Auckland Mayor Phil Goff has proposed a targeted rate on Auckland’s accommodation providers. This mechanism requires around $27 million to be raised by applying an additional rate on the capital value on hotels, motels, backpacker hostels and camping grounds throughout the Auckland region.
The proposed targeted rate does not relate to guest occupancy. Instead, it relates to the capital value of the property.
Business owners like Gina Kamboj from The Kentish Hotel in Waiuku have labelled the proposed rate as unfair: 9 per cent of Auckland’s tourism sector paying 100 per cent of the cost of a rate.
Gina and other business owners like her are telling me that tens or even hundreds of thousands of dollars in additional rates levied by Auckland Council would be so punitive it would literally force owners to consider their future in the accommodation industry.
The proponents of the targeted rate frequently fall back to headlines about hotel room rates during nights when Adele performs in Auckland, or during the Lions tour.
Prior to 2017 the Lions last toured New Zealand in 2005. Adele herself reportedly declared to her adoring Auckland audience: “Touring isn’t something I’m good at … applause makes me feel a bit vulnerable. I don’t know if I will ever tour again … I’m not sure if touring is my bag”.
Outside of the glamour fixtures and events, the owners and managers of Auckland’s accommodation establishments are still vacuuming, washing sheets, mowing lawns and cleaning swimming pools – both during the peak and the off-peak season.
The Kentish Hotel is a grand establishment, but it demands work and constant attention irrespective of fluctuating occupancy rates.
Industry representatives have told me that Auckland was ‘full’ for 9 nights in 2016. The peak rates during the small window of full occupancy helps to cover the months of lower occupancy.
If we accept the industry’s assertion, average room rates in Auckland are only now recovering after more than a decade of decline. Is this a buoyant industry ripe for the plucking?
Many of Auckland’s motels struggle to achieve more than 50 per cent average annual occupancy. Many of Auckland’s inner city hotels book rooms a year in advance under contracts with prices unable to be varied to accommodate Mayor Goff’s proposed targeted rate.
Gina tells me that she is achieving around 40 per cent average annual occupancy. Her initial assessment of the impact has left her considering whether in fact she will need to close down her hotel operation altogether.
Metasearch engines like Expedia charge Gina and other accommodation providers an average of 15 per cent commission on each booking online. Strip out the general property rate, any applicable Business Improvement District targeted rate, Mayor Goff’s proposed targeted rate, and the commission paid to United States-based travel fare aggregator websites, and not much is left over.
The proposed targeted rate is designed to replace the $27 million Auckland Council currently provides from general rates to Auckland Tourism, Events and Economic Development (ATEED) to fund ‘visitor attraction and major events’. But Gina and other business owners don’t feel the benefit of that work at the margins of the Auckland region.
I support requiring visitors to help fund Auckland’s tourism promotion. But a visitor levy or a bed tax based on one’s stay is not the same as a rate based on the capital value targeted at a narrow cohort of properties.
As decision-makers we have a duty of care to consider Gina and other business owners who would be significantly affected by the proposals contained in Auckland Council’s draft Annual Plan.
By Daniel Newman, Auckland councillor