“Benefit principle” must be applied to tourism and infrastructure funding

5 Jul 2019

Following the release on Thursday 4 July by the Productivity Commission of the “Local government funding and financing” draft report, Hospitality New Zealand continues to advocate that a visitor levy applied solely to the commercial accommodation sector is not a fair, equitable or sustainable solution to local funding.

Hospitality New Zealand supports the “benefit principle” laid out in the Productivity Commission draft report (“services should be funded by those who benefit from them”). In accordance with this principle, Hospitality New Zealand continues to argue that a visitor levy, which is applied solely to the commercial accommodation sector unfairly places the burden and risk on to one sector, which only benefits from a very small percentage of total average visitor spend, with the rest going to activities, retail and a number of other businesses where tourists spend their money - including but by no means limited to airlines, taxi services, petrol stations and supermarkets.

From the data provided in the draft report itself, it is clear that the commercial accommodation sector only receives a very small proportion of average total visitor spend:

“A strong tourism industry supports a range of businesses – accommodation providers, tourism providers, as well as restaurants and retail. In the year ending March 2018, for example, domestic and international tourists in New Zealand collectively spent almost $39.1 billion (including GST) on products including retail sales ($12 billion), food and beverage services ($4 billion), and accommodation services ($3 billion) (Stats NZ, 2018e).” Page 79.

The figures from Stats NZ quoted in the draft report suggest that accommodation services are receiving on average less than ten percent of total visitor spend (7.7 percent), far below the significant share of over 30 percent received by retail services.

• The draft report’s recommendation of a visitor levy conflicts with its own recommendation of a fair and equitable “benefit principle” in relation to who pays for funding.

• The draft report does not address the issue of different councils continuing to implement differing, ad-hoc approaches to sustainable tourism funding, and also does not advise on or specify the parameters that councils would have to work to in future to justify applying a visitor levy.

• The draft report acknowledges that the infrastructure that needs funding is ‘mixed-use’, meaning it benefits locals, as well as tourists.

• The draft report acknowledges that an accommodation levy does not capture day visitors who use infrastructure in one region, but do not stay there.

• The draft report does not address how a visitor levy would capture freedom campers, or those who stay with family and friends.

• The draft report acknowledges through the data provided that commercial accommodation receives a small proportion of visitor spend.

Commenting on the report, Hospitality New Zealand CEO Vicki Lee said: “Hospitality New Zealand recognises the need to find a fair and sustainable way to fund infrastructure across New Zealand, and with the aim of ensuring that everyone across New Zealand benefits from the positive impact sustainable tourism growth can bring to local infrastructure, employment and culture. However, we are disappointed by the report’s fall-back on a visitor levy recommendation that targets only the commercial accommodation sector. We maintain, as we have advocated previously, that those who benefit from tourism must contribute, and as such, a levy targeted to those receiving less than ten percent of tourism spend is in conflict with the “benefit principle” recommended in the draft report.”

Lee added: “As highlighted in the draft report itself, visitors are already contributing to the local funding pot by paying for goods and services at rate paying businesses. Hospitality New Zealand would like to see central government take responsibility for ensuring that funds generated by the regions through tourism, and needed by the regions for infrastructure, go back into the regions. As such, we would like to see a sustainable and centralised plan put in place by central government for how the upcoming International Visitor Levy will be ring-fenced for supporting the regions that have been responsible for making New Zealand a world-class destination, and for making tourism an industry that is responsible for employing one in eight people in New Zealand.”

While Hospitality New Zealand recognises the need to generate a sustainable infrastructure funding model for the regions, we strongly reject the recommendation of a visitor levy as a solution. We support and welcome the recommendation in the draft report for all councils to maintain a database of accommodation providers, including peer to peer providers.

Hospitality New Zealand recommends that funding from the International Visitor Levy must be ring-fenced, and fairly distributed to support the regions in New Zealand that are responsible for creating the greatest pull for international visitors. We support increased user-pays for tourist attractions and facilities, such as toilets and museums.

Read the full Productivity Commission “Local government funding and financing” draft report

Read "Local government funding & financing at a glance" summary of the draft report

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