Wales’s big tourism problem

Proposals for a law that could see tourists obliged to pay a tax for staying overnight in Wales were tabled last week in the Welsh Parliament. Under the plans, local councils will be given the power to introduce a small “visitor levy” to raise money, but will also be free to opt out of the scheme – which is itself controversial.

A decision about whether it will become law is expected in 2025, though the levy probably won’t come into effect until 2026 or even 2027. Accommodation providers will be compelled to enter their names on a national register. Visitors staying in campsites and hostels will be charged 75p per person, per night, while those staying in hotels and room rentals, such as those available through Airbnb, will pay £1.25 tax per person, per night.

Mark Drakeford MS, Cabinet Secretary for Finance and Welsh Language, says the levy will help to ensure “those who benefit from tourism will make a small but important contribution to the maintenance of local areas”.

He adds: “Visitor levies play a crucial role in supporting communities and protecting the environment all over the world. Many countries have seen real benefits from the reinvestment of visitor levy funds. We believe such success can be replicated in Wales.”

Ministers hope the money raised will help fund improvements to transport links and the promotion of the Welsh language. If all local authorities introduced a levy, it could potentially generate up to £33m across Wales.

Wales’s tourism woes

Others fear the negative impact on a tourism industry that employs 159,000 people in Wales – nearly 12 per cent of the country’s total workforce. In a consultation, which ran in 2022 and received more than 2,000 responses, self-catering firms said that a policy similar to tourism taxes in Spain and Greece could damage local economies by putting visitors off.

Wales is already struggling on that front. It received 892,000 visits in 2023, down 13 per cent on its pre-pandemic (2019) figure, while spending, at £458 million in 2023, was down 11 per cent compared to 2019’s figures. In fact, Wales was the only UK nation still down on spending compared with 2019.

Furthermore, the Welsh Government’s tourism barometer predicts visitor levels from inside Wales, the rest of the UK and from overseas are all expected to be about the same in 2024 as in 2023.

So, what’s putting people off? A recent Visit Wales survey of 50,000 potential visitors found that key concerns include the weather and the country’s 20mph speed limit on restricted roads – though the cost of travel was the main factor. Therefore businesses worry that a targeted tax, however small, will be perceived as an additional reason for not visiting Wales.

Will visitors be welcome?

Anti-tourism sentiment is a potential hot potato. The Bannau Brycheiniog (Brecon Beacons) National Park made headlines this summer when park authorities urged people to avoid visiting at peak times. Some tourists and even some long-term residents also view the Welsh language as a barrier for non-speakers. In September, a group of women ramblers from Lancashire complained that they had experienced “anti-English” attitudes in the popular tourist centre of Llanberis in Eryri National Park (Snowdonia).

Emotions and fashions oscillate, but hard economic realities might also chip away at Wales’s tourism revenues. Many councils in Wales now charge an inflated tax rate for second homes, up to 300 per cent, with the aim of freeing up rarely used housing stock for locals and generating income.

A sharp increase in council tax on second homes in Pembrokeshire – a tourism honeypot – has seen the number of second homes entering the market increase by more than 250 per cent. Homeowners have criticised the council tax premium, while local businesses argue it could push low-season visitor numbers down.

Penny Paddle, a partner at law firm Spencer West, and an expert on small- and medium-sized enterprises, says the levy “may create financial and operational challenges for businesses in the leisure, tourism and hospitality sectors”.

She adds: “Many are concerned that the levy imposing additional costs on tourists could potentially deter budget-conscious visitors or drive them to alternative destinations. It is also feared that this risk may disproportionately affect smaller accommodation providers, hostels and campsites, which rely on price-sensitive customers. Additionally, implementing the scheme and managing the levy collection is likely to increase administrative burdens and compliance costs across all accommodation businesses, again, hitting the smallest businesses the hardest.”

The Wales Tourism Alliance, which represents more than 6,000 firms, claims the Welsh Government has ignored “key points” which it put forward during the consultation process for the visitor levy bill.

“In particular we feel that the Welsh Government has missed a key opportunity to establish a registration scheme for self-catering accommodation, which would have incorporated key health and safety criteria and assured visitors that their accommodation meets basic assurance standards.

“What has been proposed will instead increase the costs for tourism and hospitality businesses, which will be passed on to our visitors, without any perceived ‘added value’. We are also disappointed that there is no clear commitment that the funding raised by the levy will be dedicated to improving the visitor experience in Wales.”

The next trend

Eric Holliday and Peter Rees-Jones, directors of the tour operator Wales Beckons, say, “As tour operators whose aim it is to encourage people to visit Wales, we are naturally sceptical about any governmental moves to make Wales a more expensive destination.

“The imposition of a tourist tax is a valid reason for believing that there would inevitably be negative effects on visitor numbers. In our view, however, this might not necessarily be the case: it all depends upon the amount of the tax and when and how it is applied and gathered.

“A small amount of tax is unlikely to prevent Wales being considered as a holiday destination. But should any such tax be applied to each visitor for every night of their stay in Wales? Surely not. A one-off amount to be paid on the first day of arrival in Wales would be fairer and perhaps more easy to collect.

“The other side to the coin is how will any monies raised by the imposition of such a tax be spent? Before there will be any chance of such a tax being acceptable to Welsh hospitality businesses and Wales generally, it has to be made very clear how everyone will benefit.”

Neil Kedward, managing director of Seren, which operates several hotels and restaurants across the country, is more trenchant in his criticisms.

“The introduction [of the levy] could needlessly exacerbate existing pressures on the hospitality sector, which is already navigating significant economic challenges. Hospitality businesses are contending with rising operational costs, including substantial increases in wages, higher National Insurance contributions and the persistent effects of the cost-of-living crisis.

“This is all taking place within a stagnating economy that is forecast to struggle for some time. Introducing a tourism levy under these conditions is both puzzling and concerning. I am all for progressive political ideas, but... it feels like politicians are jumping on the next trend and blindly implementing new ideas.”