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“Frankly speaking, prices in Hong Kong are higher than elsewhere. We spend a lot anyway, so charging a little more makes no difference,” Chen said. “If it was 10%, it would be different.”
Financial Secretary Paul Chan Mo-po announced in the budget speech last month that the 3% hotel tax will be restored from January 1 next year, 17 years after the government abandoned the hotel tax in 2008.
Chan said the measure would bring in HK$1.1 billion in revenue to the government every year. He also pledged to allocate HK$1 billion to improve tourism infrastructure and services to attract more high-spending overnight visitors.
The finance minister defended the move, saying many neighboring countries levy similar taxes on tourists and the proposed rate only accounts for 1% of the average tourist’s total expenditure.
According to the tourism board, Singapore imposes a total tax of 19% on hotel room rates, which includes a 9% goods and services tax and a mandatory 10% service charge.
Thailand levies a 17% tax on room prices, including value-added tax and service charges, while South Korea levies a 10% tax on hotel room prices. Mainland China imposes a value-added tax of 3% to 6% on housing prices.
By the end of 2024, the number of inbound tourists in Hong Kong will reach 70% of pre-epidemic levels
By the end of 2024, the number of inbound tourists in Hong Kong will reach 70% of pre-epidemic levels
Most tourists interviewed by The Washington Post said the tax would not deter them from coming to Hong Kong, but others in the industry worry it comes too soon before tourism rebounds to pre-Covid-19 levels .
Tourism legislator Yiu Pak-leung agrees that hotel tax rates are lower than those in countries in the region, but urges the government to reconsider the timetable for reintroducing the hotel tax.
“The tourism industry was shocked to learn about the resumption,” Yao said at a recent Legislative Council Finance Committee meeting, adding that businesses feared it would hurt rather than help the tourism industry.
Chung Wai-tong, founding chairman of the Hong Kong Tourism Association, opposes the tax.
“You get people coming, but you raise the prices,” he said. “Hong Kong is not as competitive and attractive as before. We need to catch up quickly.”
There is no industry consensus on whether hotels will absorb the tax or charge guests a fee, Clockwork said.
“Competition among hotels is very fierce, and some hotels may not charge taxes to tourists, which means the hotels will have to bear the taxes,” he said, adding that bearing the tax burden would eat into the hotels’ thin profit margins.
He believes that if tourists have to pay, fewer people will choose to stay overnight in Hong Kong, which means less business in Hong Kong overall.
“We’re losing more on this than we’re making on the hotel tax,” he said.
Hong Kong’s overnight visitor spending fell 37% and is expected to return to 2019 levels
Hong Kong’s overnight visitor spending fell 37% and is expected to return to 2019 levels
Last year, Hong Kong welcomed 34 million tourists, reaching 52% of the 2018 peak.
The mainland remains Hong Kong’s largest source of tourists, with more than 26.7 million visitors last year, followed by Macau, Taiwan and the Philippines.
Xu Yingwei, executive director of the Hong Kong Hotel Owners Association and former government minister, said that the amount of public investment in hotel taxes and tourism is expected to be approximately HK$1 billion. He asked whether the tax would be used to fund tourism investment.
“Our attraction has never been low prices, but service quality and experience. The imposition of this fee shows that the government believes the market is competitive,” Xu said.
He said that while Hong Kong hotels are more expensive for visitors, he hopes to continue investing to improve the visitor experience and help attract high-spending tourists to Hong Kong.
Overnight tourists typically stay three to four nights in Hong Kong, with hotel expenses accounting for about one-fifth of their spending, according to the Tourism Bureau. Last year, each overnight visitor spent an average of HK$5,800.
The average room rate in a five-star hotel is HK$2,350 per night. Taxes will add HK$70 to the cost.
For a standard hotel room that costs about HK$500 per night, the 3% levy means an additional HK$15.
Hong Kong sets aside HK$1.09 billion to promote more tourism activities
Hong Kong sets aside HK$1.09 billion to promote more tourism activities
British couple Gary and Freda Harrison, 64, said they spent HK$130,000 traveling to Hong Kong, Singapore and Phuket.
The couple said they have a modest travel budget, but hotel taxes would prevent them from traveling to Hong Kong.
“For this reason, we are not going to the United States or Greece now,” said housewife Freda. “If there is a tax here, it should be publicized so people can budget.”
Her husband, a chemist, said: “Some of our friends went to the United States and they didn’t know about the taxes and they paid about $1,200 more in taxes.”
Haggar Nurdianto, a 30-year-old Indonesian tour guide who has visited Hong Kong several times, said he believed taxes would not deter people from his country from visiting Hong Kong.
“Not that much,” he said, adding that proximity to attractions is his top priority when choosing hotels for clients.
Scottish tourist Grace Dillett spent five days in Hong Kong with her partner Craig Geult in early March, spending about HK$1,000 a night at two hotels.
Dillett, a 27-year-old dental hygienist, said they thought the hotel prices were reasonable because they were from Britain where “everything is expensive”.
They said they would not be delayed by the 3% restaurant tax.
“I was in Rome a few weekends ago and I had to pay a tourist tax of about four euros [US$4.40] Every night,” she said.
“Three percent is not a lot,” said Geert, a 27-year-old engineer.
Additional reporting by Vera Wu
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