Aviation, tourism and energy writer for the Business Herald

Hotels go into battle with Auckland's mayor Phil Goff over new rate to pay for promoting the city

Hotels such as the Pullman face a rates hike under plans by Auckland City to raise funds for tourism promotion.
Hotels such as the Pullman face a rates hike under plans by Auckland City to raise funds for tourism promotion.

Auckland hotel and motel owners are on a collision course with the city's mayor Phil Goff over a targeted rate they say will cost hundreds of thousands of dollars a year.

But Goff says the accommodation providers have never had it so go good and they should pay for tourism promotion. His council would use the money it now spends on promotion to pay for infrastructure and spare residents more in rate rises.

The new rate could raise close to $28 million and ispart of the city's annual budget which is due to be signed off around the middle of the year.

Visitor sector group Tourism Industry Aotearoa has blasted the rate plans as "appalling."

The organisation's head, Chris Roberts, said some commercial accommodation operators would be "whacked" with rates increases of 250 per cent or more.

He said the total sum involved, $27.8m a year, amounted to 90c a week each for Auckland ratepayers.

"Shifted entirely to a few hundred commercial accommodation properties, it's an average rates increase for them of 150 per cent, with some property owners facing increases of more than 250 per cent."

Auckland's Pullman Hotel has said its annual rates bill could double to almost $1.6m if the council adopts the new targeted rate.

While he accepted the sector was benefiting from a tourism boom, this would not last forever and smaller accommodation operations were most vulnerable.

"It's going to threaten the viability of the accommodation sector and moving to a situation where residents are not paying at all for promoting visitor attractions," he said.

We will be asking councillors to see sense and vote down this crazy and damaging proposal.
Chris Roberts

TIA, Hospitality New Zealand and other stakeholders would be making "strong" submissions will be made to Auckland Council.

"We will be asking councillors to see sense and vote down this crazy and damaging proposal."

Funding Auckland Tourism, Events and Economic Development's promotion activities would instead move to the accommodation sector which earns a fraction of the city's tourism revenue," said Roberts.

"In fact, of the $7.51 billion total visitor spend in Auckland in 2016, just under 10 per cent or $723m was spent on commercial accommodation. The balance goes to a wide range of sectors."

But Goff said his council was trying to broaden its revenue base. Local authorities can't impose taxes or levies but can rate property owners.

Goff said accommodation providers could pass the rates on and collect the money from guests. A working group with the industry has been set up to figure out how they could apply the charge.

"Tourists are going to worry less about whether they have to pay $6 or $10 a night by way of a targeted rate rather than being gridlocked in Auckland trying to get to their hotel and for an hour or an hour and a half," said Goff.

"What we're saying to the visitor industry is that we've got to broaden our revenue base - there's limited opportunities for a local authority to raise revenue - at the moment we put everything on the ratepayer."

The money the city wouldn't have to spend on Ateed would be diverted to spend on infrastructure, particularly transport which benefited tourists as well as residents.

Goff said the targeted rate would spare householders up to 2 per cent a year in rate rises.

Figures supplied by the council for a sample of unnamed smaller providers supplied show that rates will double and the targeted rate making up between 4 per cent and 7 per cent of estimated revenue.

Roberts said the planned rate would thwart hotel development at a time when both the Government and the council had identified the need for new hotels in Auckland to keep pace with strong visitor growth.

An estimated 4300 more hotel rooms are needed in Auckland by 2025 but with this rate potentially adding millions of dollars in bottom-line costs, developers are understandably reconsidering their planned investments.

"Hotel investors can spend their money anywhere in the world - it is quite possible that Auckland will miss out on hundreds of millions of dollars of new investment if this rate increase goes ahead."

If you were looking to invest in the hotel industry it would be hard to find a better than Auckland at the moment.
Phil Goff

But Goff said there were no signs of interest in investing in Auckland hotels waning, particularly because occupancy and yields were so high.

"I've got people coming in - international investors wanting to invest in accommodation. If you were looking to invest in the hotel industry it would be hard to find a better than Auckland at the moment."

Have your say:
http://www.shapeauckland.co.nz/consultations/annual-budget-20172018/

- NZ Herald

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