Is it time for tourism beneficiaries to pay?
‘Beneficiaries pay’ tourism funding models in regional destinations
With tighter budgets all round, it is time to look seriously at ‘beneficiaries pay’ funding models to sustainably support destination management.
Whilst conversations around levies have been coming up for many years across Australia it appears as though few have been bold enough to take the plunge and introduce either a visitor pays or a tourism business pays levy.
Here we explore three types of beneficiary pays systems, with examples from across regional Australia and beyond:
A levy on local businesses
A tax on visitors
A voluntary contribution by businesses or tourists
Levy on businesses
Deniliquin, NSW
In 2015 Deniliquin Shire Council (now Edward River Council) introduced a controversial tourism tax on all businesses to generate funds to apply for matching state funding for destination marketing. The levy was introduced as a three-year trial with the intention of attracting more visitors, residents, and investors.
This tactic resulted in a budget of $240,000 for tourism promotion, including matched funding from the state tourism organisation. This was a smart, strategic way to create an exciting destination campaign.
The two-year marketing campaign resulted in 15% more room nights over a year (an additional 6,250 room nights) – and that was a handicapped result as room nights were significantly impacted by a flood, an algae outbreak in their key attraction (the river), and a major local business closing, which impacted mid-week business travel.
The ROI of the marketing campaign was calculated to be just under $15 : $1. The Deniliquin Business Chamber representative on the Deniliquin Promotions Advisory Group said the results justified the decision to push ahead with the levy.
Swan Hill, VIC
Swan Hill Inc is, a Chamber of Commerce with a focus on destination marketing. Swan Hill have had a levy on all businesses for around 20 years. Every 5-7 years there is a vote to reinstate it (or not), and 3/4 must vote for it for it to continue.
Although Swan Hill Inc don’t report to the business community on the achievements made using the levy beyond the number of leisure and business visitors who come to town, everyone can see that main street shops aren’t empty anymore, and they credit this to the marketing campaigns paid for by the levy.
The levy was set up on a tiered structure with hospitality businesses paying a higher rate, then retail, then trades and services paying less, then manufacturers the least. This was recently reviewed, as major local manufacturers only pay $200 per year when they easily could pay more.
The levy was set up so every sector of the local economy had a committee and 50% of their sector’s funds were spent how they want to spend those moneys, and 50% was used for tourism marketing. This structure didn’t work as there were not enough volunteers to form committees, and they don’t know how to spend money effectively. Now there are only two committees – traders and marketing – plus the board.
The traders committee have run CBD activations such as an Easter market, downtown Christmas decorations, and a successful food and wine festival on a long weekend (a separate committee planned and delivered this). Part of their marketing funding also goes towards attracting new big businesses.
Swan Hill Inc also leverage their levy to provide the matched funding required by grants.
Pay to play - Levies on visitors
Introducing any kind of tax, levy, fee, or visitor contribution is going to instigate debate but when destinations experience shrinking budgets, growing impacts, and damage to physical infrastructure and natural assets, we have to be bold enough to ask the visitors that enjoy the destinations to contribute to them.
Residents pay rates to help with the upkeep of local infrastructure and community assets - why shouldn’t visitors contribute too?
Venice, Italy and Bhutan
There are regions with a tourist fee to help reduce overtourism, such as Venice’s overnight tax ($1.65-$8.25/night for the first five nights) and a new daytrippers’ contribution for access tax from 2024 ($9.90).
Bhutan charges visitors a Sustainable Development Fee of $155/day - though this was recently cut in half to try to attract more visitors.
Such fees can create an ‘exclusive’ destination, but perhaps this is the way to go for those destinations that are simply over loved, particularly by low yield day-trippers.
Wisconsin, USA and Ontario, Canada
Wisconsin Dells is a destination with millions of visitors a year and only a few thousand residents, and a bed tax maintains all the infrastructure required to service the tourists (and their cars!), which it would have been impossible for residents alone to fund.
City of Thunder Bay, Canada has a bed tax, and a tourism consultant who lives there offers this advice to others considering this option:
Keep bureaucrats’ hands off the money – make sure the fund is managed by the tourism industry and the community, otherwise, it can turn into money-for-votes.
Think carefully about how a ‘tax’ is communicated both locally and to visitors. Slapping on a “tax” without bringing those affected along for the ride will doom it to failure.
Voluntary contributions
An exciting thing today is destinations implementing voluntary contribution programs that tap into people’s desire to give back and do good. This tactic acknowledges that sometimes it’s not possible or desirable to enforce a levy on users, in which case it can be a good idea to offer visitors the opportunity to voluntarily contribute to the sustainable management of the destination.
Noosa, QLD
Noosa’s Trees for Tourism initiative is an example of a voluntary contribution. Visitors can donate to this program through the Visit Noosa website and at the visitor centre, and many local tourism businesses contribute donations. The program is also used in a non-voluntary way: Noosa's major events donate $1 from every ticket sale to the program, which is not an opt-in or opt-out payment from the attendee’s perspective.
Restricting visitor taxes
Some regions have investigated tourism levies and some have gotten close to getting them over the line, but then they get shut down for various reasons including state government push back.
Byron Bay, NSW and Noosa, QLD
Byron Shire Council, which grapples with an overtourism problem, was forbidden by the state government from implementing a bed tax, though the state allowed them to implement another kind of tourism levy. The new type of levy is still to be confirmed - potentially either charging visitors 1% more for goods or services costing more than $100, capped at $5, or a levy on all businesses as Noosa Shire Council has for marketing and implementation of projects in the Local Economic Plan. Noosa raises $2.5 million each year with this levy which funds the local tourism organisation, Tourism Noosa.
Queensland Councils
A number of Queensland Councils in 2022 who wanted to implement a levy experienced similar pushback from the Labor state government who had promised voters no new taxes. Today under a new LNP state government, the opportunity to update the Local Government Act to allow regions to put in a Visitor Levy at a local government level, if it is right for their communities, is a conversation that could be explored.
Over to you
if you are aware of any innovative examples of a ‘beneficiaries pay’ model, please share them in the comments!
