A tourism tax in places like York could do damage to the economy - Ravi Majithia
Tourism in York is the engine of the local economy. The city’s heritage, culture and hospitality sector draw millions of visitors annually, bringing in £2bn a year and supporting nearly 17,000 jobs. Around 62p of every £1 spent in the city centre comes from visitors, not residents, supporting not just hotels but a wider ecosystem of restaurants, pubs, shops and local attractions.
But in recent years, the pressures facing hospitality businesses have escalated sharply. UK Hospitality reports £3.4bn in additional costs will hit the sector this year. At the same time, hotel guests are more price-sensitive, so operators must absorb more cost to remain competitive.
It is in this context that proposals for a new overnight visitor levy, or ‘holiday tax’, are being considered by the Government. On paper, it may seem like a modest measure. In reality, for cities like York, it risks becoming a breaking point.
Businesses across the sector are already grappling with a mounting financial burden. Over the next three years, our overall business rates bill is projected to rise by 152 per cent. Our Hampton by Hilton York Piccadilly hotel will see a 126 per cent jump over the same period, around £170,000 more in a single year. Inflation, energy costs and rising National Insurance contributions are all combining to squeeze margins.
The UK already charges 20 per cent VAT on hospitality - significantly higher than Germany's 7 per cent or the 10 per cent applied across France, Italy and Spain. That places us at a competitive disadvantage relative to much of Europe. Adding a holiday tax on top compounds a cost environment already under severe strain. Visitor numbers are stagnant, and with rising fuel and travel prices, and global economic uncertainty, this proposed tax will almost certainly accelerate that decline.
My family's story is one of long-term commitment to Britain - and that is exactly what is being put at risk. My father arrived in the UK in the 1970s with £50 in his pocket, qualified as a Chartered Accountant and worked seven days a week, sacrificing time with his young family to build a better future, creating jobs and contributing to a country that gave him opportunity. With his home on the line, he developed the UK's first Hampton by Hilton in York during the financial crisis and opened the second during the pandemic. We now employ almost 100 people. Ours is a family's life work, invested in Britain for the long term.
Tourism spending does not operate in isolation. For a city like York that depends heavily on visitors, the implications of a holiday tax extend far beyond hotels. Jobs, supply chains and the vitality of the high street are all intrinsically linked to visitor spending. Introducing a levy on overnight stays, without addressing the wider cost pressures facing the sector, risks placing further strain on a part of the economy that is still recovering from the impact of the pandemic.
While a holiday tax may deliver a short-term benefit, the longer-term consequences could be significantly damaging. Analysis by Oxford Economics suggests a 5 per cent tourist levy on accommodation could, by 2030, wipe £2.2bn from the UK’s GDP, reduce tourism spending by £1.8bn, and result in 33,000 job losses, alongside millions of fewer nights spent in UK accommodation.
Introducing a holiday tax without reforming business rates, VAT and labour costs and you will squeeze out family operators.
Ravi Majithia, Avantis Hotels, owner of Hampton by Hilton York and Hampton by Hilton York Piccadilly.