Tourism tax alarm as war and rising costs threaten industry

THE cost-of-living crisis and the war in Ukraine risk damaging the recovery of the Welsh tourism industry, MPs have been told.

Nothing should be done – such as imposing a new tourism tax – that would make matters worse, according to industry leaders.

The Welsh Government is currently consulting on its proposal to introduce a small tourism tax on overnight accommodation in Wales. It argues that many other countries already impose such a tax, sometimes without visitors knowing they are paying it.

But former Conservative MS Suzy Davies, who now chairs the Wales Tourism Alliance, told the Commons’ Welsh Affairs Committee: “All tourism tax countries have much lower rates of VAT for tourism products in those countries – 10% or less, generally.

“The prospect of a 20% VAT rate plus a tourism tax, however modest, is not great news for tourism in Great Britain, let alone Wales.”

Earlier Ms Davies said: “This message about ‘we’re good to go – Wales is ready for business’ has been successful on one side. But Wales has been subject to some damaging headlines internally because of various policy announcements that have been taken and run with in a very bad way by some of the local press in connection to tourism tax and stuff.

“However, there are things in both the Welsh [Covid] recovery plan and the UK recovery plan which are extremely helpful.

“The Welsh Government has just produced its review of the first year of its recovery plan which has some very positive signs in it.

“I suppose the biggest threat to the speed of the recovery will be the very recent news about things like the cost of living and Ukraine, which are having a material effect on people’s decision-making powers. Even as recently as four weeks ago, we had people who hadn’t booked [to visit Wales] from Europe in particular saying ‘we haven’t booked yet, but we’re definitely going to’.

“They were saying they were prepared to do it because things like insurance for Covid, good cancellation policies and cheaper deals within GB and Wales were there for the taking. Whether those expressions of intention now translate into actual bookings, even with those protections, remains to be seen, simply because of what’s happened in the last couple of months. In those circumstances it doesn’t matter what’s in the strategies, because they will be overtaken by events.”

Gwyneth Sweatman, head of communications for the Federation of Small Businesses Wales, said: “We did some research in 2021. Sixty-seven businesses would not have survived, according to them, without help from the UK Government and from the Welsh Government. The debt that small businesses hold has gone up from an average of around 57% to now 77%, so small businesses are having to rely on debt from all different areas, including loans and grants, and that’s massively increasing.

“What we’ve also seen increasing is concern over the viability of high streets and how they’re doing, because quite a lot of tourism and small businesses are based on high streets, so the lack of footfall has been a real problem. We also have staycations, which have increased quite a lot in Wales, which is fantastic, but the sector isn’t yet in a strong place to be able to respond and meet the demand because of the staffing challenges.

“Businesses are facing what we’re calling a cocktail of costs – we’ve got VAT, we’ve got national insurance, energy cost rises – I spoke to a business recently whose energy bills have gone up by £15,000. This is going to have huge implications on jobs. There is not currently any support for those energy bills rising.”

Considering how Wales could appeal to a wider group of potential tourists, David Chapman, executive director for Wales of UK Hospitality, told the committee: “There are opportunities to be much more sophisticated in how the Welsh message is got across. Things like St David’s Day we could do more with, maybe.”