London hotels call on GLA to halt overnight visitor levy plans

The London Hotel Association is calling on the Greater London Authority (GLA) to pause progress towards the proposed Overnight Visitor Levy (OVL), warning that implementation is moving ahead before the potential economic, commercial and operational consequences have been properly assessed.

Following a recent meeting with the GLA, a collective of London hotels from the London Hotel Association has set out its concerns over both the process and potential impact of the proposed levy.

There is a perception that industry consultation is taking place after key policy decisions have effectively been reached and could be interpreted as tokenistic window dressing. This concern is heightened by the apparent progress already made towards implementation.

While the industry welcomes the objective of supporting investment in tourism and destination infrastructure, there is growing concern that the process has become a question of “how rather than whether” the levy will be introduced, with procurement activity and dedicated implementation resources already underway, indicating that the ‘hotel accommodation tax’ is a ‘fait accompli’ without proper consultation or impact assessment.

The GLA has shockingly admitted that no formal economic impact assessment has yet been undertaken, despite implementation planning already progressing.

This mirrors concerns raised by the recent All-Party Parliamentary Group (APPG) inquiry into visitor levies, which concluded that comprehensive pre-legislative scrutiny and a full Regulatory Impact Assessment must be undertaken before any levy is introduced. The APPG also highlighted the need to assess the cumulative tax burden already facing hospitality businesses.

The concerns come at a time when London’s hospitality sector is already facing significant cost pressures, including rising employment costs, increases in employers National Insurance and thresholds, unsustainable increases in business rates, rocketing utility costs and other inflationary pressures, labour shortages and increasing and damaging employment regulation. 

Hotels have already absorbed significant cost increases in recent years, without being able to pass the full cost on to consumers.

London’s hospitality industry is a significant employer and contributor to both local and national economies. Any measure that directly increases the cost of overnight accommodation risks reducing demand, diminishing competitiveness and constraining future investment. Reduced profitability inevitably impacts employment opportunities, wage growth, apprenticeships and capital expenditure, as well as revenue to the Treasury’s coffers, which is needed to fund public services across the UK.

The London hotel industry is requesting a comprehensive and independent economic impact assessment to be undertaken before any further decisions are made, examining the potential effects on occupancy, visitor demand, conferences and events, employment, profitability, investment and tax receipts.

Risk to London’s competitiveness

The industry is also warning that an additional charge on overnight accommodation could further undermine London’s competitiveness as a global visitor destination.

Recent UKinbound analysis highlighted that while the UK ranks as the seventh strongest tourism destination globally, it ranks just 113th out of 119 countries for price competitiveness.

In other words, the UK is already perceived as an expensive destination before the introduction of any Overnight Visitor Levy. Introducing a further charge on overnight accommodation risks exacerbating this disadvantage at a time when destinations across Europe are actively competing for international visitors, conferences, events and business travel.

The industry argues that this sits uneasily alongside wider ambitions to increase inbound tourism, attract major international events and grow visitor spending.

Displacement risk beyond London’s borders

Hotels within Greater London could also face a particular competitive disadvantage compared with neighbouring destinations outside the GLA boundary.

Richmond, for example, would be subject to the levy, while comparable hotels in destinations such as Windsor, Ascot, Egham and Staines would not. These locations compete for many of the same conference, corporate, leisure group and tour operator markets and are often viewed as interchangeable by event organisers and travel buyers. This creates an artificial pricing differential unrelated to service quality, facilities or value.

London hotels may be forced either to pass the levy on to customers and risk losing business, or absorb some or all of the cost themselves in order to remain competitive. In both cases, the financial burden unfairly ultimately falls on the operator.

This is particularly relevant when bidding for conferences, sporting events, educational groups, international tours and corporate accommodation programmes, where procurement decisions are often highly price-sensitive. Even relatively small differences in total cost can influence destination selection and deflect business to other destinations and countries.

The London Hotel Association are equally concerned by the prospect of an increasingly fragmented levy landscape across the UK. Visitors, tour operators and event organisers are already being asked to navigate differing terminology, charging structures and collection mechanisms, including London’s proposed Overnight Visitor Levy (OVL), Edinburgh’s Visitor Levy and Manchester’s Accommodation Business Improvement District (ABID) charge.

For tour operators, conference organisers and sporting bodies operating across multiple UK destinations, a patchwork of differing levy names, charging methodologies, exemptions, collection mechanisms and reporting requirements creates unnecessary complexity and unacceptable burdens. Rather than enhancing the UK’s attractiveness as a destination, there is a risk of making it increasingly difficult to understand, promote and sell internationally.

Concerns over complexity and implementation

The industry is also raising concerns about the practical administration of the levy, particularly if a percentage-based model is adopted.

A percentage-based charge could disproportionately affect higher-quality hotels that have invested significantly in facilities, guest experience and property improvements, placing the greatest financial burden on businesses that have already made substantial contributions to London’s tourism offer, often with long term ambitions and community goals.

The administrative burden should not be underestimated. Experience elsewhere demonstrates the need for system modifications, compliance processes, regular reporting, staff training and ongoing administration. Accommodation providers effectively become unpaid tax collection agents, absorbing both the cost and resource implications of administering the scheme.

The London hotel industry is therefore urging policymakers to fully understand these practical lessons before introducing a scheme across one of the world’s largest and most complex accommodation markets.

Lessons from other cities must be considered

The industry is concerned that many of the practical issues raised by operators could be viewed simply as matters to be ‘worked through’ during implementation. Challenges around booking systems, third-party booking platforms, levy calculations, bundled products, reporting, compliance and staff training are significant. Recent experience from other destinations demonstrates that these challenges can be considerably more complex and costly than initially anticipated.

In Edinburgh, for example, online travel agency platforms including Booking.com and Expedia clearly advised Government that their systems would struggle to accommodate the complexity of the legislation. Hotels are now bearing the financial and operational consequences of these limitations.

Evidence from accommodation providers and industry bodies suggests that percentage-based levy models can create significant operational complexity, particularly where bookings include additional elements such as breakfast, parking, dining or other bundled services.  In some cases, booking and distribution platforms have required manual intervention to ensure charges are calculated correctly, creating additional administrative burdens and costs for operators.

These experiences demonstrate the risk of introducing a complex charging mechanism before booking systems, distribution channels and operational processes are fully prepared.

The burden falls disproportionately on accommodation providers, which are required to invest in system modifications, staff training, compliance processes and ongoing administration whilst simultaneously managing guest expectations and maintaining service standards. 

Concerns have also been raised regarding the adequacy of implementation timelines, the readiness of third-party booking platforms, uncertainty around compliance requirements, the costs and resources involved and the availability of practical guidance for businesses.

The industry also believes caution is needed when comparing London’s proposed levy with schemes introduced in destinations such as Barcelona, Venice and Tokyo. Many such visitor levy schemes were introduced within wider strategies aimed at addressing overtourism and managing visitor pressure and with VAT rates on accommodation – 10% in France, Italy and Spain, 7% in Germany and 6% in Portugal – starkly contrasting with the 20% VAT already imposed on London’s hotel visitors. London’s objective, by contrast, is to increase inbound tourism, attract major international events and strengthen its competitive position. The industry therefore argues that a levy designed to moderate visitor demand may be fundamentally at odds with London’s ambition to grow its visitor economy.

The London Hotel Association is therefore urging the GLA to fully evaluate the lessons emerging from recently introduced visitor levy schemes before progressing further.

It would be wrong, irresponsible, unfair and regrettable if London were to encounter many of the same implementation challenges, particularly given the scale and complexity of the capital’s accommodation sector and the importance of maintaining a seamless experience for both domestic and international visitors.

The proposed OVL is the wrong response to London’s and the UK’s current tourism challenges.

Industry calls for evidence before implementation

Before implementation progresses any further, The London Hotel Association is calling for:

• A full, independent economic impact assessment.

• Assessment of the impact on employment, investment, business viability and tax receipts.

• Assessment of the impact on conferences, groups and international business.

• Analysis of potential displacement to neighbouring regions and international destinations.

• Publication of consultation findings and supporting evidence.

• Clear modelling of administrative costs and implementation requirements for all operators, including private and independent businesses.

• A detailed review of the operational, administrative and commercial impacts experienced by destinations where visitor levies have recently been introduced with the knowledge that a London scheme could be abandoned if the properly assessed consequences point to negative outcomes.

• Consideration of the recommendations of the All-Party Parliamentary Group inquiry into visitor levies, including transparent ringfencing of revenues, broad industry representation in any governance arrangements and a consistent framework that minimises administrative complexity for accommodation providers.
  
  Should the levy ultimately proceed, the industry believes any model must be transparent, proportionate, ringfenced and commercially practical, with businesses responsible for generating the revenue given meaningful input into governance arrangements.
  
  There must also be complete transparency over how funds are allocated, managed and spent within the visitor economy.
  
  The London Hotel Association remains willing to engage constructively with the GLA and welcomes further dialogue. However, it is urging the authority to stop now and reflect carefully on whether the current process is giving sufficient consideration to the businesses that underpin London’s visitor economy and the UK’s international competitiveness.
  
  The hospitality sector is not opposed to investment in tourism infrastructure. However, any proposal that places additional costs and administrative burdens on businesses must be supported by robust evidence demonstrating that the benefits outweigh the risks.
  
  At present, the industry remains concerned that implementation is advancing ahead of the analysis required to justify such a significant intervention.
  
  The London Hotel Association is therefore calling on the GLA and Government to address the absence of an economic impact assessment, the potential competitive disadvantage facing businesses within Greater London, the lessons emerging from Edinburgh and other recently introduced visitor levies, and how the concerns of the hospitality industry will be meaningfully reflected before implementation decisions are progressed and certainly before they are finalised or implemented in any way.