Most hotels already use computer software that calculates and adds more than one tax as required. The benefit to hotels should be that they will have increased revenue from marketing campaigns that bring in more tourists. The collection cost for the City could be covered by small charge against the total funds raised by the Levy.
Your Questions & Answers
How much would it cost hotels and the City to collect an Accommodation Levy?
Will the levy be applied to campgrounds?
Most cities do not charge an Accommodation Levy on campsites and there is no plan to do this in Yellowknife.
Who is monitoring the collection of the Levy to ensure hotels are collecting and remitting?
The City will be working with hotels to set up the system. Collecting the Levy would be treated like any other tax that is being collected. Hotels would be required to keep records that would be available for audit and/or inspection.
Why not make the Accommodation Levy voluntary? Don’t cities in Ontario use something called a “Destination Marketing Fee” which can be taken off the guest’s hotel bill if they ask?
The voluntary fee hasn’t worked very well in most places. Some hotel chains refuse to participate and the lack of consistency from one hotel operator to another is frustrating to consumers. The use of Destination Marketing Fees is also not as transparent as when the money collected is managed by a not-for-profit Society dedicated to tourism marketing.
Don’t tourists already avoid Yellowknife because of high costs? Won’t an Accommodation Levy reduce tourism levels?
Not likely. Most cities now charge an Accommodation Levy, so the Levy charge will not be a total surprise. In winter visitors often come to Yellowknife for three days and stay two nights. A 3% Accommodation Levy would add about $12 to the cost of an average visit for two people. Including airfare, hotel, meals and activities the average three day cost for two people from a southern city like Calgary would be $1,500 to $2,000. So a $12 charge on hotel rooms (@ a 3% Levy) is not likely to be a deal breaker.
For example: Air Canada (2 return fares @ $400 each), Explorer Hotel (2 nights @$195), Meals ($60 per day per person); Excursions (Aurora and dog sled $200 for both); gifts/Souvenirs ($100 each) = $1,630 plus tax.
Why do hotels have to be the only ones carrying the burden of raising funds for marketing the city using an Accommodation Levy?
The type of expenditure most associated only with visitors is the cost of accommodation. So adding a charge to accommodation has come to be considered as the fairest way to raise money while avoiding increasing costs for local residents. Charging an extra fee at restaurants, arts and crafts stores, festivals, sports events, taxis, bars and night clubs would increase costs for local residents more than for visitors.
If there has to be a Levy, why not start low and raise it a little at a time?
The experience of other cities is that it can be hard to increase a Levy. Their advice is to start with what is needed to allow the city to have an impact on tourism marketing. In Yellowknife’s case this woud be best at about 3%.
Who controls the spending of marketing dollars and what say does the City have?
Since it is the City that collects the Levy almost all cities with an Accommodation Levy require that the City review and approve the annual destination marketing plan and budget. However the operation of the Destination Marketing Organization is separate from the City and the City does not have any day-to-day control of the Destination Marketing Organization. The DMO reports to an independent not-for-profit Society that leads the community’s destination marketing efforts on behalf of all stakeholders.
How will the City evaluate the effectiveness of the marketing efforts?
In most cities the annual DMO marketing plans have specified performance measures. It is common that the performance measures include both activity and impact measures. The impact measures can be set in terms of both measureable changes and improvements.
Does tourism drive up the cost of living in Yellowknife?
In a city like Yellowknife tourists have minimal negative impact on roads and infrastructure. The services they use are often different than the ones that citizens use. On the positive side tourism creates jobs and brings economic benefits. It can increase social and cultural benefits as larger numbers of visitors can make special events, festivals, specialty restaurants and expanded cultural facilities more economically viable and available for both citizens and visitors.
Can Levy funds go to fund a visitor centre?
In most cities funds collected by an Accommodation Levy go strictly to “destination marketing.” Almost everywhere, visitor services are already being funded by contributions from city and provincial or territorial governments. And, the practice across Canada is to treat funds raised for a DMO as new funds. With the exception of St. John‘s, Newfoundland, where the DMO funds go to the interest payments on a Convention Centre, DMO funds in Canada are also not used for capital expenditures. DMO funds are almost always focused on marketing to increase traffic to a tourism destination.
What about Airbnb accommodations? Will the Levy be applied and if so, how will it be enforced?
If the Accommodation Levy implementation plan includes collecting the levy from B&B guests, then all B&Bs will be required to include the Levy on the room cost. The City of Yellowknife will be reviewing short term accommodation issues this year, as well as best practices from other jurisdictions. Items such as licensing and enforcement will also be reviewed.
Does the City of Yellowknife have small, medium and large sized B&B categories/definitions? Due to limited occupancy, are not all small?
The City of Yellowknife does not define B&Bs by categories. To date, no decision has been made about collecting the Levy from visitors who stay in B&Bs. However, our research shows that most “Accommodation Levy” programs in Canada do not collect the Levy from B&Bs that have less than four rooms, or from guests who stay for 30 plus consecutive days.
How much could an Accommodation Levy raise?
Based on current nightly hotel rates, a Yellowknife Accommodation Levy could raise between $350,000 (with a 1% charge) and $1.8 million (with a 5% charge) a year if the Levy was applied to businesses that have four or more rooms for rent. A 2% charge would raise approximately $750,000. A 3% charge could raise approximately $1.1 million and a 4% charge could raise approximately $1.5 million.
Could an Accommodation Levy charged in one town or city be used to help pay for marketing programs by other NWT towns and cities?
This not what the City of Yellowknife is requesting. The City is asking for tax-based NWT municipalities to be given the power to collect a Levy on short term accommodation in their own communities and to use that Levy to pay for tourism marketing promoting their own community.
Would Yellowknife residents have to pay the Levy if they choose to stay in a Yellowknife hotel themselves?
In other Canadian cities we have studied there is no exemption for local residents.