Garry Clark: Tourist tax poses a threat to Edinburgh's small businesses

If tourism in Edinburgh is booming, then so must be our tourism businesses. That, at least, seems to be the view of many and this argument has been used by those proposing a tourism tax, or Transient Visitor Levy, for our city

Monday, 14th January 2019, 5:00 am
Garry Clark is Development Manager - East of Scotland, Federation of Small Businesses

However, is everything as it seems? Are our local small businesses operating in the tourism and hospitality sectors thriving, or are there challenges lurking behind the apparent tourism boom? Indeed, are our small businesses being listened to?

Edinburgh is home to many small businesses for which tourism is hugely important: small hotels, guest houses, self-catering accommodation, bars, restaurants and retailers, to name but a few. We have a strong local economy that can sustain a great many businesses, large and small, but Edinburgh’s draw as a destination for tourists and visitors helps to create an even more thriving and diverse city – a great place to live and to do business.

Some of Edinburgh’s tourism economy is constant – for example, Hogmanay and the festivals. However, the ways in which visitors choose to enjoy our city, and particularly their choice of accommodation, is constantly evolving. On the one hand, plans for new luxury hotels are gathering pace; whilst on the other, the number of Airbnb rooms in the city has sharply increased. All of this has combined to create competition in Edinburgh’s accommodation sector like never before.

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This is great news for tourists, who are faced with more choice than ever, but it means that accommodation providers – and small businesses in particular – are facing unprecedented challenges in filling rooms.

Edinburgh’s accommodation occupancy rate, though still high in comparison to the rest of Scotland, actually fell across most of 2018. Indeed, Federation of Small Businesses members reported empty rooms even during the busy festival season. This would have been unheard of even a few years ago. Small businesses have responded by cutting room rates and investing in marketing and in the fabric of their properties. They are working harder to attract visitors and there is a cost associated with that.

These are among the reasons why Edinburgh’s small tourism businesses have been so concerned about the impact of a tourism tax in the city. At a time when some guest houses or bed and breakfasts are struggling to fill their rooms, along comes the council asking them to be unpaid collectors of a tax untried in the UK, which they fear could result in fewer tourists deciding to visit Edinburgh.

Marketing Edinburgh’s research shows that a tourism tax might not deter 78 per cent of visitors but even if only three per cent of tourists chose not to come, the impact could be the loss of over £40 million to the Edinburgh economy. In addition, it is completely understandable that firms have concerns when proponents have been unhelpfully vague about how they’d collect such a levy.

Small businesses will continue to play a crucial role in Edinburgh’s tourism economy and their views on the challenges and opportunities ahead must be listened to by government at a local and national level if our city’s successes are to be shared.

Garry Clark is Development Manager – East of Scotland at the Federation of Small Businesses