Would London benefit from a tourism tax?
What sets London apart from its neighbouring European cities? The City’s bustling financial centre? A super connected underground rail system? Its diverse population of inhabitants?
The answer could well be London’s hesitancy to tax its tourists for overnight stays. Even the country’s de facto second city Manchester has followed in the footsteps of Paris and Barcelona and introduced a one pound charge for all holidaymakers.
Called the ‘City Visitor Charge’ the fee will be added to the bill for every guest staying in one of the hotels within the Northern city and will, in theory, generate £3 million which will fund a new business improvement district, ABID.
“Essentially hotels and serviced apartments collect the charge and then every quarter they get a bill from Manchester City Council that they need to pay and that goes into the fund that will be utilised for Manchester Accommodation BID activities,” an ABID spokesperson told City PM
Whilst it’s not strictly a tax – Manchester City Council is only involved as they are handling the billing – it’s an interesting move and one that will be watched elsewhere.
Would it work in London?
According to the Greater London Authority, in 2022 it was estimated that 11.2 million tourists flocked to the capital. Very basic analysis by City A.M estimates that if London introduced a £1 pound tourist tax similar to Manchester it could take in a further £11m to pump across various sectors in the capital.
“London is out of step with other global cities that have charged a tourism tax for many years,” Nick Bowes, chief executive for Centre for London told City PM
Almost uniquely, the capital still offers the chance for tourists to visit world-leading museums for free – perhaps making the case even more compelling.
“Allowing the city to come up with a scheme that charges a few additional pounds a night on hotel bills would provide a steady income stream independent of the central government,” he explained.
He added: “This would lead to vital reinvestment to make London an even more attractive place to visit.”
While it tends to fly under the radar, the argument for a tourist levy in London has existed for some time.
In 2017, a paper published by the Greater London Authority said that revenues from the tax could be used to fund “cultural attractions” and help bolster “hotel employees and owners for activities to support the sector such as education and training”.
With Edinburgh also now eyeing a £2 charge for visitors entering the Scottish capital, City A.M reached out to London mayor Sadiq Khan.
A spokesperson for the mayor told City A.M that while he has “no powers” to implement a tourism levy he would offer his support to industry leaders in the hotel and restaurants businesses if they were to push for its introduction.
They said: ”The development of any such scheme would have to be led by London’s world-class hospitality industry. If industry leaders wish to develop such a scheme, the Mayor would support them.”
It seems there’s little chance of that for now, UKHospitality expressed fears that such levies could be “punitive” and “deter visitors” in what is an already challenging time for the sector.
Kate Nicholls, UkHospitality chief told City A.M, said: “UKHospitality has been consistent that levies that are punitive, deter visitors or are incorrectly targeted are ineffective and should be avoided at all costs.
“Tourism and accommodation Business Improvement Districts can have a role to fund local marketing and promotional activities, however there must be comprehensive local support and significant engagement with the business community before it is implemented. It’s also essential funds are ring-fenced for spend within the sector and not funding matters covered by general taxation.”