No point looking out for the pennies on your next weekend break in Manchester, because the pounds will be disappearing before your eyes. Next month the city will become the first in the UK to impose a tourist tax on visitors.
From April 1, overnight guests in city centre hotels will be charged £1 per night, per room, in a scheme that officials hope will raise £3 million per year.
The money will help to fund the new Manchester Accommodation Business Improvement District (ABID), which aims to “improve the visitor experience” and “support future growth of the visitor economy” over the next five years.
Manchester joins tourism powerhouses like Barcelona, Bali and Venice in introducing an overnight tourist tax, a form of targeted fundraising that is becoming increasingly popular around the world. Indeed, many destinations will roll out a tourist tax for the first time in 2023.
The first tourist tax in the UK
Manchester may be the first UK city to introduce a tourist tax, but it is not the first to consider it. In the past decade Oxford, Bath and even Hull have also contemplated the move, but all have stopped short of introducing one.
Edinburgh is on the cusp of introducing a £2-per-night tourist tax, after local officials in November 2022 agreed on the policy, which will be presented to the Scottish Parliament for legislative approval. The Scottish Highlands and Islands is also pushing forward a £1 tourist tax that was paused due to the pandemic; a vote is expected this spring.
The holiday spots that make you pay
Tourist taxes have been around for a while, and more destinations are either joining the club or raising the amount they will charge visitors for staying the night.
In Barcelona there is a €4 overnight fee made up of two charges: a regional fee of €2.25 and a city fee of €1.75. On April 1, 2023 the city fee will be raised to €2.75 and then again to €3.25 on April 1, 2024.
Venice has a similar overnight tax, ranging from €1 to €5 depending on the star rating of your accommodation, which is payable for up to five days. But the city is also trying to push through a controversial day-tripper tax of up to €10 per person; this was supposed to come into effect in January 2023, but due to protests the introduction of the levy has been delayed by six months.
Other European countries have similar tourist taxes. In France you will have a taxe de séjour added to your hotel bill, ranging from €0.25 to €4 per person, per night. In Greece there is a tax based on the star rating of your hotel, going up to €4 per room. And in Germany there is a bed tax (bettensteuer) in Frankfurt, Hamburg and Berlin, amounting to around 5 per cent of your hotel bill.
Other European countries including Belgium, Bulgaria, Croatia (summer only), Czech Republic (Prague only), Hungary (Budapest only), the rest of Italy, the Netherlands, Portugal, Slovenia, Spain’s Balearic Islands and Switzerland also charge a tourist tax.
Farther afield, Thailand will begin collecting a tourist tax in June 2023. Those arriving by air will pay 300 baht (£7.12) while those arriving by land or water will pay 150 baht (£3.56). Bali introduced a US$9 (£7.35) tourist tax in 2019, and Malaysia (£3.27), Japan (1,000 yen on exit; £6.17) and New Zealand (NZD$35; £17.78) also charge visitors for the privilege of visiting. Many Caribbean islands have tourist taxes or departure fees, too, and the US has a room occupancy tax which varies by state, rising as high as 15 per cent in Connecticut.
The most expensive tourist tax of all is in Bhutan, where visitors must pay a “sustainable development fee” of US$200 (£163) per night. Unlike with its previous system, this daily rate no longer covers the cost of hotels, food, transportation and guide services.
Where does the money go?
Typically a tourist tax is added to a hotel bill or your flight, ferry or cruise ticket, and in nearly all cases the money ostensibly goes towards managing or improving tourism in the area. In Thailand, for example, the projected 3.9 billion baht (£9.2 million) raised in tourist tax fees per year will go in part towards providing health and accident insurance for tourists.
Sometimes the focus is on the improvement of life for locals. In Valencia, for example, tourist tax fees will help to provide affordable housing for locals in busy tourist areas. Barcelona says its tourist tax proceeds will fund vital infrastructure like roads and bus services. In Bali, taxes go towards the preservation of the island’s environment and Balinese culture.
In other areas, like Venice, a tourist tax has been tabled as a political tool to manage (or be seen to be managing) tourist numbers, whereas in Manchester the programme is to help grow tourist numbers in the city. In Greece, the overnight tax was introduced in part to help reduce national debt.
Are tourist taxes effective?
That’s the million dollar question – or £1 question, rather.
Justin Francis of Responsible Travel says that tourist taxes are broadly a positive thing. “We support them, because tourists are essentially temporary residents who make use of public services such as water, waste management, and public health and safety without paying for them,” he said.
“Tourists also enjoy nature and landscapes, street life and culture, architecture and other things supported by local communities, often without making a direct contribution to their conservation.
“In short, there is a hidden cost to tourism that must be met. We’d like to see the money from taxation reinvested back into improving places for both residents and visitors. The challenge is about making it fair, to capture day visitors and people staying in Airbnb as well as hotels.”
However, Tom Jenkins, executive director of the European Tourism Association (ETOA), believes they can be counter-productive.
He said: “Prices in tourism are elastic: they change according to demand. Much effort is expended in determining what a client is prepared to pay: tax is a component of this cost point. If a tourism tax is levied, then the proportionate yield from the sale to a business will go down.
“So, tourism taxes are generally a misnomer, as they do not tend to take money from tourists but from those local companies who invest in supplying the service which is being taxed.
“They have the added side effect of discouraging overnight visitors (who in general pay more), and encouraging day visitors (who pay less).
“So, it is not a ‘victimless crime’: it is a cash grab from local businesses that distorts the market against higher spending visitors.”