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This idea is a non-starter

18 May 2006

Tourism is an essential part of the UK's economic health. It is key to our global reputation, and the hotel industry is core to that success. As the largest full-service hotel operator in the UK, InterContinental Hotels Group (IHG) has a keen interest in the future shape of UK tourism and, along with others, we are alarmed by recent suggestions of a so-called "bed tax". We believe it would be extraordinarily damaging of Government to introduce a tax, penalising a growing industry which provides more than two million jobs in the UK.

A bed tax would undoubtedly increase the cost of travel for both domestic and international tourists. It would lead to a fall in demand for guest accommodation, which in turn would lead to a reduction in overall tourism revenue. At a time when the UK should be positioning itself as a premier travel destination in advance of the 2012 Olympic and Paralympic games, you have to ask how the Government could introduce legislation that presents itself as a direct threat to the future health of the industry.

According to research from Nottingham University, a 1% increase in the price of hotel accommodation has an equal and opposite effect on tourism, reducing the flow of travellers by 1%. The introduction of a 5% tax on overnight accommodation would cut inbound tourism revenues by £220m per year, and domestic tourism revenues by £325m.

All this seems to be in direct contradiction to the Government's own findings in its report Tomorrow's Tourism Today, in which it outlined its aim to increase the industry's turnover from £76b to £100b by 2010.

The proposal is also flawed from a practical standpoint. Each local council would decide whether to impose the tax, creating complex boundary anomalies, and the prohibitive cost and complexity of collecting such a tax would be a costly burden to say the least.

It is self-evident that introducing a tax on overnight accommodation in the UK should be a non-starter. As an industry we have dealt with a number of blows in the past few years - foot-and-mouth and terrorism, to name but two. Let us not deal ourselves another.

Why would a bed tax be bad for England?

Elena Brown, proprietor, Sienna restaurant, Dorchester These things all add to the cost of a holiday. When you compare the UK with the increasingly cheap cost of going abroad, then a bed tax may make people think twice. We are already viewed as an expensive place to visit.

Will Ashworth, managing director, the Hotel and Extreme Academy, Watergate Bay, Cornwall We operate in a leisure market competing with hotels, restaurants and resorts around the world. Adding a further tax would make us massively less competitive. We are already more expensive than many international options purely because we operate in the UK.

Colin Paton, chief executive, Portland Hotels, Edinburgh It would reduce the amount of cash we would have for reinvestment, as we do not see this as a tax that can justify simultaneous price increases. We would see our profits drop, and this would come at a time when we have an incredibly high minimum wage and higher VAT than the rest of the EU. It's a pretty bleak outlook.

Jennifer and Brian Steele, proprietors, Yeoldon House hotel, Bideford, Devon It is impossible to pass increases in the cost of rates, utilities, licences and bureaucracy on to the customer, and we already work lengthy hours for limited financial rewards. Small businesses and tourism are vital to this country's economy so, as an industry, we must fight this to what may well be our dying breath.

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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