When Hester Van Buren, a deputy mayor of Amsterdam, recently proposed a one percentage point increase in the city’s lodging tax – already among the highest in Europe – her fellow city councilors responded with one criticism: they wanted the increase even bigger.
“Of course we have high costs for the city – for well-being, for quality of life,” Ms. Van Buren said in a recent interview at Amsterdam City Hall. “We don’t want to raise taxes for our residents. So we said, ‘Let the visitors pay a little more.’”
Across Europe, many of Mrs Van Buren’s colleagues have similar thoughts. After several years of steady urban tourism growth in the run-up to the pandemic, many European cities have found new ways to tax visitors, which are both a major source of income and – in some cases – a headache for residents.
And while there’s little evidence that tourist taxes are significantly dampening visitor demand, the measures can generate significant funds for street cleaning, road works and other urban improvements that benefit visitors and locals alike.
With growing concerns about the negative impact of tourist flows, tourism tax revenues can help keep this important part of many European economies free to operate in society.
“The big question that worries many local communities is, ‘How can we harness the value of tourism?’” said Peter Rømer Hansen, founding partner and chief strategist at Group NAO, a Copenhagen-based tourism consultancy. “Tourism used to be tax-free. Now it says, “No, it’s not – you should tax tourism to take some of that added value for the community.” It’s a paradigm shift.”
The tourism zeitgeist
Tourism taxes are now widespread in Europe: of the 30 countries examined in a 2020 report whose lead author was Mr Hansen, 21 had taxes on tourist accommodation, typically in the range of 0.50 to 3 euros (about 55 cents per year). $3.30) per person per night. (In the United States, most states levy taxes on lodging in the single-digit percentage range, but this varies widely — from zero lodging taxes in Alaska and California to a 15 percent hotel tax in Connecticut.)
Countries in southern and western Europe, where tourism tends to make up a larger share of the economy, are more likely to levy tourism taxes, Mr Hansen said. However, he expects northern European countries to start imposing similar levies soon, owing to factors including the climate crisis, the post-pandemic tourism boom and a growing interest in making tourism work for local communities.
“It’s part of this zeitgeist that we need to be more aware and take better care of our local environment,” said Mr. Hansen.
In line with this trend, some European destinations that have long had tourism taxes have started to increase their rates or levy additional levies.
Last year, Barcelona City Council started charging visitors with a ‘city surcharge’, on top of the occupancy tax (ranging from €1 to €3.50 per night) introduced by the Catalan government in 2012. Barcelona’s new fee – which applies to both tourist stays and cruise guests – is set to rise from 2.75 euros to 3.25 euros on April 1 next year, said Jordi Valls, deputy mayor of the city council for tourism. This year’s bid is expected to generate €52 million, money that will go towards spending on public spaces and environmental protection, as well as enforcing laws regulating tourist rentals, among other things.
The same is true of the Croatian city of Dubrovnik — which had the highest tourist-to-resident ratio of any European city, according to a 2019 index. Dubrovnik has long levied an accommodation tax, which now stands at €2.65 per person per night from April to September, dropping to €1.86 the rest of the year. But in 2019, the government announced a tax on cruise ships as well, after the city’s mayor, Mato Frankovic, described a “very hectic situation.”
“Many of our residents were wondering, ‘What are we getting from these cruise lines?’ “You don’t pay anything to the city of Dubrovnik,” Frankovic said, adding that the cruise tax, which came into effect in 2021, is expected to bring in €750,000 this year, funds that will be spent on improving roads in the city. The mayor called the cruise tax “a win-win situation.”
“The cruise lines and the cruise guests know where the money they pay is actually invested,” said Frankovic, “and the citizens of Dubrovnik clearly see the benefit of the cruise business.”
Sharing the cost of running a city
In Amsterdam, where the tourist tax is expected to raise €185 million this year, these benefits are perhaps even more evident. The city collects two taxes: an occupancy tax, which has been in effect since 1973, and a cruise tax, which was introduced in 2019. (The city council recently adopted a proposal to ban cruise ships from Amsterdam ports. The measure is not expected to come into effect until next year at the earliest.)
Funds raised from both taxes would be used to improve public spaces in parts of the city that attract few tourists, Ms Van Buren said. In this way, she added, the tax ensures that people across Amsterdam can enjoy the fruits of tourism.
The Amsterdam accommodation tax is now 7 percent of the accommodation cost for hotel stays plus a flat fee of €3 per person per night. (Guests in short-term apartment rentals, which the city tightly regulates, pay a 10 percent nightly tax.) The City Council will meet in October to decide whether and by how much to increase the tax, which it has most recently was raised in 2018.
Ms Van Buren believes there is support for an increase. She pointed out that last year Amsterdammers paid 172 million euros for garbage collection and street cleaning alone, including in areas popular with tourists. It’s only fair, she said, to ask visitors to contribute to the costs of keeping the city functioning.
She described the city’s tourism taxes as part of a package of measures to limit tourism growth in Amsterdam, which had stopped marketing itself as a tourist destination several years before the pandemic. However, Ms Van Buren acknowledged that the lodging tax appears to have had only a minor dampening effect on visitor interest, a conclusion supported by Mr Hansen’s 2020 report.
That doesn’t mean taxes don’t help shape tourism in the city. The €3 per night surcharge is intended to ensure that the measure is noticed by Amsterdam’s budget hotels and the low-budget tourists who frequent them, said Ms Van Buren, adding that such visitors, who often attend bachelorette parties etc. come with “a lot of problems” for example.
In this respect, the measure appears to be having the desired effect. Henriette Zwart, the owner of Hotel Koffiehuis Voyagers, a budget accommodation option in Amsterdam’s historic center, said the tourist tax forced her to make a renovation so she could charge enough to cover her running costs. She used to charge 100 euros a night for a room that could sleep three or four people, but when her hotel reopens after renovations in October, she will charge 200 euros for a room that only sleeps two people.
“We look at the prices in this area and everyone has such high prices,” said Ms. Zwart.
“They don’t want cheap tourists. They want upper-class tourists, which is quite discriminatory,” she said of the city guides. “When you have a low cost per person and a high tourist tax, it’s almost not even motivating to run a business like this.”
More taxes are coming
Other major European tourist destinations, including Edinburgh, are considering new visitor fees.
That year, Manchester became the first UK city to introduce a visitor’s charge, when local hotel owners began collectively charging an additional fee of £1 (approx. US$1.27) per person per night. British cities don’t have the power to introduce the kind of taxes that Amsterdam and Barcelona have introduced, said Bev Craig, the leader of Manchester City Council. So the companies introduced the tax themselves, with the support of the local government.
The resulting funds will be used to clean up the streets, run targeted tourism campaigns and prepare bids for major events that will attract even more tourists to Manchester, Ms Craig said, adding that tourism has become a major employer.
“We’re thinking about the role of tourism in our city – be it for football, culture or history – and we really want to develop that,” said Ms. Craig.
Things are different in St. Ives, a quaint English seaside town that has been attracting tourists for more than a century. But the growing influx of visitors has begun to strain the city’s services and the patience of its residents, said Johnnie Wells, the mayor. Mr Wells noted that St Ives spends almost a fifth of its annual budget – around £200,000 – just on cleaning the city’s eight public toilets, which are used far more frequently by visitors than locals.
Faced with the same fiscal constraints as Manchester, local council have decided to charge visitors 40p to use the toilets. Local officials are also considering a ‘community fee’, similar to the visitor fee levied in Manchester.
Mr Wells stressed that tourism is a big part of the economy of Cornwall, the south-west English county that’s home to St Ives and dozens of other popular coastal communities. The area used to depend on mining and fishing, but as these industries declined, tourism has become an increasingly important source of employment and income.
“People are always complaining about the holiday industry, but that’s what we Cornishers do,” Wells said, adding that residents’ frustration with tourists “is becoming an issue”. But he believes a visitor fee, if enforceable, would be a positive step.
“If locals feel their city is improving with the influx of tourists, that will help bridge that gap and create a slightly better feeling between the two,” he said.
Paige McClanahan is a regular contributor to Travel and is writing a book on the tourism industry.
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