The Visitor Levy (Scotland) Act 2024: What it means for accommodation providers

In 2024, the tourism sector in Scotland was valued at approximately GBP10.8 billion, accounting for a substantial portion of the nation's economic activity.¹ The sector supported around 245,000 jobs, representing 9.2% of total employment in Scotland.² Additionally, there were 10.6 million overnight trips made by residents of Great Britain alone to Scotland, resulting in 29.5 million overnight stays.³ These figures underscore the importance of tourism to Scotland's economic health and highlight the potential impact of the newly introduced Scottish Visitor Levy (SVL).

The Visitor Levy (Scotland) Act 2024 (2024 Act), enacted in July 2024, introduces a significant change for the hospitality sector, particularly for accommodation providers. This new legislation introduces the SVL, colloquially referred to as the "tourist tax". This allows local authorities to impose a levy on overnight stays in certain types of accommodation to raise funding to support tourist and visitor facilities and services.

As the first city to implement this levy, Edinburgh is setting a precedent that other councils will likely be monitoring closely. Some of the key elements of the SVL which are relevant to accommodation providers within its scope include:

• Local authority discretion and Edinburgh's implementation: The 2024 Act allows local authorities to decide whether to implement the SVL and to set the rate and duration. This means that the impact can vary significantly across different regions. For example, Edinburgh has decided to implement a 5% levy on overnight stays (the rate), capped at five consecutive nights (the duration).⁴ This flexibility allows local authorities to tailor the levy to their specific tourism needs and economic conditions, potentially leading to diverse implementations across Scotland.⁵
• Potential for broader adoption: Other councils, such as Aberdeen, are considering similar measures, proposing even higher rates such as 7%.⁶ The Federation of Small Businesses reports that two-thirds of councils are exploring the possibility of adopting the levy or "actively pursuing its introduction".⁷
• Businesses affected: Affected accommodation includes but is not limited to, hotels, hostels, B&Bs, guesthouses, and self-catering accommodations, but not accommodation such as local authority accommodation or registered social landlord traveller sites.

Some of the key commercial implications for accommodation providers and customers include:

1. Increased costs for guests: The levy will directly increase the cost of overnight stays, which could influence booking decisions.⁸
2. Revenue allocation: Funds generated from the levy are intended to support local tourism infrastructure and services, potentially benefiting the hospitality sector indirectly by improving the overall visitor experience.⁹
3. Competitive positioning: Hotels in regions without the levy might gain a competitive edge in terms of pricing, especially those close to the borders of the regions which impose the levy. Conversely, hotels in levy-implementing areas will need to emphasise the added value and enhanced local amenities funded by the levy. On this basis, early commercial consideration as to how to respond to the SVL being introduced is critical.
4. Operational adjustments: Hotels will need to update their billing systems to incorporate the levy and ensure compliance with local regulations. This includes clear communication with guests about the additional charge. Providers must ensure their systems are capable of collecting the levy and, if necessary, refunding it in the event of a reservation cancellation.
5. Enforcement provisions: The enforcement mechanisms under the 2024 Act are somewhat stringent. Local authorities have the power to inspect and seize documents with limited notice,¹⁰ ensuring strict compliance with the levy requirements. This means accommodation providers must be meticulous in their record-keeping and levy collection processes to avoid the various penalties the act empowers authorities to impose. The enforcement mechanisms and powers to impose default penalties under the 2024 Act underscore the importance of getting the operational aspects right to prevent any legal or financial repercussions.

Future Considerations

To maximise the benefits of the 2024 Act, accommodation providers should closely monitor its impact on bookings and guest feedback. This data will help in making strategic adjustments, such as offering special promotions if the levy deters guests. Active engagement with local authorities through consultations can ensure the hospitality sector's interests are considered in the levy’s implementation.

Conclusion

The 2024 Act represents a significant shift in how local tourism is funded and managed. It is imperative that hospitality sector providers to who the SVL will apply take advantage of the lead time currently available to ensure that their operations are compliant.

For a more detailed discussion on how this legislation might specifically impact your operations and strategic planning, please reach out to James McGachie or Allan Leal of DLA Piper Scotland LLP.