InterContinental chief warns on hotel 'bed tax'

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The Independent Online

InterContinental boss Andrew Cosslett slammed a proposed "bed tax" yesterday as a local government money-grabbing scheme that would wipe £300m from UK hotel industry revenues.

He warned that the tax, which is being promoted by local authorities, would harm the British economy by deterring overseas tourists and enticing UK holidaymakers to go abroad.

A hotel bed tax is being considered as part of an independent review by Sir Michael Lyons into local government funding and has drawn fierce opposition from British tourism bodies as well as the hotel industry.

Mr Cosslett, the chief executive of the world's largest hotels group, said: "We're very against this as a notion. This seems to be ill thought through. This is a country that people want to visit but we're making it increasingly difficult for them to come.

"And to penalise people within Britain for wanting a holiday here isn't the right thing to do. There's really no evidence there's any benefit - it's just a money-making scheme."

The figure being bandied around is a bed tax of 5 per cent, though it may be higher. Mr Cosslett argues the timing is particularly bad as the tax would come before the 2012 London Olympics. His comments came after InterContinental unveiled a 7.6 per cent increase in first-quarter pre-tax profits to £70m, driven by strong demand in America and China.

The idea of a bed tax has been floated by the Local Government Association in a consultation led by Sir Michael, a professor of public policy at Birmingham University, who previously advised the government on moving thousands of civil service jobs out of London. The professor is looking into the role and funding of local authorities, including the reform of council tax. The Lyons report is due in December, but the hotel and tourism industry is already lobbying heavily to squash the bed tax. Sir Michael stated in his interim report last December that he "was interested in exploring this issue (of tourist-related taxes) further".

Travelodge has warned that a bed tax of 10 per cent would add £100 to a weekly accommodation bill for a family of four. Of 2,000 people it surveyed, 77 per cent said they would be more likely to go on holiday abroad as a result. Travelodge's chief executive Grant Hearn said it was "a poll tax" and added: "Our research shows that holidaymakers would spend less on other local businesses like bars, restaurants and shops. It would be bad for local economies, and bad for us."

InterContinental and Travelodge have joined forces with the British Hospitality Association, VisitBritain, VisitLondon and the TourismAlliance to fight the proposed tax. Miles Quest, a spokesman for the BHA, said: "We don't know on what basis the tax will be, whether it will be statutory or whether local authorities will have the power to introduce it locally - it's all very vague." He added: "We're fiercely opposed to it because of the extra cost on businesses and holidaymakers in the UK - this is the last thing they want." A 5 per cent tax would saddle holidaymakers and businesses with an extra bill of £190m, he said.