A controversial "bed tax" for Auckland hotels and motels has been passed by Auckland councillors.

The bed tax, or targeted rate, will add between $1 and $3 a night for motels and between $3 and $6 for hotels, said Mayor Phil Goff, who won backing for the proposal at a council budget meeting today by 11 votes to eight.

It has still to be confirmed by the full Governing Body following today's budget meeting at the finance and performance commitee.

"It is the price of a cup of coffee and a Big Mac," said right-leaning councillor Desley Simpson, a supporter of Goff in a long battle with the hotel and accommodation sector who have campaigned against the proposal.

"No one gets off the plane from Singapore to check into the Manurewa Village," said Daniel Newman, a councillor opposed to the targeted rate.

He said the village, which provides emergency accommodation for the poor and homeless, would pay $2780 for the targeted rate on top of current rates of $8500 to fund things like the Adele and Justin Bieber concerts.

In order to appease industry and political concerns, Goff watered down the targeted rate in May by excluding backpackers, camping grounds and areas on the fringe of the city.

The rate is now expected to raise $13.5m, rather than the original $27m to fund spending by Auckland Tourism, Events and Economic Development (Ateed) to attract visitors and events and free up investment for transport.

Councillors have also asked staff to look at how hotel operators can have a say in Ateed's spending on tourism and events.

"Why should the general ratepayers be landed with the bill for which the hotel industry makes hundreds of extra dollars per room per night during the events we organise on their behalf.

"Why is it always dumped on the ratepayer and hasn't the ratepayer got the right to share that burden with the direct beneficiaries," Goff said.

Several councillors raised concerns about the legality of the targeted rate, but Goff was confident with the council's legal advice and the ability of accommodation providers to pass it on by way of a levy on visitors.

Councillor Greg Sayers said the "bed tax" was in fact a property tax that was fundamentally flawed and faced a potentially costly legal challenge.

"Using a targeted rate is a very blunt and inappropriate financial instrument for the council to be using," Sayers said.

Today's budget meeting started with councillor Dick Quax being called out by Deputy Mayor Bill Cashmore over an allegation he was in communication with a lobbyist for the hotel industry at a confidential run-through on the budget yesterday.

Cashmore said the councillor should consider his actions in terms of a real or perceived conflict of interest.

Quax said he may have made an error of judgment but having received advice from council's legal team he was clear that no conflict of interest exists and would participate and vote on the bed tax issue.

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Tourism Industry Aotearoa and Hospitality New Zealand said they were disappointed because most of the councillors recognised the unfairness of the proposal but a majority still decided to vote for the measure.

TIA chief executive Chris Roberts said the targeted rate proposal was based on bad information and a poor understanding of how the visitor economy works.

"There is an alternative approach to the targeted rate. The commercial accommodation sector has repeatedly offered to work with the council to find a fair and sustainable way to make an appropriate contribution to the city's visitor and event promotion activities. That offer still stands," Roberts said.

HNZ chief executive Vicki Lee said the targeted rate would have a devastating impact on Auckland's commercial accommodation sector and the wider tourism industry.

"An unbudgeted cost increase of this magnitude would create serious challenges for any business, and Auckland's motels and hotels are no exception," Lee said.

The groups would work with their affected members to decide on their next steps.