There was a time – not so long ago, although it feels a bit sepia-toned now – when London was a place where tourists arrived with stars in their eyes and left with shopping bags that had cut off circulation to their fingers.
Harrods bags, Selfridges bags, Mulberry bags, the bright yellow of Fortnum’s peeking out from a suitcase sat on in a hotel lobby. Europe’s most popular playground for adults; Manhattan’s chic transatlantic sibling; Tokyo’s idea of European swagger with better tailoring and messier restaurants.
And somehow, somewhere between the end of the pandemic and the beginning of this new national habit of self-sabotage, we concluded that this was all terribly inconvenient.
Because instead of rolling out the red carpet for the big-spending visitors who fund much of our hospitality and retail sectors, we seem determined to trip them up with a series of political banana peels. A kind of bureaucratic Mario Kart, except instead of cartoon plumbers sliding off Rainbow Road, it’s Mulberry’s Andrea Baldo watching millions disappear from his London coffers.
First came the abolition of tax-free shopping, what the press politely calls the “tourist tax,” but business leaders today speak about it in much the same tone one would reserve for a hornet’s nest in the attic. It was, in the gentle words of one retail boss, a “massive global disadvantage”. He’s not wrong. France is wooing Chinese visitors with instant VAT refunds in Charles de Gaulle, Italy is essentially giving tourists a Prosecco while they prepare their Prosecco. In the meantime, we greet them with the fiscal equivalent of a bad-tempered traffic cop.
Retail bosses have been patient – or at least as patient as one can be when they point out, month after month, that the math just doesn’t add up. Tourists want the thrill of a VAT-free luxury holiday. If we don’t offer it, they’ll just go somewhere else. Hence the ever-louder chorus of people like Mulberry’s Baldo, who have watched sales in London decline while the Paris boutiques did well. You don’t need a PwC report to see what’s happening: Buyers are following Value, and Value has migrated.
You might think the lesson here is obvious. If you want tourists who are big spenders and see a long weekend as an Olympic sport, then don’t hit them with a tax as soon as they land. One might imagine, perhaps naively, that the next step would be to reverse the damage, or at least stop adding new obstacles.
But no. This is London. And when the opportunity arises in London to make a bad idea even worse, we grab it with both hands and a press release.
Step forward Sadiq Khan, who is making a big splash announcing the possible introduction of a second tourist tax – a nightly levy on hotel stays that, we are told, would “boost London’s economy”. That’s an interesting definition of “supercharge,” unless we use the word to mean “asking people for more money so they’ll spend less of it somewhere else.”
This proposed hotel levy, designed to bring the capital into line with other global cities, is the second blow in a one-two punch that the hospitality sector has absolutely not asked for. Because to be clear: London is not Barcelona, drowning in stag parties getting naked in fountains. Nor is it Amsterdam declaring war on the Hen Party Industrial Complex. London’s problem is not so many tourists, but the fact that we are making ourselves unattractive to those we need.
That’s why, in the 11th round, the hospitality industry looks a bit like a boxer, wobbling slightly, with blood in his eye and shouting “Really? Another one?” murmurs.
Hotels have only just crawled out of the Covid crater. Personnel costs are rising. Energy bills are rising. Supply chain madness. Then a visitor economy still recovering from the years when the only people checking into hotels were essential workers and couples pretending to “work from home.” Revenues are fragile. The margins are thin. And now a town hall-branded surcharge?
The timing is amazing. Just as business travelers, the holy grail of midweek occupancy, are beginning to return…just as American tourists are rediscovering the joys of London theater and carpeted pubs…just as Asia is again sending busloads of shoppers armed with American Express and enthusiasm…we decide to give them a bill for showing up in the first place.
What message does this send? The same goes for the VAT refund fiasco: London is becoming the most expensive and least rewarding city in Europe to visit.
Basically, it’s a lack of imagination. Instead of asking, “How do we compete?”, policymakers seem content to ask, “How much can we take away before someone books Berlin instead?”
The answer is increasingly: not much.
Because tourists talk. They compare. They do the math. And when your long-haul holiday is already costing thousands, the pound is weak and hotels are more expensive than ever, that extra charge per night isn’t symbolic, it’s irritating. Add to that the lack of VAT refunds and a weekend that once felt like fun suddenly becomes an exercise in tax masochism.
All of this could be gratifying if the revenue raised were used for something great – a transportation revolution, a cultural renaissance, a hospitality boom so extraordinary that visitors would line up to pay. But the rhetoric is vague, the benefits are theoretical and the impact on the ground is immediate.
The truth is quite simple: London thrives when it is welcoming, frictionless, rewarding and – crucially – competitive. What we have instead is the creeping notion that our leaders view tourists not as valued guests, but as walking wallets that they can squeeze a little more out of because they can.
The hospitality and retail sectors do not need another tax. They need policymakers who understand that the visitor economy is not a faucet that can be turned on and off at will. It is sensitive, reactive and easily redirected.
For now we’re deflecting it.
London does not need a second tourist tax. It needs to be thought about again.
