The Proposed New Tourist Tax – What Could It Mean for Your Guests?

There has been a lot of noise around England’s proposed tourist tax recently, particularly around the suggestion of a 5% charge. Questions are naturally being asked: When will it come in? Who will pay it? What is the final rate going to be?

But from a revenue point of view, the question we need to ask is: What will it do to the total price the guest sees?

Because whatever we call it internally - room rate, tax, levy or additional charge - we all know the guest ultimately sees one thing: how much their stay is going to cost. And that’s the bit we need to be thinking about.

Different areas could mean different rules

At the moment, there is no confirmed 5% national tourist tax. The proposal is for local areas to have the power to introduce their own Overnight Visitor Levy, which means we could end up with different rates, different rules and potentially different start dates depending on where a hotel is based.

For guests, that could get confusing quite quickly. Imagine someone travelling around England and staying in several different places, only to find that the levy changes from one destination to the next.

The other thing to consider is: if neighbouring councils are able to set different levies, could we eventually see destinations using that as another way to compete for visitors?

If staying in one area becomes noticeably more expensive than staying just down the road, it will start to impact demand patterns, with price differentials influencing where guests choose to stay.

Your competitive set may suddenly look a little different

Imagine your hotel introduces a levy, but another hotel a few miles away sits within a different local authority and doesn’t… or perhaps both areas introduce one, but at different levels.

We already spend a huge amount of time looking at competitor pricing, demand, booking pace, availability and what is happening in the market. This could simply become another part of that picture.

A £180 room at your hotel and a £180 room at a competitor may no longer mean the same thing once the guest gets to the final price.

If your hotel sits close to a local authority boundary, or you compete with hotels across a wider area, I think this is something worth keeping an eye on.

It won’t affect every hotel, or every guest, in the same way

We also need to be careful about talking about the impact on demand as though there will be one answer… because, to put it simply, there won’t be.

Someone booking a luxury weekend away may barely notice an additional charge. Someone comparing two hotels at a much lower price point may look at it very differently.

Even within the same hotel, different segments may view the price changes differently.

Leisure guests, corporate travellers, groups, weddings and events can all behave differently when price changes, so I think revenue teams need to start asking questions about price sensitivity.

Where does price really influence the decision? Where do you have more flexibility? And where are guests already comparing you very closely with the competition?

Those are probably more useful questions than trying to decide whether a tourist tax will simply be good or bad for demand.

What about business that is already on the books?

Hotels are agreeing corporate rates, group bookings, weddings, meetings and events months, and sometimes well over a year, in advance.

So, if a levy is introduced during that period, what happens to rates that have already been agreed?

Is it added on afterwards? Is it included? What has been promised to the customer? And what will they expect to see when the invoice arrives?

We don’t have all of those answers yet, so I’m not suggesting hotels start changing contracts now. But it is worth having the conversation internally. Revenue, sales and finance all need to understand what could be coming because this is unlikely to sit neatly with one department.

Technology is going to matter too

And of course we can’t forget how your tech stack is going to manage this. At first glance, adding a percentage levy sounds fairly simple.

But hotels have different room rates, packages, discounts, booking channels, corporate agreements and potentially exemptions to deal with.

For groups with properties across different areas, it could become more complicated again if each hotel is working under slightly different local rules.

So I would want to understand whether the PMS, booking engine, payment systems and accounting platforms are set up to deal with that.

Although changes don't have to be made today, it is better to understand any limitations early rather than find out when a levy is about to be introduced.

So what should hotels actually do now?

At the moment, not a huge amount. We are still missing a lot of detail, so there is no reason to start changing rates or pricing strategies on the back of headlines.

But it is worth thinking about how this could impact your guest. One useful exercise would be to model a few different scenarios against your current pricing. What would a 2%, 3% or 5% levy do to the final price the guest sees? How would that compare with your competitors? Are there certain price points or segments where that difference starts to matter more?

You may find the impact is fairly small… you may find there are certain parts of your business where it matters much more… but either way, it gives you a better picture of what this could mean for your hotel.

I would also keep an eye on what is happening within your own local authority, speak to your technology providers and make sure the people looking after corporate, group and M&E business are part of the conversation too.

And if consultation opens locally, please get involved.

Hotels know their markets incredibly well. They know what drives demand, how guests respond to price and how their destination competes, so that experience should be part of the discussion.

There may well be benefits too. If money raised through a levy is genuinely reinvested into the destination, improving transport, events, attractions or the overall visitor experience, that could ultimately help hotels by giving people more reasons to visit.

But operators will quite rightly want to understand where that money is going and what difference it is actually making.

For now, I wouldn’t get too caught up in whether the eventual number is 2%, 3%, 5% or something else.

I would be looking at the bigger question:

What does it do to the final price my guest is paying, how does that compare with the market around me and could it change demand?