The UK is giving local leaders new powers to charge overnight visitors, while visa and travel costs are also rising. For the travel industry, the question is whether Britain can raise more revenue without making itself less competitive.

Britain is about to give mayors across England a new tool to raise money from tourism: an overnight visitor levy on hotels, holiday lets, B&Bs and other short-term accommodation.

The UK Government announced on 10 September that mayors and local leaders will be able to introduce the levy in their areas, with the charge calculated as a percentage of accommodation costs rather than a flat fee. The Government says the revenue could support high streets, public transport, events and other local services that benefit both residents and visitors. 

For the travel industry, however, the move raises a bigger question: how much more can visitors be asked to pay before Britain becomes less attractive compared with competing destinations?

The concern is not necessarily the existence of a visitor tax. Many major destinations already have one. The issue is the cumulative cost of travelling to the UK, particularly if different cities introduce different rates.

The World Travel & Tourism Council (WTTC) is warning that uncapped local levies could make the UK less competitive and divert visitors and spending to competing destinations. Its research found that 29% of travellers from the US, France and Germany would consider another destination or decide not to travel if faced with a €10 visitor tax. Among UK residents, 39% said they would consider holidaying elsewhere or not taking a UK holiday if faced with a £10 levy. WTTC estimates that, under that scenario, international visitor spending could fall by £14.4 billion in 2027.

That puts the debate beyond the hotel bill. International visitors spend across the wider visitor economy – from restaurants and attractions to retail, transport and entertainment. If higher costs discourage some visitors, the impact can extend well beyond accommodation.

A growing cost of entry

The visitor levy is also arriving as the cost of entering the UK rises. From April 2026, the standard UK visitor visa for up to six months increased from £127 to £135. Longer-term visitor visas have also increased, while the UK's electronic travel authorisation (ETA) rose from £16 to £20, according to the UK Home Office.

Individually, these increases may appear modest. But for travellers comparing destinations, the overall cost and convenience of a trip can influence where they choose to go.

That is particularly relevant for families, repeat visitors and price-sensitive travellers – and potentially for tour operators packaging accommodation, transport and experiences into a single holiday price.

The question, then, is not simply how much revenue a visitor levy can generate. It is whether the additional revenue outweighs any reduction in visitor demand and spending.

The VAT debate

Hospitality businesses argue that the UK is already carrying a relatively high tax burden compared with some European competitors.

UKHospitality has called on mayors considering a visitor levy to support a reduction in hospitality VAT to 10%, arguing that countries such as France, Spain, Germany and Italy generally apply lower VAT rates to hospitality. The trade body is also calling for a statutory 5% cap on any visitor levy.

Its argument is that if Britain wants to follow international examples by introducing tourist taxes, it should also consider the wider tax environment in which hotels, restaurants and attractions operate.

The case for the levy

There is also a legitimate argument in favour of giving destinations more control.

Tourism puts pressure on local infrastructure, particularly in busy cities and visitor hotspots. If the levy is invested transparently in transport, public spaces, events and destination management, visitors could ultimately benefit from the money they contribute.

The UK Government says the percentage-based model will also make the charge proportionate to the cost of the stay, meaning visitors staying in lower-cost accommodation would pay less. 

The question, therefore, is less about whether visitors should contribute and more about how the system is designed, communicated and ultimately used.

Finding the balance

For Britain, the timing is important. International travellers have more choice than ever, and destinations are competing not only on attractions and experiences but also on price, convenience and ease of access.

A visitor may not decide against Britain because of a £10 levy alone. But when that levy is added to accommodation costs, VAT, transport, visa or ETA fees and the general cost of a UK holiday, the overall proposition begins to matter.

And that is where the debate moves beyond taxation.

For the travel industry, the real measure of a visitor is not the amount collected at the border or added to a hotel bill. It is the economic value generated throughout the trip – from the hotel and restaurant to the taxi, attraction, retailer and local business.

Britain may be right to ask visitors to contribute towards the destinations they enjoy. But as more costs are placed on travellers, policymakers will need to consider the other side of the equation: whether making Britain more expensive could ultimately make it less competitive. The challenge is to find a level of taxation that funds better destinations without pricing the visitor out of them.