Tourist tax incoming: Is the hotel industry ready?

At Independent Hotel Show London, David Sheen, Public Affairs Director at UKHospitality, joined Eloise Hanson, Editor of Boutique Hotel News, to explore what a tourist tax could mean for independent hotels, from pressure on profitability and investment to the complexities of collecting a levy and ensuring its revenue benefits the visitor economy.

The Hotel Business Stage was sponsored by eviivo and designed by Merav Bustan Design. 

At Independent Hotel Show London in partnership with James Hallam Insurance Brokers, David Sheen, Public Affairs Director at UKHospitality, joined Eloise Hanson, Editor of Boutique Hotel News, to discuss what a tourist tax could mean for hotel profitability, investment and the communities hospitality businesses support.

From the complexity of collecting a levy to questions about where the revenue would go, the discussion highlighted the importance of ensuring that the industry’s voice shapes its implementation.

Who ultimately pays?

One of the central concerns was whether hotels would be able to pass the full cost of a visitor levy on to guests. Discussing a potential 5% charge, Sheen warned against assuming that businesses could simply increase their prices without consequences.

“It's inevitable that some of it will be absorbed by hoteliers. If they were able to add 5% to your room rate they would've done so already.”
For operators, this creates a difficult judgement about how much customers will accept and how much the business can afford to absorb. Sheen questioned whether the resulting pressure would eat into staffing, quality of service or future investment.

The discussion framed tourist tax as a commercial issue with implications for the whole hotel experience. Reduced margins could affect refurbishment plans, recruitment and the resources available to deliver the service guests expect.

Where will the money go?

Sheen also raised concerns about whether revenue collected from overnight visitors would be used to support the businesses and destinations generating it.

“Our big fear is that money is absorbed by local authorities and used to fix potholes etc.”

While acknowledging the importance of local services, he argued for a tighter definition of how levy revenue could be spent, with a clear connection between the charge and improvements benefiting those paying it.

“We want the money to genuinely be spent on the betterment of those paying the tax.”

Sheen contrasted concerns about revenue being absorbed into wider local authority budgets with constructive conversations in Cardiff about using it to grow footfall into the city. The distinction was whether a levy would support the visitor economy or become another source of funding for unrelated spending.

For hotels, that raises an important question: what tangible benefit would their guests and businesses receive in return?

Learning from Edinburgh

The practical challenge of administering a visitor levy was another major theme. Sheen described the system in Edinburgh as “ferociously complicated” and said conversations with hoteliers had revealed uncertainty about their obligations.

His comments underlined the importance of meaningful engagement with businesses before a scheme is introduced. Hotels need clear rules, understandable guidance and collection arrangements that work with their booking and payment processes.

Sheen said the development of proposals in England offered an opportunity to learn from difficulties encountered in Edinburgh, including issues around commission. Questions about what the levy applies to, its interaction with VAT and the processes needed to collect and transfer it remained important concerns within the discussion.

Avoiding a fragmented approach

Differences between schemes could create further challenges for operators, particularly those working across more than one destination.
“We're seeing fragmentation across the UK,” Sheen said of varying tax rates, identifying greater consistency as a priority for UKHospitality in the next phase of consultation.

The concern extends beyond the headline rate. Different definitions, collection requirements and spending arrangements could make it harder for businesses to manage their responsibilities and explain charges to guests.
Sheen also challenged the idea that a visitor levy would have no consequences for local residents simply because they would not directly pay it. Hospitality businesses provide employment and sustain local venues, meaning pressure on their finances can reach into the wider community.

Making the sector’s case

“We more than pay our way,” Sheen said, emphasising hospitality’s existing contribution and questioning whether a visitor levy was the best way to fund mayoral authorities.

He expressed hope that the Budget would deliver more support for hotels. Alongside that, the session highlighted the value of operators sharing concrete evidence with their associations: figures and examples showing how additional costs could affect jobs, service standards or planned investment.

For independent hotels, the message was to remain involved as proposals develop. The rate matters, but so do the rules for collecting the levy and the safeguards governing its use. Each will influence whether businesses can manage the change and whether the money raised delivers meaningful benefits for the visitor economy.