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Proposed Auckland bed tax slammed by New Zealand’s hotel industry

Sunset at Auckland Harbour Festival 2006. Viaduct Basin. Auckland. New ZealandBy James Wilkinson and James Wells

Auckland’s new Mayor, Phil Goff, is proposing a NZD$5 bed tax for the city’s hotels in a move that has been slammed by the nation’s tourism body.

The revenue captured through the levy is forecast to be NZD$20-$30 million a year and Tourism Industry Aotearoa (TIA) says Goff’s proposal “unfairly targets accommodation providers and fails to take account of the economic benefits tourism brings”.

Further concerning the industry, New Zealand’s Prime Minister, John Key, is reported to have said that if it proves successful, it should be rolled out across the nation.

“It is inequitable to target commercial accommodation providers when the benefits of tourism are spread throughout Auckland’s economy,” TIA Chief Executive Chris Roberts says.

“It is wrong of the Mayor to suggest that visitors are not already paying their way,” Mr Roberts says. “Auckland is benefitting more than any other part of New Zealand from the tourism boom – and the benefits flow throughout Auckland’s economy.”

Tourism spend in the last year in Auckland was NZD$7.37 billion, an increase of NZD$1.519 billion or 26% in the past two years. Domestic spend was NZD$3.414 billion (up 12.5% in the last two years), and international spend was NZD$3.956 billion (up 41%).

“Of the total annual tourism spend in Auckland of NZD$7.37 billion, just 10.5% or NZD$771m was spent on accommodation,” Roberts says. “That shows how widely distributed the tourism dollar is, benefitting the wider Auckland economy and its residents.

“Tourism is a huge success story for Auckland – the Council should be supporting its continued growth, not trying to fleece the golden goose.”

Roberts says the narrow focus of the proposed new rate “also fails to fulfil the stated goal of getting a direct contribution from visitors to Auckland”.

“It ignores the hundreds of thousands of visitors to Auckland who stay with friends and family, or rent private holiday homes, or use shared accommodation services like Airbnb,” he says.

“Commercial accommodation providers are not only unfairly singled out, but will face additional administration costs to collect the proposed rate. And it cannot be assumed in a competitive market that they will be able to pass the costs onto their customers.

“We look forward to thorough consultation with all affected parties before any decisions are made about this new rate, including how the revenue would be spent. A range of other funding mechanisms are available to achieve the council’s aims and we look forward to discussing those with Mr Goff.

“Neither our commercial accommodation providers, nor our visitors, should be treated as cash cows,” Roberts says.

According to Radio NZ, Prime Minister Key said a levy should be looked at for all of New Zealand.

“If we’re going do something in terms of that sort of mechanism, then I think we want to do it nationally and don’t think we want to do it locally,” Radio NZ reported Key as saying.

“Auckland may well have some tourism issues, given so many people flow into Auckland, but the reality [is] so does Queenstown, so does Taupō, so does the rest of the North Island.”

At the 2016 New Zealand Hotel Industry Conference (NZHIC) in Auckland during May, the Prime Minister floated the concept of introducing a NZD$20 departure tax or bed tax to help offset NZD$140 million in annual spending to support the 100% Pure New Zealand advertising campaign.

During his keynote address, Key said: “There has been some talk in the industry about whether we should apply some charge somewhere along the line and use that charge to build what would be a fund that is collected solely for the purpose for why it was funded.

“So what the argument from the industry has been is put on some sort of charge – one argument could be a departure tax, one argument could be a bed tax and there are variations on what we can do.

“So here is the opportunity and here are the challenges with all of that, so at the moment, we are a little unusual, in that fundamentally as a government we pay 100% of tourism marketing – the national advertising for NZ 100% Pure and other related costs. We pay the bill and that is broadly NZD$140 million.

New Zealand Prime Minister John Key

New Zealand Prime Minister John Key

“So if we theoretically did that and run the concept for a second, let’s just say we put a $20 departure tax on – by the time you get to four million visitors which isn’t that far away, you are talking $80 million a year.

“Then the question is how elastic is it – how much does it stop someone coming to New Zealand because they have to pay that and the answer is probably unlikely to be very elastic.

“It is easy for us to say that as we don’t have our businesses on the line, but in all reality if someone turns up, even with a family of four, and they come to New Zealand from Los Angeles and they are here for two weeks, they are pretty unlikely not to come because of NZD$80.

“If they are, then they shouldn’t come as most other places in the world, as it is all embedded and you don’t see it, but it is there.

“You could do the same thing with a bed tax, so if you are a backpacker it is 20 cents or 50 cents a night, and for a five star hotel it is going to be more.

“The problem with that is it is virtually impossible to solely target foreigners. Because by definition if I decide to go to Sydney, I am going to pay the departure tax. If I am a New Zealand tourist and I decide to go to Dunedin to watch the All Blacks play Wales in a few weeks’ time and if there is a bed tax then I am going to pay it. So that’s the first issue – it is very difficult to separate it out.

“We first looked at this in 2010, and I think in 2013-14, there was a proposal for differential pricing on national parks, and by the way that is not unusual – if you go to the United States, if you are a foreigner you pay more to go to Yosemite than if you are an American – so everywhere in the world they have this sort of stuff.

“But about three months ago, a number of the industry leaders came to me and said that you need bigger input into infrastructure and we want to come to you the government and present that to you.

“So if it happened it wouldn’t happen for a while, it’s going to take quite a bit of time and I think that we need to think long and hard about whether we would agree to it. But I am telling you it is out there and it is floating around,” Key said.

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