View providers will end up paying levy

In a softening tourist market, accommodation providers rather than tourists will end up paying the 5% visitor levy - also known as the "bed tax" - being promoted by the Queenstown Lakes District Council.

That's the view of Peter Sutherland who, with wife Jenny, owns and operates The Moorings Motels and Apartments overlooking Lake Wanaka.

At a recent council meeting in Wanaka, Mr Sutherland produced figures showing accommodation providers would take a 30% hit to their profits because the market would not allow for them to increase rates.

Explaining his figures to the Otago Daily Times, Mr Sutherland used the $250 plus GST room rate used by the council to show how the tax would apply.

After running costs, accommodation providers might normally expect a profit margin of 15%-20% - in the case of a $250 plus GST room rate at a profit margin of about 16% that would amount to $40.23.

But that figure would become about $28 if they could not pass the 5% on to tourists, Mr Sutherland said.

To maintain their current profit margin - which is usually the source of the provider's salary and bank repayments - Mr Sutherland said they would need to increase their accommodation rate by 6.5%.

But the international travel wholesalers who sold his accommodation as part of packages "have simply said `no"', Mr Sutherland said.

"They've given us a very clear message that if we lift our rates they will expect to sell less."

If rates did rise, he believed some tourists would reduce the number of nights they stayed in the Lakes district or even choose not to come to New Zealand.

"The council seems to think we can just put our rates up and the market will swallow it with no objection.

"But at the end of the day, the market decides what the rate is.

"If we could charge more for a night, we would. We are charging now what the market will bear."

Mr Sutherland said the Lakes district was viewed as an expensive place to visit, and while the 5% was not enough to stop all tourists, "it might affect 5%, it might be 2% - we don't know".

He accepted the council needed more money for infrastructure but believed the cost should be borne by all tourist "business operators".

"Instead of being a 5% tax over only 10% of commercial ratepayers, that might be 1.5% over 60 or 70% of commercial ratepayers."

Also, the bed tax as proposed did not catch freedom campers or "day trippers", Mr Sutherland said.

"There are a lot of people who stay in Cromwell now and do a day trip to Queenstown because Queenstown is too expensive to stay in."

Asked to look at Mr Sutherland's figures, a council spokesman said the council "does accept the calculations in the letter as being correct.

"However, while we do understand the consequences as outlined, they don't show the entire picture.

"They do, however, highlight some of the work that the Government and council will need to do to address the effect.

"The way funding is calculated will be a key part of any further work once Cabinet makes its decision."

Earlier this year, a referendum showed more than 80% of the 42% of Lakes District residents who took part favoured the council's visitor levy proposal. 

The idea is now being considered by the Government.

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