Scots tourism chiefs 'very sceptical about visitor levies'
City of Edinburgh Council leader Jane Meagher has previously declared the levy, capped at five nights in a row, will provide a 'once in a lifetime opportunity to invest tens of millions of pounds towards enhancing and sustaining the things that make our city such a great place to visit – and live in – all year round'.
Businesses will be required to apply the levy to any advance bookings made from October 1, 2025, for stays on or after July 24, 2026.
While council chiefs agreed to push the start date back by three months to give businesses more time to prepare, the prospect of visitors being taxed on overnight stays, and hotels being handed the responsibility of collecting the tax, is continuing to rankle within the tourism and hospitality industry.
Industry chiefs wrote to Minister for Public Finance Ivan McKee last week warning that legislation allowing councils in Scotland to introduce tourist taxes will 'fail at the first hurdle' and harm Scotland's economy and businesses. The letter, spearheaded by the Scottish Tourism Alliance, urged the Scottish Government to change the Visitor Levy (Scotland) Act to remove from businesses the burden of collecting the tax by introducing a QR code system paid directly to local authorities.
'We share the Scottish Government's ambitions to build a stronger economy and to make Scotland a world-leading visitor destination but are frustrated and very concerned that the visitor levy in its current form risks undermining that success,' the letter states.
'Taking a different approach to the rest of the UK on this policy is putting the sector at a competitive disadvantage and causing considerable complexity and unnecessary cost to businesses. Unfortunately, it is another example of a well-intentioned policy being badly implement.'
Preparations for the levy are being made as hotels, bars, restaurants, and visitor attractions are continuing to battle a cost of doing business crisis which was recently exacerbated by sharp increases in employer national insurance contributions and national living wage that came into in April.
Domestic tourism in Scotland has also failed to recover from the pandemic as strongly as the overseas market, as UK consumers continue to feel the pressure of the cost of living crisis.
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Leon Thompson, director of UK Hospitality Scotland, told The Herald that the industry is concerned the levy will undermine the competitiveness of Scottish tourism on the world stage, and highlighted the burden it will place on businesses at a time when they are grappling with high costs.
'Our position has always been that we are very sceptical about visitor levies, not just in Edinburgh but generally,' he said. 'The reason for that is just around costs [and] price competitiveness. It is possible for destinations to price themselves out of the market. We are very keen we don't see that happening anywhere in Scotland.
'The levy also comes with some costs for our businesses as well. They will have to collect the money on behalf of the council so therefore I think it is really imperative there is some financial benefit coming to businesses. The most obvious way to do that is to ensure that there is a steady flow of visitors coming to the city so that there are opportunities to increase revenue right across hospitality but particularly for the accommodation businesses that are going to need to collect the money.'
Marc Crothall, chief executive of the Scottish Tourism Alliance, raised concern over the cost of the levy due to be introduced in Edinburgh, and shares Mr Thompson's concerns about the responsibility to administer the scheme being delegated to businesses.
He told The Herald: 'Whilst there is a recognition that there is a need for more monies to be invested in the tourism and visitor experience and a transient visitor levy is a means to raising such monies, it is all about striking the right balance – both in the timing of the introduction of a levy, the amount that would be charged to the person staying overnight, and fully assessing the economic and competitiveness risk before introducing it.
'The 5% levy charge being applied on top of the accommodation rate is being mooted by many as too much, [as] most had expected a levy fee to be circa £3-£4pp [per person]. Nor is the percentage methodology approach acknowledged as being simple and easy for business and the visitor to work with, as well as it being costly to administrate.
'It is the firm view of many in the sector and among some local authorities that a much better approach to the charging and collection of a levy would be to apply a flat rate per person and for the levy to be paid via a digital-first approach, using QR code technology. In adopting this approach, the visitor pays straight to the authority, which takes away the cost, time burden and VAT (valued added tax) implications for the accommodation business, and benefiting the authority, who gets the money into their account quicker to spend.
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'Most importantly, when levies are raised, they should only be used for investing in projects that directly enhance the visitor experience. Currently there remains concern [held] by many about where monies will be spent, the cost of administration and that the levy will be too much on top of already high costs, especially for Scottish and domestic visitors but not excluding international tourists, who may well go elsewhere or have a reduced stay.
'We also continue to be concerned that without more weight being given to the visitor levy forums, set up to advise on how the monies raised will be invested in enhancing the visitor experience and made up of representatives from both the sector and communications, then there is a risk that Edinburgh councillors could spend the revenue on local vote winners rather than on how the legislation intends.'
Neil Ellis, group operations director Places Hotels in the capital and chair of Edinburgh Hotels Association, agreed that it is vital any revenue raised by the tax is used to enhance the visitor experience in the city. 'Business, leisure and event visitors are all contributing significant sums over the next few years so Edinburgh must communicate its intentions as loudly as possible,' he told The Herald.
'The majority of visitors to a destination don't mind paying as long as they know and can see where their money is being spent. I'm confident the new Visitor Levy Forum will succeed in ensuring a balanced approach is taken when reviewing and proposing levy projects.'
Mr Ellis, who runs the Place Hotel on York Place, highlighted business rates and the recent rise in employer taxation were among other challenges currently facing the industry, noting that business rates are higher in Scotland than England, where relief is in place for hospitality firms.
Michael Golding, chief executive of the Association of Scottish Visitor Attractions, said a recent survey of businesses had underlined the depth of concern about financial pressures in the sector. Some 78% of Scottish attractions said they were being affected by financial challenges, including the rising cost of energy, staff and reduced funding for the public sector and charities that make up a large portion of the sector. Just over half (51%) of attractions highlighted challenges around transport as a barrier to progress, following by staffing (35%), and seasonality (20%).
Mr Golding said: 'There is widespread recognition across Scotland that investment is needed in our infrastructure as well as to fund the ambition of our national tourism strategy to be world leaders in 21st century tourism. However, we are in a post-pandemic economy, with high cost pressures, a lack of funding, staffing issues, seasonality, transport and more.
'Focussing on the combination of the cost of business, and the ability of our visitors to spend, making Scotland more expensive does create a risk that less people visit, or that they stay less long, and most importantly for attractions that visitors ability to spend on activities is reduced. So, we must seek to balance our need for investment, while mitigating the risks, that should be underpinned by a well evidenced economic impact study to show that the benefits.'
One other ongoing challenging facing tourism and hospitality operators in the city concerns is access to labour supply. Mr Thompson hopes that the UK and EU reach agreement on a youth mobility scheme which would allow young people from countries within the bloc to sample life and experience work in Scotland.
The UK and EU recently agreed to work towards agreement on a youth experience scheme that would make it easier young people from the bloc to work and study and vice versa.
'We still have some issues around workforce supply, so it is quite heartening to see the UK Government is looking very favourably upon an extension to the youth mobility scheme to help ensure our businesses can access young people from the EU to come and work here,' he said.
'I think a place like Edinburgh would do very well from being able to attract that talent from across Europe. That's a positive development in that space. If it does happen, certainly Edinburgh will be well placed to take advantage.'
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