Hotels and short-term letters could be facing more challenges in London as Westminster City Council plans to implement an “overnight levy” for tourists as it looks to clamp down on a rise in Airbnb Inc (NASDAQ:ABNB) rooms.
Hoping to introduce the charge so visitors staying overnight are “playing their part” in the maintenance of the city, the London authority is hoping to target a vast number of Airbnb rooms in Westminster, which has more residencies listed than any other borough.
Hotels, both independent and group-owned, will also have to pay the charge.
Collecting the levy from overnight visitors as an additional charge on their bills, accommodation owners will then be expected to pay this fee to Westminster, in a similar way to paying tax.
Adam Hug, leader of Westminster Council, justified the plans at a meeting on Tuesday by pointing to other popular European cities like Rome and Dubrovnik where overnight levies already exist.
Adding that the rise in Airbnb’s popularity has created “an uneven playing field” amongst hospitality firms, Hug noted how short-term lets did not have to pay corporation tax or business rates.
Hug added: “We are exploring with business partners what an overnight stay levy could look like in practice. When you consider the impact of events like the King’s Coronation which drew millions to Westminster, this has to be seriously considered.
“At one point, a block of apartments in our city had almost as many rooms available for short-term letting as the Ritz has hotel rooms.”
Council tax paid at the apartment was only £92,000 whereas the Ritz pays around £2.7 million per year in business rates, the Labour Council leader said.
Shares in the US-listed Airbnb closed at around US$141.85 and are currently flat in pre-market trading ahead of Wednesday’s opening.