Councillors will decide next week whether to put proposals for a tourist tax scheme to a public consultation.
Otherwise known as a visitor levy, should it happen, it would see the Highlands follow large numbers of other destinations across Europe that charge additional tax per night.
What is the scheme?
It is a Highland-wide scheme, with no local exemptions, and a levy rate of five per cent on the accommodation only element of a charge. Other charges, including catering and parking, are not subject to a levy.
It is estimated such a scheme could generate £10 million net revenue income.
Highland Council says this forecast income is based on VisitScotland’s occupancy and price data, and data relating to accommodation providers subject to non-domestic rates.
However the local authority has conceded: “It is acknowledged in the guidance that at the initial outset, the quality of information and business intelligence available to local authorities for forecasting purposes may be of variable quality, with many assumptions in the data, as well as external variables such as fluctuations in occupancy rates, dynamic pricing and unforeseen events.”
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How does it work?
It is intended that the outline scheme will be published for a formal 12-week consultation starting on November 15 and closing on February 7.
Should it go ahead, the levy will be charged as a percentage of the room rate, therefore a family rate will include children.
However, families and those on school trips staying overnight may be impacted, as larger room costs are generally higher price – so it all depends on the accommodation you choose.
A family of four choosing low-cost accommodation (such as a caravan site) could pay less than £10 on their long weekend, whilst a couple visiting a high-end hotel at peak season for a long weekend could pay around £23 visitor levy for their stay.
Accommodation providers will be responsible for collecting levies from visitors.
How big is the tourism sector?
Data shows a clear upward trend in visitor numbers to Highland over the past 10 years. In 2022, visitor numbers had almost bounced back to pre-pandemic numbers (6.832 million visitors) and in 2023 visitor numbers had reached 8.4 million, surpassing all previous years.
Pre-pandemic in 2019, the economic impact was £1.78 billion in Highland. By 2022, and when taking account of price inflation, the economic impact was assessed at £1.847 billion. In 2023 it had increased further to £2.078 billion.
In 2012, data shows that tourism supported a total of 19,895 FTEs in Highland and by 2023 it had risen to 26,411 FTEs.
Through other data sources, including recent engagement with businesses and business groups, there are some concerns that these positive headline figures disguise the financial fragility of many within the accommodation sector in Highland. The sector reports that, whilst visitor numbers (business and leisure) have increased and visitors are spending more, profitability has not returned and remains low due to factors including higher operating costs, staffing challenges and a rising minimum wage.
Some businesses have reported essentially making no profit post-pandemic, says the council.
The Highland Hotels Association (HHA) state: “Accommodation providers are deeply concerned about the economic impact of increased pricing in an already highly inflationary market.”
In 2024, there have been reports from some Highland businesses that occupancy rates have not matched that in 2023. HHA stated: “Inverness experienced three consecutive months of declining occupancy, with a significant drop of up to 14 per cent in August – their peak trading quarter. For example, Kingsmills Hotel reported a 21 per cent increase in sales from 2019 to 2023, yet profits decreased by six per cent. Inverness is the only major city in Scotland where occupancy is decreasing year-on-year, as per STR Scottish city stats [industry data organisation] (August 2024). Despite highly publicised ‘freak’ room prices often quoted in local media, the annual achieved room rate in Inverness for 2023 remains just above £100.”
Other information sources point towards a more buoyant position. Colliers ‘UK Hotels Market Index 2024’ market tracking index that analyses 10 key performance indicators of 35 cities in the UK found the Inverness hotel market to be one of the most buoyant. It identified Inverness as a ‘Rising Star’ and had climbed to third place, “fuelled by Scottish destinations’ appeal, solid performance metrics, and favourable construction costs”.
The council says the latter finding is reflective of recent announcements that two new large hotel developments in Inverness city centre will go ahead – a 72-bed hotel in Church Street by Patio Hotels and a 210-bed hotel in Academy Street by Hampton by Hilton.
When would it start?
Should councillors approve the recommendation to undertake a statutory consultation, it is anticipated that a report will be considered at a meeting of the Highland Council in spring 2025. The commencement of a visitor levy scheme must be at least 18 months from the date a local authority formally decides to proceed to introduce a visitor levy in their area.
The 18-month statutory standstill period is intended to enable accommodation providers and the local authority to make arrangements for the implementation and delivery of the visitor levy scheme. Should councillors agree to implement a visitor levy scheme in spring 2025, the earliest such a scheme could be implemented in Highland is autumn 2026 (around September 2026).
Are there any exemptions?
The council says to ensure the administration of the scheme is kept to a minimum, and to maximise the revenues generated to sustain, support and develop the visitor economy, the council is not proposing to exercise its discretion to apply local exemptions.
But a visitor levy cannot be charged for accommodation on local authority gypsy and traveller sites, and registered social landlord gypsy and traveller sites. It also cannot be charged for accommodation in a vehicle, or on board a vessel that is undertaking a journey involving one or more overnight stops.
There is also an exemption for those receiving specific disability benefits. In the proposed outline scheme, the national and legislative disability exemption will be administered on a reimbursement arrangement. Once levies have been paid by visitors, the council will have arrangements in place to enable eligible visitors to claim their exemptions and to be reimbursed by the council. “This approach is important to protect the relationship between accommodation providers and their guests, and to ensure the dignity of visitors who are entitled to an exemption,” states the local authority. “The Highland Council has the experience of verifying and awarding exemptions and a key design principle for the levy is to ensure the administrative burden for accommodation providers is kept to a minimum.”
Other exemptions are being homeless or at risk of homelessness; very poor housing conditions (such as overcrowding, serious damp or disrepair); experiencing domestic abuse or other forms of violence; someone’s residence being unfit for habitation; and someone being an asylum seeker or refugee.
The council concedes people visiting those in prison or attending court proceedings may be negatively affected “as families affected by imprisonment often face financial stresses”. But it points out funding is available in Scotland for those visiting people in prison, which means that those with the most need will not be negatively affected by the implementation of a visitor levy.
The Visitor Levy (Scotland) Act makes no provisions for the levy to apply to those who choose to stay overnight in informal sites rather than staying on a campsite or motorhome parks.
But what if I’m here for medical purposes?
Some groups – older persons, those receiving gender-affirming treatment, pregnancy and maternity, disabilities – are arguably more likely to receive medical treatments and require the use of overnight accommodation, says the council, adding: “These groups may be negatively impacted by additional charges for accommodation.”
It adds: “Most of the patients travelling for medical treatment can apply to their NHS board for support in relation to travel and accommodation. NHS policy states that patients can claim expenses from their local NHS board. The Scottish Government’s Young Patients Family Fund is available for patients aged under 18 years. It states: ‘If you’re the parent, primary carer or sibling (aged under 18) of a young inpatient under the age of 18 receiving hospital care, you can claim for the costs of travel and food…You also need to send evidence with your claim form. For example, receipts or bank statements for all public transport, parking and accommodation.’”
What are the positives?
According to the council, a major factor in favour of the levy is the positive benefits visitors will gain from sustaining, supporting and developing infrastructure and public services which they use and enjoy when visiting the region.
“Sustaining and developing the condition of infrastructure and services and protection of the environment, will result in an improved experience for visitors, continued word-of-mouth recommendations to visit Highland and to encourage visitors to return,” it states.
It also points to other places with the charge, which clearly communicate to visitors that the visitor levy collected in their area has led to the delivery of specific projects such as a refurbished public toilet, a new footpath, road maintenance and other infrastructure.
Any concerns?
The two main potential impacts on businesses which relate to the proposed outline visitor levy scheme are the impact of a levy on levels of visitor demand for paid accommodation and the impact on the operational costs of those businesses collecting and remitting the levy.
The council accepts there is evidence which indicates that the proposed scheme will have some negative impacts on businesses from additional costs and administrative work, but it says: “These are likely to be relatively minor when taking account of the wider legal and tax requirements a business must already undertake.”
It also states: “Through our engagement with businesses and from other sources, concerns have been raised as to a potential negative impact a visitor levy scheme could have on occupancy rates in Highland.”
What happens if it isn’t introduced?
Engagement with some community groups shows that the experience within some communities across Highland is that of ‘overtourism’ and that the negative impacts outweigh the positives, says the council report, adding: “Common issues raised include antisocial and irresponsible behaviour, infrastructure and services being unable to cope with visitor numbers, traffic congestion, environmental degradation and increased litter and waste management concerns. With increasing pressure on public finances, including those of the council, there is a high likelihood that were a levy not introduced that it would lead to greater challenges in maintaining the quality and provision of public amenities and infrastructure. This would be detrimental for communities and for visitors’ experiences.
“Unlocking new income streams to help address these pressures is therefore essential.”
Hang on, there was a consultation in 2019 – what happened to that?
This report follows an agreement by council in December 2019 to the principle of introducing a visitor levy in the Highlands based on an extensive consultation undertaken which resulted in a total of 6600 responses from residents, businesses and visitors to the Highlands.
Key design principles approved by the council at that time were: the levy should be able to be applied in ways other than just a ‘bed tax’ on those staying in paid overnight accommodation; Highland residents should be exempted from paying a Highland visitor levy; revenue should be ring-fenced to ‘tourism uses’, with continued work to determine what constitutes ‘tourism uses’ and how these are defined for the Highlands; options be explored for how some of the levy revenue might be ring-fenced for use in the area of the Highlands in which it is raised.
It is unclear whether these aspects will be revisited.
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