A tourist tax of up to £3 a night to stay in London must be reinvested to make the capital an even stronger magnet for overseas visitors, say business chiefs.
They stressed that the millions raised should be used to boost the city’s hospitality sector and tourism attractions rather than being diverted to plug funding shortfalls.
The Government is backing Sir Sadiq Khan and other mayors introducing a tourist tax.
A consultation is due to end on Wednesday on the new levy which will be charged on hotels and Airbnb-style accommodation.
In its response to the consultation, business group BusinessLDN called for the tax to be a flat rate of around £2-3 per night, with a cap on the maximum number of nights for which it is charged to avoid discouraging long stays.
It described such a proposed level for the levy as “the least worst option” amid fears that it could hit the capital’s hotel sector and wider tourism industry.
With thousands of jobs going in the city’s hospitality sector, Muniya Barua, deputy chief executive at BusinessLDN, said: “Hotel and accommodation providers are facing a perfect storm due to significant tax hikes and rising employment costs.
“Introducing a new overnight visitor levy at this time will be extremely challenging for the sector so it’s vital that these plans are well-thought through and deliver tangible results in terms of boosting inward tourism.”
She added: “The Government should in parallel take steps that can enhance the attractiveness of London and the UK, such as re-introducing VAT-free shopping for international visitors which would more than pay for itself.”
BusinessLDN, which represents 170 leading employers in the capital including hotels, airports and business improvement districts, argued that proceeds from the levy should be ringfenced to support growth and increase tourism, and that it should be “as simple as possible” in design and administration.
New York, Tokyo, Lisbon, Barcelona and Prague already have a tourist tax, as does Paris which has a range of charges including 3.25 euros (£2.86) for an overnight stay in a two-star hotel and 8.45 euros (£7.43) for a four-star hotel.
But UKHospitality, which represents hotels, pubs and clubs, has opposed the plans for a tourist tax, which could raise £250 million a year in London, slamming them as “shocking” and warning they would “only serve to ramp up prices and drive inflation”.
A spokesperson for the Mayor of London said: “The Mayor welcomes the Government providing London with new powers to charge a tourist levy.
“This extra funding will directly support the capital’s economy and help cement our reputation as a global tourism and business destination. “
City Hall pledged to work with the hospitality and tourism sectors, as well as boroughs, to ensure the levy delivers the “maximum benefits” for London.
“Providing London with the powers to collect and retain a tourist levy would generate sustainable revenue to reinvest back into London’s economy, driving growth, creating new jobs and boosting the UK’s global standing and competitiveness,” the spokesman added.
In another major change to Airbnb-style accommodation in London, a registration scheme for short-term lets is due to be introduced to stop breaches of a 90-night a year rule limiting how often homes can be rented out and to protect housing for Londoners.
