OPINION: Where’s the detail on visitor levy impact?


YOURWORD: Brett Duncan

Brett Duncan is managing director of Adventure Hostels New Zealand, in Camp Street, Queenstown

The idea backpackers don’t spend money is a myth. They use budget accommodation so they can spend their savings over months, not weeks like traditional holiday makers. Five per cent can make all the difference.

What follows are simply facts.

Backpacker arrivals are down five per cent. Average stay is down a further 13 per cent. Shoulder season nightly rates are the lowest in six years. And 16 of 21 hostels here are small business, 19 are privately owned, two are non-profit.

Backpackers provide most of the hospitality workforce. Fifteen per cent GST, 15 per cent commission and five per cent levy is 35 per cent of the advertised bed rate. Independent hostels have not been consulted. An impact study has not been presented.

Further, many traffic issues will not be fixed by a QLDC levy. State Highway 6 (Frankton Road, Ladies Mile) is a central government road and funding problem.

Mayor Boult announced a 5 per cent levy, dismissing the need to conduct a study into the impact by stating a levy has been proven to have no effect elsewhere. Without referencing a study, this is simply assumption.

Average bed rates are about $40 a night. We’re largely small operators trying to get by, so if we believed backpackers would pay 5 per cent more, we would already be charging it. Bed rates are driven by what people are prepared to pay and what their budget is, not an arbitrary number plucked from wishful thinking. It’s disingenuous of the mayor to suggest we could maintain higher rates.

It’s simple: rates go up, some people are discouraged from visiting, one business struggles for market share and lowers rates, others follow so they don’t also lose market share. Therefore, the levy comes from profits, not the visitor. Same reason why rates this month are lower than they were in May 2013; it’s called supply and demand.

GST is not the only tax derived from tourists. Our revenue is 100 per cent driven from tourism and 95 per cent comes from international visitors. A small hostel will generate about $175,000 in GST, PAYE and company tax annually. That’s all tourist money. A $150,000 developer contribution is paid at fit-out, a fee council states is to ease the burden our guests would bring on to the town’s infrastructure.

This not only affects hostels and hotels. Do you Airbnb a room or house? Short-term property managers; are your clients aware this will impact them? Do you operate a business in hospitality?

Backpacker numbers are falling, so deter them further and hospitality has a problem. Demand for workers will push up pay rates, which will push up prices; consider bar price rises since the minimum wage increase. Some businesses will reduce operating hours, as was seen last November. Other industries are also reliant on a backpacker workforce.

This referendum and levy model are non-binding. Is staying silent and hoping it’s not added to your business worth the risk of not fighting for a larger GST share?

Slowing global economies, trade wars, Brexit, and Australian housing slumps contribute to falling visitor numbers. Tourism is our number one industry, so there could be no worse time to experience the impact of this levy. No matter your industry in Queenstown, we all rely on tourism. To think this will only affect accommodation providers is naive. QLDC have not presented a study to show otherwise.

The mayor’s open letter was little more than a rallying cry containing assumptions without evidence to support his claims. He admits “council has not been able to provide detailed information”. Where is the feasibility study into the wider impact a levy would have on our town? We need the results of such a study to have an informed debate prior to the referendum, not uninformed opinions due to a lack of consultation and research.

We need to start asking better questions to see the bigger picture. Starting with, “why won’t central government step up with tax sharing?” – “Because they’ve already said no” is not good enough. To our mayor and central government ministers, the question is,”why not?”