The arguments for and against a tourism tax have been played out through the media over the course of 2018 and with the current Scottish Government national consultation now live, we felt it was time to set out some of the facts and figures that lead us to believe that a tourism tax would have a negative impact on Scotland’s tourism industry.
We also thought it would be useful to consider some questions; things that nobody knows the answer to at the moment but will be useful in framing your thinking.
Whether you’re a tourism business, a supplier to the industry or a destination, we hope you will find the following useful in helping you to shape your views on a tourism tax.
Scotland as a global destination
We are simply at the bottom of the pile when it comes to competing on price against other global destinations.
If price and value for money is a deciding factor in a visitor’s choice of destination, there are 134 places in the world that will be more attractive to them than the UK.
Where would we sit in relation to price competitiveness if we introduced another tax on the international visitor, and indeed our domestic tourists?
Is tourism really booming?
Despite what you might be reading in the news, Edinburgh, Scotland’s busiest destination, is not having a good year.
As measured by STR (source for premium global data benchmarking, analytics and marketplace insights), Year to Date occupancy is down 1.4%.
Edinburgh is one of the few European cities in decline. Glasgow figures are showing the same trend. There is a misconception of a buoyant industry.
Transparency in pricing
Unlike many of our competitor destinations where additional taxes can be hidden behind the room price advertised, pricing to the public in UK must be inclusive of all taxes and compulsory payments.
We would be at a competitive disadvantage to other locations with a much lower VAT, who do not include any tourist taxes in public prices. Scotland would be presenting perceived high prices.
Prices displayed by our competitor destinations will always look more attractive at first glance.
The hidden costs to accommodation providers
If a tourism tax was introduced and collected through accommodation providers, those businesses would be paying credit card commission and OTA commission on two taxes (VAT and Tourist Tax).
The research and evidence we have gathered over the past two years shows that the rising costs of doing business remains the number one concern of tourism business in Scotland.
Increases in price reduces tourism
Research by Tourism and Travel Research Institute (TTRI) at Nottingham University (Tourism Competitiveness: Price and Quality – March 2005) revealed that an increase in price of 1% relative to competitors reduces tourism by 1%.
Research by BTA (now VisitBritain) shows an increase in the value of currency of 1% will reduce tourism earnings by 1.3%.
Tax our visitors more and they will spend less
Also by TTRI, Study of Tourism Demand in UK (2007) shows that a 1% increase in UK prices or relative exchange rates would lead to a 0.61% fall in tourism expenditure.
The Association of Scotland’s Visitor Attractions published recent statistics which showed that the average visitor spend in the last quarter in attraction shops in Scotland was just £1.59. In catering outlets in visitor attractions in Scotland, the average spend was £1.19.
A tourism tax could negatively impact businesses that rely on the tourism economy by reducing visitor spending right across the industry; in pubs, restaurants, shops, cafes, visitor attractions and entertainment venues. What would this mean for your business, destination and local economy?
We’ll tax you when you arrive and tax you when you leave
We welcome our visitors with one of the highest rates of VAT in the world and we wave them goodbye with the highest level of Air Passenger Duty in Europe (and one of the highest in the world).
Our visitors are taxed at every point in their journey while in Scotland.
Other destinations where a tourist tax has been introduced have significantly lower rates of VAT and APD. We cannot compare the UK to these destinations. We are simply far more expensive for tourists. When tourists visit these destinations, they are able to spend more, stay longer because ultimately, they are taxed less. Does the idea of introducing an additional tax to visitors seem sensible given that it costs them significantly more to travel to Scotland and holiday here?
Questions to consider
Attractiveness of Scotland for future investment
How would we be perceived by investors, people who want to invest in Scotland’s tourism economy by creating hotels, attractions, shops, restaurants, bars and activities, all of which equal job creation and a boost to the economy if we were to introduce an additional tax on our visitors? Investing in a tourism economy likely to take a downward turn would seem unlikely.
Do you want to pay a tourist tax?
In the event that a tourist tax was introduced in our destinations, if you’re holidaying in Scotland you would also pay this tax were this to be collected by accommodation providers. The UK gives Scotland 60% of our market. The tourist tax is not just a tax on international travellers, this would come out of your expenditure too.
Where does the money go?
None of the facts around the ring-fencing or distribution of a tourist tax have been made clear by any of the proponents of the levy or details of how the tourism industry would benefit from these additional funds if a tax was introduced. Where would the money go? Potholes or destination marketing?
Do you need another administrative burden?
The logistics and costs of administering a tourist tax in your accommodation is important to consider. How does this fit with your IT systems? What are the costs of making modifications to the way you charge guests? How do you absorb these costs? Can you absorb these costs? The cost of regulation and legislation for our tourism and hospitality industries is significant and is already eroding the profit that you could be making according to our research. A reduction to profit impacts the quality of your product, the service you deliver and greatly reduces your opportunity to invest.
One night or two?
What could be a two-night stay, might become one. Our domestic market is already feeling the pinch. Household budgets are squeezed and we’re not able to spend as much on leisure activities as we used to. Two nights can become one, expenditure in your hotel or tourism business is therefore halved.