Bed tax drive causing sleepless nights across sector

The news this week that local councils have given their backing to the controversial 'bed tax' has dismayed the hotel sector. The Local Government Association told the Financial Times that it acknowledged it was 'thoroughly unpopular' as a result of endorsing the proposal,which is being considered as part of the Lyons Inquiry into local government finance. The LGA emphasised that it should be up to local authorities to decide whether or not to impose the tax, creating the possibility that some hotels would be forced to compete with others in neighbouring authorities on unfair terms. The government has said that it has no plans for a bed tax, but with the LGA writing to Sir Michael Lyons asking him to recommend one, the possibility is a real one. The British Hospitality Association estimates that a 5% bed tax would reduce inbound tourism by £220m and domestic tourism by £325m. The tax on a hotel bill of £60 per night could see an increase of about £100 for a week-long stay. The tax would add an extra charge to hotel rates on top of VAT, taking the total tax on an overnight stay to almost 25%. The BHA has cited research by Nottingham University, which says that a 1% rise in price in relation to other countries leads to a 1% fall in international tourism, the BHA estimated that the tax could cut international tax revenues by £220m. The association said that the tax would be unfair, because it only hit the 40% of overnight accommodation stays that were in hotels, against the 60% of people staying in rented homes, with friends and relations, camping or in timeshare. However, it is not only hotels which are expected to suffer should the tax go ahead. Research revealed this week by Beacon, the UK's largest purchasing consortium for the independent hospitality industry, found that almost two thirds of other hospitality businesses are also expecting a knock-on effect. Of the businesses surveyed by the group, 62% of pubs, bars and restaurants predicted a negative impact on their business, with 21% of other facilities such as golf clubs, spas and leisure centres also showing concern. Ninety-three per cent of hotels anticipated a downturn in trade should such a tax be introduced. John Vinuesa, director of Beacon, said: "Our research shows that the potential bed tax is likely to have wider implications beyond hotels to many other hospitality businesses such as restaurants, bars and leisure outlets. "The hospitality industry took a downturn after September 11, 2001, and it is feared that an increase in room rates will deter tourists again as the UK is already considered expensive." InterContinental Hotels Group, Travelodge and Premier Travel Inn have all spoken out against the tax - the budget sector in particular would suffer under what would effectively be a 25% tax regime. Travelodge has estimated that 77% of its customers would be more likely to travel abroad if a tax is introduced. The scenario is a familiar one to the UK's hospitality industry. Bodies such as VisitBritain and VisitLondon work to promote the UK around the world - a role that became even more important in the wake of the 7 July terrorist attacks - while the government creates the conditions to make the country less competitive. The result of the Lyons Inquiry is due later this year and the industry will find out whether it must face yet another challenge imposed by Westminster. Coming so soon after the changes to the licensing regime and the smoking ban in Scotland, and with England's ban to come, those working in the hospitality industry must be starting to wonder whether a move into accountancy would be more profitable. Katherine Doggrell is the editor of M&C Report sister publication Hotel Report