Industry News

Auckland’s appalling targeted accommodation rate

By Chris Roberts, TIA Chief Executive

How can Auckland Mayor Phil Goff think it’s OK to whack the city’s commercial accommodation operators with rates increases of 250% or more?

TIA is vigorously opposing the Mayor’s proposed targeted rate. It unfairly slams the commercial accommodation sector, will stymie much needed hotel development and will potentially force smaller motel, backpacker and holiday park operators out of business.

Seeking ways to minimise rates increases for general ratepayers, the Mayor’s office has come up with the idea of switching the source of funding that goes to ATEED for tourism promotion and event support from general rates to this new targeted accommodation rate.

The total sum involved here is $27.8 million pa. For Auckland ratepayers, that’s 90c a week each. Shifted entirely to a few hundred commercial accommodation properties, it’s an average rates increase for them of 150%, with some property owners facing increases of more than 250%. Auckland’s Pullman Hotel has said publicly its annual rates bill could double to almost $1.6 million if the council adopts the new targeted rate.

This huge financial impost, which is based on each property’s capital value, cannot simply be passed onto the customer. The Mayor has erroneously called this a visitor levy – it is not. Accommodation providers will have no more ability to add the new targeted rate to a guest’s bill than they do the existing rates, or payroll tax, or electricity and gas charges.

Inequitable rate

The Council’s rational for this targeted rate is based on the flawed belief that accommodation providers are the main beneficiaries of visitor spend in Auckland.

In fact, of the $7.51 billion total visitor spend in Auckland in 2016, just under 10% or $723 million was spent on commercial accommodation. The balance goes to a wide range of sectors.

So, the commercial accommodation sector gets 10% of the direct benefit if ATEED is successful in its efforts to grow tourism, but is being asked to pay 100% of the cost.

The targeted accommodation rate is way off target.

It also ignores the fact that hundreds of thousands of visitors to Auckland stay with friends and family or rent privately owned accommodation, that many of the events supported by ATEED are mainly enjoyed by locals, and that every sector of the city’s population benefits in some way from ATEED’s economic development work.

In heaping $27.8 million a year in additional charges on commercial accommodation providers, the council is also failing to recognise the wider contribution this sector makes to Auckland through employment, sponsorship, community support, marketing and support for the city’s business associations.

Stymie growth

Ironically, this targeted accommodation rate will thwart hotel development at a time when both the Government and the council have identified the need for new hotels in Auckland to keep pace with strong visitor growth.

An estimated 4300 more hotel rooms are needed in Auckland by 2025 but with this rate potentially adding millions of dollars in bottom-line costs, developers are understandably reconsidering their planned investments. Hotel investors can spend their money anywhere in the world – it is quite possible that Auckland will miss out on hundreds of millions of dollars of new investment if this rate increase goes ahead.

TIA is willing to work with the council to seek better funding solutions. However, it is not up to the commercial accommodation sector to plug the funding gap between the Mayor’s promise to keep residential rates increases at 2.5% and what he is able to deliver.

This targeted rate is an ill-conceived response to a funding shortage which could have devastating consequences for Auckland’s thriving tourism industry. It threatens to fleece the city’s golden goose!

It needs to be tossed out and TIA is determined to ensure that happens. We are working closely with the hotel sector, Hospitality New Zealand and other stakeholders. Strong submissions will be made to Auckland Council and we will be asking councillors to see sense and vote down this crazy and damaging proposal.

Go to our advocacy page to find out more.