    Ratepayers all benefit from the tourist dollar. A small percentage increase in their rates to address infrastructure, improve water quality, the beaches and safe guard the environment etc. must be an easier solution but whilst elected members have to impose this, it is not a palatable solution.
    Whether directly or indirectly I am hard pressed to think of anyone not benefiting from the tourist spend so why do decision makers think that accommodation providers and visitors be the ones who provide more?

    Our members are small business owners faced with continual compliance changes and associated costs. Most are owner operators, operating on very small margins. An increase in costs through an additional levy will push some owners to cease operating, reducing the choice for future visitors to our areas.

    The recommendation that in smaller communities that do not have a large rate base the government provide funding from the International Visitor Levy is commendable. However the government should make income raised from tourism in the form of GST available rather than permit councils to raise funds through an accommodation levy. Not only would this be fairer but also ensure that the funds go to projects that are proven to improve the infrastructure.

    In a climate of decline many visitors to New Zealand are now having to add $50.00 to the price of visiting the country (ETA and IVL) and very soon in “tourist towns” maybe a bed tax. We have a wonderful product and we should not undervalue that. We certainly need to encourage the guests who value and are able to afford that, but adding more to the cost of our most valuable export in this climate is incomprehensible.

    Having recently travelled in a country where Bed Tax is applied and in areas where tourism is a major earner the streets are not paved with gold. The footpaths are rugged and the roads so, so and most new roads are tolled. Their issues are the same but bed tax is not the proven panacea.

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