Michael Barnett: Bed tax proposal off-target and unfair

Rate rise would be negative for whole city.

•Michael Barnett is chief executive of the Auckland Chamber of Commerce.

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.

If fleecing Auckland's accommodation sector is the outcome the mayor and council are seeking from their proposal to redirect the current $27.8m on visitor attraction and major events funded by general rates, they couldn't be more misguided.

Yes, it has been presented as a targeted rate - a rate increase that will add $27.8m in operating costs to about 300 Auckland accommodation providers - hotels, motels, serviced apartments, camping grounds, backpackers, B&Bs and homestays.

But council then have the audacity to suggest to the sector that if they want to recover this cost they can increase room charges and then call it a visitor levy.

It isn't a visitor levy; councils don't have the power to impose one. It is a targeted rate, and a poorly targeted and misguided one at that.

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.

The narrow focus of the proposed new rate fails to fulfil council's stated goal of getting a direct contribution from visitors to Auckland. It ignores the hundreds of thousands of visitors who stay with friends and family, or rent private holiday homes, or use unregistered shared accommodation services. It ignores the fact that the benefits of tourism spread across all sectors of the community.

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.

Further, I am reliably informed developers are already reviewing their plans. If it goes ahead, this rate will be a major deterrent to much needed new hotel development in Auckland. It is in direct contrast to the Government and Ateed's push to encourage new hotel and tourism development in the city.

As any good business does when faced with increased costs that they cannot control, providers will be forced to do what council has not and look at reducing staff and trimming their business costs in other ways.

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.

There is no evidence that internal costs have been reviewed to meet the Mayor's rate-rise cap of 2.5 per cent.

Mr Mayor, that's the place to start. Auckland business is willing to work with you and council to seek a mutual solution. Tourism is too huge a success story for Auckland which council and all its supporters should be supporting 100 per cent.

- NZ Herald

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