Goff’s 150% rates increase on accommodation providers slammed

Michael Barnett writes:

There is no other way to put it – the Mayor’s proposed way to pay for Auckland’s tourism promotion is a knee-jerk, easy response that will not deliver positive benefits to the city.

Call it what you like, a visitor levy, a bed tax or a tourism tax but it is a rate increase, and calculated like other rates – on capital value.

A breakdown of the targeted rate he wants to impose on Auckland accommodation operators shows that central city hotel rates will increase on average by 150 per cent with some facing hikes of more than 250 per cent.

For example, if a hotel operator is paying $1 million in rates now – and some are – it will go up to $2.6m assuming that the hotel’s capital value doesn’t also increase.

That’s a huge increase.

Tourism generated spending of more than $7500m last year. But accommodation accounted for just 10 per cent (around $720m). Retail generated 30 per cent, cafes and restaurants 17 per cent, transport 16 per cent and tourism activities 13 per cent. Yet the accommodation sector gets just 10 per cent of the direct benefit but is being asked to pay 100 per cent of the cost. If that is not grossly unfair, I don’t know what is.

I’m in favour of user pays, but this seems to be asking 10% of the tourism sector to fund 100% of the tourism spend by Council. And even worse they get no say in where that spend goes.

It gets worse. The rate will have an immediate impact on both the underlying value of existing accommodation assets and the feasibility of new projects.

That’s anti-business and an insult in respect of the impact it will have, for example, on profit before tax, which will be reduced by some 10 per cent in a good profit year and more in quieter years – because the rate will have to be paid regardless of the number of guests.

So again far from user pays.

It is not too late for council to pause and seek a change of thinking, and keep its promises. The obvious place for council to look at other options is in-house. Council’s salary bill is more than $600m – a 10 per cent cut would easily recover the tourism promotion spend. Then there is council’s more than $60 billion of assets, including buildings it owns.

Far easier to tax more, rather than control spending.