The UK’s tourism industry is one in a state of flux at the moment. Key political decisions, such as Brexit, the mooting of a potential “bed tax” on hotels in London, and the highest rates of VAT on hotel rooms in Europe all threaten to shake the status quo of the U.K.’s hotel market.
Hospitality and tourism is a highly price-sensitive industry, and domestic and international visitors have significant destination choice, as do business travellers, event organisers and investors. Visitors to the U.K. already pay the highest tourist taxes in Europe. The World Economic Forum currently ranks the U.K. 135th out of 136 countries in terms of tourism price competitiveness.
Leading the charge for a fair trading base is Ufi Ibrahim, Chief Executive of the British Hospitality Association. The BHA represents represent the interests of operators, brands and owners of 46,000 businesses, including hotels, restaurants and food service, serviced apartments, clubs and visitor attractions.
Since joining the BHA in 2010, Ufi has spearheaded the establishment of the Tourism Industry Council, which has resulted in 67,000 new career starts for under 25s, and The Hospitality & Tourism Summit. Before joining the BHA, Ufi was Chief Operations Officer of the World Travel & Tourism Council.
We caught up with her to find out more about the BHA’s aims to drive competitiveness, facilitate access for tourism talent looking to work in the U.K., and the impact of industry disruptors such as Airbnb to the market place:
The BHA is leading a campaign to prevent the introduction of a “London tourist tax”. If enforced, what would this mean for hoteliers and room rates in the capital?
A tourism levy or tax would harm already hard-pressed hospitality businesses and discourage guests from staying overnight, reducing spend in the wider economy.
A tourist tax would provide sharing platforms, such as Airbnb, with an even greater advantage over hotels, as visitors using these platforms not only do not have to pay VAT on the cost of their stay but also would not have to pay the proposed tourist tax.
Previous attempts to introduce a bed tax in York, Edinburgh and Cornwall have failed, primarily because of concerns that it would drive guests away.
The U.K. government claims such a tax would raise funds to promote London. Could that, in fact, benefit hoteliers in the capital?
The BHA supports government tourist promotion schemes but I think it is important not to overlook the private sector’s already very large role in making London and the U.K. so appealing to visitors. Tourists in the U.K. already pay the highest amount of tax in Europe to visit our great attractions and world-leading visitor economy. Taxes make up nearly 9% of the overall trip costs to the U.K., compared with 6% for Germany and just 3.3% for Ireland.
In my opinion it is essential for jobs, growth and exports that the tax regime encourages rather than deters visitors from coming to the U.K.
Airbnb hosts would also be liable for the London bed tax. How would that work under the “rent a room” tax free allowance?
The rent-a-room relief allows property owners to receive tax-free rental income for furnished accommodation for main homes. The Chancellor of the Exchequer has announced that he will look at revising this relief to ensure it meets these aims of encouraging long-term lets, rather than very short lets in the sharing economy. The BHA welcomes this and will be leading the industry response to inform the planned consultation on changing the relief scheme. A Bed Tax is an additional charge paid by the visitor, often to municipal councils, rather than by the property owner or hotelier.
If a bed tax is introduces in London, is there a chance other notable tourism destinations, such as Edinburgh, Birmingham or Liverpool, might be hit with a tourism tax?Read how @UfiIbrahim of @BHAtweets plans to keep UK #hotels competitive #hotelnews Click To Tweet
Over the past year, several local authorities have raised the prospect of implementing a local tourist or bed tax, but the BHA has secured a verbal guarantee from the U.K. government that they will not bring forward legislation to enable local councils or elected mayors to put this policy into effect.
How has the introduction of such disruptor services as Airbnb impacted the U.K. hospitality market?
Over the past few years, the BHA has consistently confronted the difficulties arising from the role of home sharing platforms as “intermediaries”. These operate a huge sharing economy without responsibility for the services they facilitate or any obligation to provide data to relevant authorities to support law enforcement. Rogue landlords can ignore fire, health and food safety laws, and avoid paying taxes. The BHA has led effective lobbying in Parliament and the Greater London Authority to tackle this issue.
In our big cities, these problems are acute. For example, an estimated 41% of London listings on Airbnb are professional landlords renting out entire buildings, running “pseudo-hotels” without the requisite safety regulations in place. According to figures from London Councils (including Westminster, Camden and Hackney) and a report by the Residential Landlords Association, this reduces housing supply, restricting the number of properties available to families and workers and increasing residential rents.
After much work by the BHA, in December 2016 Airbnb agreed to block hosts from renting entire homes for more than the 90 days permitted in London, unless they have a license to do so.
Other leading global cities have already recognised the scale of this problem: New York, San Francisco, Berlin, Brussels, Amsterdam, Paris and Barcelona are all now taking action to ensure the proper regulation of this new part of the economy and that the economic benefits are not outweighed by social dislocation and other negative impacts.
BHA is also campaigning to cut tourism VAT. Are you hopeful this will be cut in the near future? And if so, what would this mean for hotel prices across the country?
The BHA is a key supporter of the Campaign to Cut Tourism VAT from 20% to 5%. The campaign has a great level of cross-party support with 172 MPs in the last Parliament and in the devolved assemblies, as well as amongst businesses and tourists. The campaign is based on strong economic evidence and support for it will continue to grow.
It is expected that many hospitality businesses would pass-through a reduction in VAT, lowering room prices and increasing competition in the market. Many of the largest businesses in this sector have already agreed to do so in the event of a reduction.
A cut in VAT would bring the U.K. in line with competitor destinations in the EU. However, with the U.K. now leaving the EU, and the pound at a low against the euro, can U.K. hotels still really compete with this market place?
Brexit looks set to have a huge impact on the European labour market – a vital pool of talent for U.K. hotels. What should the U.K. be doing to plug this potential talent shortage?
Recent research we commissioned from KPMG showed that the hospitality industry alone needs 200,000 workers each year just to replace churn and meet current growth at the moment. In the circumstances that free movement of people ended after Britain leaves the EU and was not replaced with other arrangements to access EU workers, the hospitality industry would need to recruit 60,000 more workers each year. At a time of low unemployment and a very high level of participation in the labour market by people of working age the BHA believes this would be impossible – especially given the competing resourcing requirements of other sectors.
This is why the BHA has been working on a 10-year strategy to recruit a substantially higher proportion of its workforce from the U.K.
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