Is it time for visitors to pay to play?

‘Users pay’ tourism funding models in regional destinations

With government funding shrinking and tighter budgets all round, it is time to look seriously at ‘user pays’ 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 a visitor pay to play model.

Here we explore three types of user pays systems, with examples from across regional Australia and beyond:

• A levy on local businesses

• A tax on tourists

• A voluntary contribution by businesses or tourists

Levy on businesses

Deniliquin, NSW

The best we have seen on a small scale is what Deniliquin Shire Council (now Edward River Council) in NSW did in 2015. The 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 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

Another example is Swan Hill Inc in Victoria, a Chamber of Commerce with a focus on destination marketing. Swan Hill have had a levy on all businesses for about 20 years. Every 5-7 years there is a vote to reinstate it, and 3/4 must vote for it for it to continue. 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, but everyone can see that main street shops aren’t empty anymore, and they credit this to the marketing campaigns.

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. Today this is under review, as major local manufacturers only pay $200 per year when they easily could pay more.

The levy was set up so every sector had a committee and 50% of their sector’s funds were spent how they want to spend those moneys, and 50% was used for 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 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 the 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 tourists

Introducing any kind of tax, levy, fee or visitor contribution is going to create great debate and divided viewpoints but when we have shrinking budgets, growing impacts, and damage to infrastructure and natural assets, we have to be bold enough to ask the visitors that enjoy our 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 and Bhutan

There are regions with a tourist fee to help with overtourism issues, 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 a fee 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 and Ontario

Our Kushla used to live in a destination with millions of visitors a year and only a few thousand residents (Wisconsin Dells, USA), and a bed tax maintained all the infrastructure required to service the tourists and their cars, which it would have been impossible for the residents to fund.

Our friend Pete from WOOF! Media lives in a destination (City of Thunder Bay, Canada) that has a bed tax and offers some words of advice to others looking at 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 a tax on without bringing those affected along for the ride will doom it to failure.

Voluntary contributions

The exciting thing today is seeing cities and regions around the world taking the ‘levy’ idea further and 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.

States are restricting Tourist 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 Queensland Councils

This happened to Byron Shire Council (where there is an overtourism problem) and to a number of Queensland Councils who wanted to implement a levy - in both cases the State Government (NSW and QLD) forbade the local government authorities from implementing a tourist tax.

Learn more

Check out the white paper Destination funding and the impact of tourism taxes on European cities

Over to you  

if you are aware of any innovative examples of user pays model, please share them with us in the comments!