Senedd Cymru | Welsh Parliament
Y Pwyllgor Cyllid | Finance Committee
Bil Llety Ymwelwyr (Cofrestr ac Ardoll) Etc. (Cymru) | Visitor Accommodation (Register and Levy) Etc. (Wales) Bill
Ymateb gan STAA (Short Term Accommodation Association) | Evidence from STAA (Short Term Accommodation Association)
(We would be grateful if you could keep your answer to around 500 words).
The STAA has supported for many years a compulsory, national, affordable, and declarative registration scheme administered by a recognised body and thus welcomes plans for the register introduced by the Bill. Such a scheme will serve as an authoritative data source to objectively assess the industry in Wales, ensuring the economic benefits of the short-term let sector are protected and supported. We also believe the registration scheme will enable local authorities to enforce existing laws more effectively, particularly around health and safety and anti-social behaviour. Finally, it will provide regulators and local authorities with a high-quality source to draw on when considering regulatory interventions, rather than basing their decisions on data of questionable integrity.
The STAA supports ecologically aware, sustainable tourism. Nevertheless, we are concerned by the proposal to give local authorities the power to introduce a visitor levy in Wales, especially at this time, and believe it to be unfit for Wales’ tourism landscape. Overnight stays in Wales already make up only a small percentage of overall visits (around 8 million overnight trips compared to more than 70 million million day trips in 2022), but bring in significantly more spending for local areas than trips without overnight stay. A visitor levy specifically affects overnight visitors, whose numbers have already declined between 2023 and 2022 - British visitors (who make up 94% of Welsh tourism) took 8.44 million overnight trips in 2023, down from 8.65 million in 2022 and from 10.7 million in 2019, and disincentivises this activity. Tourism employed 11.8% of Wales’ workforce in 2022 and economic activity related to short-term rentals contributed more than £3 billion to Wales’ GDP in 2021. Introducing a levy risks making the tourism industry in Wales less competitive and pushing visitors to other neighbouring destinations. Research supports this concern: in a 2019 report, the UK Parliament’s APPG for Hospitality highlighted academic research which found that price elasticity in the UK is higher than on the continent. It found, for example, that a 1% increase in prices in the UK reduced the demand for tourism from tourists from France by 2.2%. Since VAT is charged on hospitality, and will be included within the taxable amount paid on a visitor levy, tourism in the United Kingdom is more exposed to small price changes than other European countries. If prices go up, the demand for service will be impacted and will decrease.
Short letting is already subject to various regulations and contributes a lot of value to local economies in Wales. Short-term lets in Wales have had to cope with the introduction of the 182-day rule to qualify for business rates (in a country where tourism is highly seasonal and many businesses are unable to meet this threshold), the introduction of new planning use classes which mean that operators need planning permission if a council makes an Article 4 Direction, high council tax premiums on second homes which are occasionally used as short-term lets, as well as UK-wide changes such as the forthcoming abolition of tax reliefs for furnished holiday lets and increases to Employer National Insurance . As the sector is struggling with the cumulative impact of these regulations, any new requirement introduced by the Bill, however simple, is going to come on top of an already significant regulatory burden.
Sources:
- Gov Wales: Domestic GB Tourism Statistics Annual Report 2022; Revised statistics for 2022-23
- Wales Guidebook
- Visit Wales - Figures on visitor economy in Wales
- Sykes report: https://www.sykescottages.co.uk/blog/short-term-lets-economic-impact-report/
- APPG for Hospitality report on tourism tax, 2019
The Regulatory Impact Assessment is set out in Part 2 of the Explanatory Memorandum (https://senedd.wales/media/g5ipwvwh/pri-ld16812-em-e.pdf). This includes the Welsh Government’s assessments of the financial and other impacts of the Bill and its implementation.
(We would be grateful if you could keep your answer to around 500 words).
The STAA finds there are three initial barriers to the implementation of the Bill’s provisions. Administrative costs for property managers and platforms, for both the register and the levy, are bound to be significant and the impact assessment does not sufficiently take them into account. The Bill also does not consider potential interactions with UK regulations around drip pricing - the visitor levy might be shown as an extra when the booking is being made and open property owners up to accusations of hiding real costs, or their display will be cumbersome and negatively affect the customer booking journey. Thirdly, the fact that the Bill allows for third parties to collect and pay the levy but makes this voluntary is likely to create discrepancies in customer journeys and booking systems, and thus further increase the administrative burden on property managers and platforms. Accommodation providers who choose to let third parties collect the levy with the original booking will be put at a commercial disadvantage as their immediately displayed fees may seem less competitive. At the same time, when providers choose to collect the levy themselves, no matter how well a future fee is advertised, customers may still be taken aback by the charge (e.g. for a week-long stay in a four bedroom place it would be an extra £84 inc VAT).
In addition to these, as it is still unclear how the visitor levy and registration scheme will work together in practice, and how the planned licensing scheme will fit in with these measures, it is difficult to predict exact barriers at this stage. Indeed, we believe that the introduction of a registration scheme provides additional tools to local authorities to manage any issues from short-term lets and can be used to signpost operators to existing regulatory obligations, reducing the need for further interventions such as a bureaucratic licensing scheme. Finally, we also find that the Bill should include within it a requirement on local authorities to consider data from the registration scheme before deciding whether to either implement an Article 4 direction under planning powers granted in 2022, or to introduce a visitor levy. This is crucial, since data to inform these decisions is a key benefit of any registration scheme, and a failure by councils to consult what will be the only authoritative source of information on the scale of the visitor accommodation sector will be a major omission and call into question the soundness of further interventions. In fact, it was STAA’s understanding that the original plan would have seen a registration scheme be introduced before the levy in order to implement a phased approach, whereby data and insights from the scheme could have been used to inform next stages. The joint introduction of the register and levy loses out on this important aspect and increases the administrative burden on businesses.
(We would be grateful if you could keep your answer to around 500 words).
The STAA foresees that the visitor levy may affect the already declining number of overnight stays in Wales, both by acting as a financial disincentive and by creating a sense that tourists are not welcome in Wales. In some European capitals, e.g. Amsterdam, tourist taxes were introduced as a way to reduce overtourism - a consequence which would not benefit Wales. The fact that revenue from the levy is strictly to be used for a set of designated purposes is also likely to have the unintended consequence of incentivising councils to divert existing spending away from those areas (more on this below).
For the registration scheme, a key concern for us is that the data collected through the register must act as a tool and resource for local government and other stakeholders, and provide an accurate picture of short-term let activity. While the explanatory memorandum states that mechanisms will be in place to periodically check that providers’ details are correct, no further details are provided on what these would entail. The STAA worries that many people will likely not deregister when exiting the STL market, meaning that the register’s figures would risk suggesting an inflated number of STLs unless appropriate checks are put in place. The scheme must also allow registrants to accurately reflect the type of short-letting activity they conduct or else the data may lead to incorrect conclusions (e.g., that a primary home short-let during the owner’s absence could be available to others on the primary home market; or that some specific property types such as yurts could be used as primary homes). Any inaccuracies in the data mean that the Bill could have unintended consequences for the announced licensing scheme, affecting its design and efficiency, and for Article 4 Directions under existing use class legislation.
(We would be grateful if you could keep your answer to around 500 words).
The STAA finds that the government’s assessment ultimately underestimates the financial impact that the Bill is likely to have on the short-term let sector and hospitality more broadly. The published regulatory impact assessment itself acknowledges the uncertainty of its estimates regarding the costs that visitor accommodation providers would incur. The range provided for costs is so broad that it is unhelpful for providers who wish to rely on it when making their calculations. Some of our members’ own assessments of the financial impact of implementing the levy far exceed these estimates when taking into account frictional costs. The impact assessment also works with the assumption that all 22 local authorities implement the levy at the earliest opportunity. However, it is more likely that only some of them will do and at different moments in time - leaving property managers unable to apply a system uniformly across their properties. In cases where councils were to choose to introduce a premium, this fragmentation would be even higher. On top of this, property managers and platforms operating across the devolved nations would have to set up and manage different levy collection systems, for instance collecting a fixed levy for Welsh properties and a percentage-based levy for Scottish ones.
On the other hand, the impact assessment likely overestimates the positive effects of spending of the revenue from the levy due to potential diverting of existing council spending in target areas. As the levy will provide councils with a pot of money strictly for spending in designated areas relating to destination management and improvement, it is likely that they will choose to divert existing spending in these areas to other purposes - nullifying any increase in the council’s tourism-related spending. There is no provision in the current draft of the Bill to prevent this scenario from happening. Therefore, the overall improvements to local infrastructure and services are bound to be lower than the impact assessment foresees. Even without such miscalculations, the assessment of the Bill’s impact by the government remains worrying as it predicts a net cost. The assessment admits that more than 700 jobs could be lost, and since the impact on visitor numbers, and thus on demand for accommodation, is left as an “unquantified cost”, this figure could be even greater, affecting a potentially large proportion of the almost 12% of Welsh people employed in the tourism industry.
The powers to make subordinate legislation are set out in Part 1: Chapter 5 of the Explanatory Memorandum (https://senedd.wales/media/g5ipwvwh/pri-ld16812-em-e.pdf).
The Welsh Government has also set out its statement of policy intent for subordinate legislation (https://business.senedd.wales/documents/s155951/Statement%20of%20Policy%20Intent.pdf).
(We would be grateful if you could keep your answer to around 500 words).
The STAA notes that, by leaving certain matters to be defined through subordinate legislation, the Bill is bound to create uncertainty for visitor accommodation providers. The Bill currently gives Ministers the power to make regulations specifying the maximum amount of the premium which may be added by a principal council (part 3, section 14 (3)) but does not specify even an indicative figure. A cap being set out ahead of implementation, rather than being left to Ministers’ discretion, would go a long way towards mitigating uncertainty. Similarly, the ability left for Ministers to change the working definition of “visitor accommodation provider” creates unpredictability for providers who feel that may suddenly be included or excluded by it.
There are a number of steps that could be taken to mitigate these concerns. First, where the Bill gives powers to ministers to make future changes to the visitor levy framework or the scope of the registration scheme, we believe these should be within limits set out in the legislation. For example, as well as specifying the maximum amount of premium that the minister may approve, the Bill should also set out in more detail parameters of the scheme which are set nationally and cannot be changed - for example, clarifying that ministers cannot approve changes that would see a visitor levy apply only seasonally, or only to specific areas within one local authority, since such changes would create an overly complex and complication scheme that would be difficult for accommodation provers and platforms to manage. We also recommend that the Bill clarify, or that the Welsh Government publish guidance on how accommodation providers could meet the requirement to advertise the levy, and should provide a grace period for hosts to register once the registration element of the bill comes into effect (since under the current drafting, hosts become liable for a penalty if they do not register the instant that the legislation comes into effect).
(We would be grateful if you could keep your answer to around 500 words).
The STAA found the legislation to be overall clearly explained but was not satisfied with the quality and detail of the impact assessment published with it, which does not sufficiently account for administrative and frictional costs faced by platforms and property managers, decline in demand from tourists, and diversion of existing council spending from target areas. The implementation timelines of the register and levy are also too close - a more staggered approach, with work on the visitor levy not starting until the register is fully implemented and operators have had time to adjust to this change, would allow for councils’ decisions on whether or not to introduce a levy to be based on high-quality data from the registration scheme and make compliance easier for operators.
(We would be grateful if you could keep your answer to around 500 words).
The STAA supports proportionate penalties with sufficient rights for appeal. We find the proposed penalty to be proportionate, but there should be a grace period in the first year after implementation as operators get used to the new requirements. In this time, operators should receive a warning and be directed towards resources for compliance, rather than being hit by a penalty. Further clarification on scenarios that constitute a “reasonable excuse” (7C) “special circumstances” (7D) would also be useful.
(We would be grateful if you could keep your answer to around 500 words).
There are four issues with the Bill that we would like to raise as factors creating uncertainty for the hospitality sector. To begin with, the Bill states that a council may add an additional amount to either rate of the visitor levy (part 3, section 14 (1)), i.e. add a premium. Allowing for different levies to be charged will create regulatory fragmentation and therefore confusion amongst operators, undermining the Welsh Government’s intention to create a scheme that follows nationally set standards and is thus easy for accommodation providers to understand and comply with. Instead, some hosts may find themselves having to comply with several different rates for different properties and this would greatly increase administrative costs for them (which is not reflected in the impact assessment to the Bill). Secondly, the Bill allows councils to take action on a levy after a period shorter than 12 months since the notice was published, provided the council and the Welsh Revenue Authority (WRA) agree to it (part 3, section 26 (3)). While this provision may be helpful in the case of a council seeking to quickly reverse the introduction of a visitor levy and minimise economic loss, the current wording leaves open the possibility for a council to not just remove but also introduce a levy with less than 12-month notice. In line with the Government’s stated expectations, we believe that this exception should only apply where councils want to remove a visitor levy, but not where they wish to introduce one, and see no reason why this should not be specified in the legislation. Moreover, it is still unclear what the VAT treatment will be, which may especially punish smaller owners. Finally, another point which could benefit from further explanation is how the current Bill will interact with the forthcoming one on licensing.