Supreme Court backs Auckland’s controversial hotel ‘bed tax’

Auckland’s controversial hotel ‘bed tax’ has been approved by the Supreme Court following some modifications, overturning a previous finding by the Court of Appeal that deemed it invalid.

The Accommodation Provider Targeted Rate (APTR), which was first introduced in 2017 by Auckland Council as a means to fund tourism marketing, has been the subject of a lengthy legal battle.

Hotel Council Aotearoa (HCA) has labelled the decision “disappointing”, saying it will affect members and the entire tourism industry.

“The APTR was suspended during COVID because it wasn’t working and would have sent some small operators out of business,” said HCA Strategic Director, James Doolan.

“Council appears to now accept that the APTR is a poor way of funding destination marketing and event attraction.

“The APTR was a targeted rate under which accommodation providers paid one-half of the costs to receive one-tenth of the benefits. It could not be passed on to guests as an additional charge at check-out, which meant accommodation providers were all affected in different ways.”

Doolan said HCA and many of its members are working with Auckland Council on a new, fairer scheme to secure additional funding for Auckland’s event attraction and destination marketing work.

“The proposed new voluntary scheme no longer ignores the other businesses that clearly benefit from tourism,” said Doolan.

“That’s a positive development and a signal that Auckland Council, under its new Mayor and with a refreshed line-up of councillors, is more forward-thinking about tourism-related issues.  A thriving visitor economy and high-quality hotel rooms are essential for any international-standard city such as Auckland.”

Doolan said a more collaborative effort is needed when designing targeted rates.

“It serves no-one for councils and commercial ratepayers to be caught up in expensive and time-consuming litigation, especially when the litigation is about a policy that has subsequently been dropped,” he said.

“Any new funding regime should draw upon international best-practice, as opposed to being hurriedly designed to meet short-term objectives.”

Before the pandemic, New Zealand’s tourism industry generated NZD$3.8 billion in GST revenue annually plus an estimated NZD$3.1 billion in tourism-related taxes.

Doolan says the tourism and hospitality industry is not seeing the full benefit of central government’s collection of GST on spending by international tourists.

“Central government’s tax take from tourism is not fully reinvested in the sector, nor is it adequately shared with local authorities to support investment in essential infrastructure,” he said.

“As a result, New Zealanders get frustrated with overcrowding and local authorities have turned to novel fundraising techniques, such as the APTR, to fill the funding gap.

“If New Zealand is going to fix our trade deficit problem, we need much better strategy and policy for tourism.

“The APTR is a relic from the bad old days of policymaking.  Let’s hope we never see anything like it again.”