What the Overnight Visitor Levy means for hotels

Home » Resources

Back in December, we looked at the Government’s plans to give English mayors powers to introduce a tourist tax. In May, we revisited the debate and considered whether a visitor levy could ultimately help or hinder the hotel sector.

Now, we have more clarity.

On 10 September, the Government confirmed plans to give mayors and other local leaders across England the power to introduce an Overnight Visitor Levy (OVL) on short-term accommodation.

Importantly for hotels, we also now know more about how the levy is expected to work.

What has changed?

Rather than introducing a single national tourist tax, the Government plans to give local leaders the choice of whether to introduce an Overnight Visitor Levy in their area.

Any authority considering a levy will need to consult locally before introducing it, meaning the eventual approach and rate could differ from one destination to another.

The Government has also confirmed that the levy will be calculated as a percentage of the accommodation cost rather than a flat nightly fee.

The reasoning is that the charge should be proportionate. A guest staying in budget accommodation would therefore pay less than someone booking a higher-priced hotel stay.

Revenue raised could then be invested locally in areas such as transport, infrastructure, high streets, events and the wider visitor economy.

What could a percentage-based levy mean for hotels?

For hotel operators, the percentage-based approach is particularly significant.

The higher the room rate, the greater the monetary value of the levy. Hotels will therefore need to consider how an additional charge affects the total price guests see and pay, rather than looking at room rates in isolation.

This matters at a time when consumers and corporate travel buyers are already highly conscious of price.

Even where the levy is ultimately passed on to the guest, it still increases the overall cost of a stay. Hotels could consequently face difficult decisions around pricing, packages, promotions and maintaining their competitiveness against properties in neighbouring areas where a levy has not been introduced.

There is an administrative consideration too. Accommodation providers will be responsible for calculating and paying it, although they may choose to pass the cost on to guests.

For groups operating hotels across different parts of England, this could become particularly important if different authorities adopt different rates or exemptions.

Another pressure on hotel economics

The levy doesn’t arrive in isolation.

Hotels are already managing significant pressures across labour, energy, food and beverage, supplier pricing and other operating costs. An additional charge on accommodation could therefore add another variable to an already complex profitability equation.

UKHospitality has strongly opposed the proposals and argues that an additional levy could affect demand, jobs and economic output.

The Government takes a different view, arguing that money raised locally can be reinvested in the destinations that attract visitors in the first place – improving infrastructure, transport, public spaces and events and, in turn, supporting the visitor economy.

For hotels, both sides of that equation matter.

Investment that makes a destination more attractive could help generate additional demand. But operators will still need to understand what an increased overall cost to the guest means for occupancy, average daily rate and total revenue.

Room revenue is only part of the picture

For full-service hotels in particular, the impact of any change in guest behaviour extends beyond bedrooms.

A hotel stay can generate revenue across restaurants, bars, room service, events and other F&B outlets. If guests become more price-conscious because the overall cost of their stay has increased, protecting profitability across these areas becomes even more important.

That means understanding not simply how much revenue each outlet generates, but what it actually contributes to the bottom line.

Accurate recipe costing, menu engineering, purchasing, inventory management and waste control can help hotel teams identify where margins are being lost and where there are opportunities to improve performance without compromising the guest experience.

Visibility will become increasingly important

Hotels cannot control whether their local authority ultimately introduces an Overnight Visitor Levy.

They can control how well they understand and manage their own operation.

Having accurate, connected data across purchasing, recipes, menus, inventory and F&B performance gives hotel teams greater visibility over where money is being made – and lost.

If the total cost of staying in a hotel increases, finding incremental improvements elsewhere in the operation could become increasingly valuable.

A small improvement in food cost percentage, reduced waste, better supplier purchasing or a more profitable menu mix may individually appear relatively modest. Across multiple outlets, hundreds of covers and an entire hotel group, however, those improvements can add up.

What happens next?

The announcement doesn’t mean every hotel in England will suddenly be subject to a visitor levy.

The powers still need to be introduced through legislation, and individual local leaders will then decide whether a levy is appropriate for their area. Local consultation will form part of that process.

That means hotels should watch developments within their own strategic authority particularly closely.

For hotel operators, the question is also beginning to move on from “Will England introduce a tourist tax?” to “What would a local levy mean for our guests, our pricing and our profitability?”

Whatever individual authorities decide, the direction of travel reinforces something hotels already know: protecting margin is becoming increasingly complex.

And when external costs and charges are outside an operator’s control, having visibility and control over the costs that can be managed becomes even more important.

Sources

• GOV.UK – Government announcement, 10 September 2026
• GOV.UK – Visitor Levy consultation outcome
• UK Parliament – Fiscal Devolution in England statement
• UKHospitality – Holiday tax scheme proposal