Tourist taxes: Pros and cons for destinations and visitors

More and more destinations around the world are beginning to introduce tourist taxes.

Since 2023, visitors to Manchester have been charged an additional levy for each night of their stay – at a rate of £1 a night for each hotel room. The first UK city to introduce a tourist tax, according to a BBC report, during its first year in operation, Manchester’s City Visitor Charge raised £2.8 million.

As a result, Wales is among other UK destinations now also considering introducing a similar tax.

More recently, in April 2024, Venice launched an experiment to tax day trippers €5 to visit the centuries-old city during the busiest tourist season.

Such taxes are intended to raise funds to help mitigate the potentially negative effects of tourism, and, in some cases, limit excessive visitor numbers.

With more than 60 destinations around the world already charging some type of tourist tax, read on to learn more about why so many places are keen to tax their visitors and understand the benefits and potential drawbacks this can have for destinations and tourists.

Advantages of levying a tourist tax for destinations

Could help cover some of the costs of the ill-effects of tourism

Tourist taxes are usually relatively small fees charged to overnight visitors through accommodation providers or holiday companies. The funds raised are typically used to counter some of the ill-effects caused by high volumes of tourism.

While tourism generates profits from places, people, and the environment, where tourist numbers are excessive, it can take its toll and start to become unsustainable – both environmentally and in terms of the sometimes negative impact it can have on those living in popular tourist locations.

Can help ease overtourism

Increasing the cost to visit certain areas by charging tourists a little extra through tax can help reduce overcrowding and make the experience more enjoyable for visitors.

As such, applied sensibly, tourist taxes can help popular areas avoid the problem of “overtourism”, which can leave locals or visitors overwhelmed by too many tourists, and could prove detrimental to quality of life.

Supports investment

A tourist tax can generate additional cash for local government and/or the tourism industry. The extra funds generated can then be put towards improving or adding new infrastructure and services that benefit tourists and residents alike.

Popular Cotswold village, Bourton-on-the-Water, introduced an additional 50p to the parking charge, in 2021. In the first year of the parking increase, the BBC reported that the simple initiative raised £62,000 for the community. The extra money helped to fund a new village warden, larger waste bins, and new bollards to help prevent illegal parking.

Likewise, in the sunnier climes of the Balearics, revenue raised from tourist taxes tend to fund projects that mitigate the negative effects of tourism on the environment, culture and society of the islands. With money spent on improving waste management, conserving natural habitats, and historical monuments, and supporting social housing.

Potential drawbacks of applying tourist taxes

Some people believe that adding to the cost of a holiday could create problems, especially during the cost of living crisis.

There have also been claims that tourist taxes are elitist – especially when discussed in relation to reducing the numbers of tourists.

While wealthier individuals may be less affected by tourist taxes, it remains true that local people should be able to enjoy their homes, not to mention the potential preservation of the environment that could be affected by too many visitors to a particular location.

One obvious flipside of this is that by increasing the cost of visiting a particularly popular spot, a tourist tax could unhelpfully discourage some tourists from choosing destinations that actually want to attract more visitors.

The single biggest problem with tourist taxes today is their lack of transparency. With taxes charged in a variety of different ways, it’s not always easy to understand where you may end up paying additional charges.

Plus, some doubt that the extra money raised will be spent well and fear that it could simply be used to boost local government budgets.

Don’t let tourist taxes put you off travel

Tourist taxes are fast becoming a typical part of travel, no matter where in the world you go.

The good news is that, whether you’re holidaying or day-tripping, in the main, these fees appear to help improve your overall experience.

The taxes charged are typically pretty low in relation to the rest of your budget, so shouldn’t hamper your plans. However, in some destinations you may find that a daily rate could quickly mount up, so it’s wise to know exactly how much you’ll be charged, and how.

To avoid any nasty surprises, always research the fees at the destination you plan to visit before you arrive and make sure you factor the extra cost into your budget.

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