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National funds for a national stadium
Fiona Luhrs
Monday November 20, 2006

Tourism adds $3.2 billion a year to Auckland's economy, providing thousands of jobs and helping make the city a vibrant place to live.

The Rugby World Cup in 2011 will give a huge boost to the city and the tourism industry fully supports it, whatever the outcome of the stadium location debate.

Events are a vital factor in attracting visitors to Auckland.

While staying in the city they eat at cafes and restaurants, go shopping, buy petrol and newspapers.

The tourism industry is vehemently opposed to forcing them to pay for a new or redeveloped stadium as well.

The Tourism Industry Association (TIA) has surveyed its 2000 members and found 97 per cent are against imposing bed or airport departure taxes on visitors to pay for a stadium.

Stadiums elsewhere have been paid for using a mix of central and local government funding, along with commercial investment and sponsorships. Our stadium should be no different.

Auckland ratepayers need not be heavily burdened to fund the stadium. The attitude taken by the government of the day towards Te Papa was that it was a national asset so should be funded nationally.

That decision was taken in 1992 when the budget was running a significant deficit.

The Government today is sitting on a record surplus. That is one place where funding should come from for a national stadium.

Similarly, the Government receives nearly $526 million each year in GST from international visitors.

The Government absorbs these funds and little is allocated to directly support the industry in the way of infrastructure (just $11 million last year).

In short, central government is well placed to shoulder the brunt of the stadium bill.

Other places as diverse as New York, Denmark, the Balearic Islands and Ireland have tried bed and airport taxes, only to find they harmed their tourism industries.

They have all abolished, or greatly reduced, the impost on visitors in order to improve their international image and competitiveness.

When the Australian Government proposed introducing a bed tax, the Australian Hotels Association (AHA) warned it would raise hotel administration costs by 4 per cent. The AHA added that visitors' price sensitivities would mean hotels would have to bear a part of the tax themselves, which would "serve to reduce the competitiveness of the Australian tourism industry".

The proposal was eventually shelved in the run-up to the Sydney Olympics.

Here in New Zealand, it is only four years since the Government dropped a bid to open the door to bed taxes in the Local Government Rating Act.

Then, Tourism Minister Mark Burton said it was "neither fair nor credible" to single out the accommodation sector for tax.

The minister said many visitors did not stay in motels or hotels, and participated in activities operated by other sectors of the tourism industry which would not be subjected to levies under the proposed tax.

So what has changed since 2002?

For the tourism industry, things have got harder.

Our growth rates have slowed, competition from international destinations has got tougher and international marketing costs have climbed.

The international attention garnered by the Lord of the Rings movies, the America's Cup regattas and the Lions rugby tour has waned, and it is five years until thousands of rugby fans arrive to enjoy the Rugby World Cup.

We are already an expensive destination, far away from our major visitor markets in the Northern Hemisphere. Yet the Government is seriously considering bed and airport taxes as a means of helping pay for a new Auckland stadium, whether it is on the waterfront or a redeveloped Eden Park.

Visitor taxes will make many small accommodation businesses unviable, particularly at the budget end of the market.

Larger hotels will also be seriously impacted. Their tariffs are quoted to international travel wholesalers as far as two years in advance. This means they will have to absorb the costs of any bed tax until at least 2008, rather than being able to pass them on to their clients.

A narrow sector of the tourism industry should not be taxed to pay for a facility that will benefit the wider community. A wide range of businesses will benefit from a new stadium, including restaurants, bars, transport, construction and retail.

The health of Auckland's multibillion-dollar tourism industry is at stake. The tourism market is extremely price-sensitive and increasing Auckland's prices will make it less attractive and less competitive compared with other New Zealand cities.

For instance, a $10 bed tax would add $3000 to the costs of 100 out-of-town delegates attending a three-day company conference in Auckland. As a result the conference could be held elsewhere.

Or consider a group of young German backpackers who plan a three-night stay in Auckland at the beginning of their trip.

They have no interest in rugby but find themselves paying an extra $10 on top of their $18 a night dorm bed - five years before a game is even played in the stadium. They would cut their Auckland stay to just one night.

Or a family of four from Nelson travelling overseas for a holiday. Because of flight times, they must overnight at an Auckland hotel, paying an extra $40 in bed taxes and airport departure taxes of $10 each - a total of $80 extra. They could well decide to leave from Christchurch instead.

Bed taxes will lead to a reduction in overnight visits, impose costs on individual tourism operators and put the margins of some businesses beyond the point of viability.

Taxing visitors for a stadium they may not use will be disastrous for Auckland's tourism industry and will damage its international reputation.

This is the lazy option for stadium funding and an abuse of the principle of user-pays.

A national stadium must be nationally funded.


Tax scenarios

* Family of four from Christchurch travel to Auckland to be with a sick child transferred to the Starship and need to stay for a week. They must pay bed tax of $10 per night per person for seven nights - an extra $280 in total.

* A young English couple plan to spend four nights in Auckland at the end of a six-week backpacking holiday. Bed tax will increase their per-person night cost at a backpacker hostel from $23 to $33 and they must also pay $10 airport tax, amounting to an extra $50 per person. The couple opt for just one night in Auckland before leaving.

* An executive is commuting to Auckland for a six-week project and staying five nights a week in a serviced apartment. This costs the company an extra $300 in bed taxes. The company decides to rent private accommodation instead.

* Fiona Luhrs is chief executive of the Tourism Industry Association.