Since Edinburgh's visitor levy went live on 24 July 2026, almost every hotel owner call I take in the UK starts with the same question: do we eat the 5 percent or put it on the guest? The same conversation is happening in Barcelona, where the Catalan tourist tax doubled on 1 April 2026, in Hawaii, where the state lodging tax rose on 1 January 2026, and in Glasgow, where a 5 percent levy starts in January 2027. It looks like a finance question. It is a pricing question, and most hotels answer it with one blanket decision that is wrong on half their dates.
I have spent 18 years in revenue management, much of it inside international five-star hotel chains, and I have watched hotels lose more money from the way they react to a tax than from the tax itself. In this article I will show you how I decide, date by date and segment by segment, whether a hotel should absorb a tourist tax increase or pass it through. You will get the arithmetic, a decision table, the comp set trap, and a checklist for your 2027 budget.
Hotel tourist tax: what changed in 2026
A hotel tourist tax is a charge that a city, region or state adds to the price of an overnight stay, collected by the hotel and paid to the government. In 2026 Edinburgh, Barcelona, Hawaii, Amsterdam and Kyoto raised or introduced one, and more start in 2027, so many hotels now carry a new cost per room night.
The details matter more than the headline, because each levy is built differently and each design changes the pricing response. Here is what has actually moved, using the published figures.
United Kingdom
The City of Edinburgh Council's visitor levy is 5 percent of the cost of overnight accommodation, charged on a maximum of five consecutive nights, for stays from 24 July 2026 that were booked on or after 1 October 2025. The council expects it to raise up to £50 million a year once established, and providers keep 2 percent of what they remit to cover their administration. Glasgow City Council has approved a 5 percent levy from 25 January 2027 which, according to VisitScotland, applies to any stay with no cap on the number of nights; the council expects about £16 million a year. In Wales the national rates are fixed by the Welsh Government at £1.30 per person per night for most accommodation and 75 pence for hostels and campsites, and the Welsh Government's visitor levy guidance for providers explains that each council decides whether to adopt it. Cardiff has set 1 April 2027 as its start date.
Europe
Amsterdam's tourist tax stays at 12.5 percent of the room price through 2026, and on top of that the Dutch VAT rate on accommodation moved from 9 percent to 21 percent on 1 January 2026. Horwath HTL's HOSTA 2026 report forecasts Dutch hotel demand to fall by about 2.5 percent this year as a result. In Catalonia, the regional tax on Barcelona stays doubled from 1 April 2026, to €7 per person per night for luxury hotels and €3.40 for four-star hotels, on top of Barcelona City Council's own surcharge, which rose to €5 and is scheduled to climb by a euro a year to €8 in 2029. Greece's climate resilience fee, charged per room per night, runs at €15 for five-star hotels and €10 for four-star hotels between April and October, falling to €4 and €3 in the winter months.
United States and Japan
Hawaii raised its statewide transient accommodations tax from 10.25 percent to 11 percent on 1 January 2026, and each county may add a surcharge of up to 3 percent, before general excise tax. Governor Josh Green framed the increase as about $3 more for every $400 a guest spends. Kyoto City's revised accommodation tax, approved for March 2026, moved to five tiers, with the top tier at 10,000 yen per person per night for stays priced at 100,000 yen or more, up from a previous maximum of 1,000 yen.
The pattern for 2026 and 2027 is clear: lodging taxes are rising in exactly the markets where hotels have had pricing power, and they are being designed in three different shapes (percentage, flat per person, and tiered). Each shape needs its own response.
Bottom line: Read the exact rules of your levy (base, cap, per room or per person, start date, booking cutoff) before you touch a single rate, because the design decides the right answer.
Should hotels absorb a tourist tax rise?
A hotel should absorb a tourist tax rise only on dates where a visible price increase would lose more room nights than the margin it protects. On compression nights, events and high-season weekends, the hotel should pass the full tourist tax through to the guest. Most hotels need both answers in the same month, not one rule for the year.
When I audit a hotel after a levy change, the most common mistake I find is a single policy decided in a board meeting: "we will absorb it to stay competitive" or "the guest pays, full stop." Both are lazy. The first throws away margin on nights the hotel would have sold out anyway. The second pushes the price over a threshold on soft nights, when the guest comparing three hotels on an OTA is most likely to leave.
What the research says about incidence
Economists call the question of who really pays a tax its incidence, and the answer depends on how price sensitive demand is. A study published through the University of Memphis, which looked at lodging tax increases across eight US destinations, found that hotels appeared to absorb those increases with little measurable impact on their business. That fits what I see: in most markets, a levy of a few percent is smaller than the normal day-to-day movement of a well-managed rate. Amsterdam is the counter-example. When a 12.5 percent city tax is stacked on a VAT rise from 9 to 21 percent, the combined change is too large to hide, and Horwath HTL's forecast of a 2.5 percent fall in Dutch hotel demand for 2026 shows guests do react.
How I split the decision
I sort every future date into three demand bands, using the same pace and pickup data the hotel already has, and set a different tax policy for each band.
| Demand band | Typical signals | Tax policy I recommend | Why |
|---|---|---|---|
| Compression | Pace well ahead of last year, comp set closing out, events | Pass the full levy through, and keep raising the rate as usual | Guests on these nights are buying the date, not the price |
| Normal | Pace in line with last year, comp set rates stable | Pass through on the public rate, absorb on member or direct rates if needed | Protects the headline price on the channel where guests compare most |
| Need | Pace behind, comp set discounting, low pickup inside 14 days | Absorb part or all of the levy on the lowest public rate | A visible price rise on a soft night costs more room nights than the levy |
This is the same thinking I use for any cost the hotel cannot control. The levy is not a reason to rethink the whole pricing strategy, but it is a reason to check which dates can carry a higher total price and which cannot. If you want to understand how sensitive your own demand is before deciding, my earlier piece on what a rate change really costs walks through how I measure it.
Bottom line: Pass the levy through by default and absorb it only on need dates, because a blanket "we absorb it" policy in 2026 gives away margin on the nights that make your year.
Hotel tourist tax maths on one room night
The hotel tourist tax maths comes down to one comparison: absorbing a percentage levy cuts net ADR on every room you sell, while passing it through cuts the number of rooms you sell by the guest's price sensitivity. Whichever loss is smaller on a given date is the right policy for that date in 2026 and 2027.
Here is a worked example, using numbers I made up to show the method. They are not from a client.
Example: an 80-room hotel facing a 5 percent levy
Take an 80-room hotel in a city that introduces a 5 percent levy on the accommodation price, like Edinburgh or Glasgow. Over a 30-day month it runs at 78 percent occupancy with an ADR of £150, before the levy.
- Room nights sold: 80 rooms x 30 days x 78 percent = 1,872 room nights.
- Room revenue: 1,872 x £150 = £280,800. RevPAR is £150 x 78 percent = £117.
Option A, absorb the levy. The guest still pays £150, but that £150 now has to include 5 percent levy. The hotel keeps £150 / 1.05 = £142.86. Occupancy stays at 78 percent. Room revenue becomes 1,872 x £142.86 = £267,429, a loss of £13,371 for the month, or 4.76 percent. RevPAR falls to £111.43.
Option B, pass it through, price-sensitive guests. The guest now pays £157.50. Assume an elasticity of 1.2, meaning a 5 percent price rise loses 6 percent of demand. Occupancy falls to 73.32 percent and room nights to about 1,760. Room revenue is about 1,760 x £150 = £263,952, a loss of £16,848. But the hotel no longer services 112 room nights. At an assumed cost per occupied room of £35, that saves about £3,931, so the net loss is about £12,917, slightly better than absorbing.
Option C, pass it through, less sensitive guests. Same as Option B, but with an elasticity of 0.6 (a 5 percent price rise loses 3 percent of demand). Occupancy falls to 75.66 percent, room revenue is £272,376, a loss of £8,424 before cost savings and about £6,458 after them. That is half the loss of absorbing.
What the example teaches
Three things. First, absorbing is never free: it takes 4.76 percent off the top line on every room, including the rooms you would have sold at any price. Second, once you count the cost per occupied room you no longer carry, passing the levy through wins even at an elasticity a little above 1. Third, the answer flips with demand, which is why I set it by date band and not by year. If you have never worked out what an occupied room actually costs you, the piece on the net RevPAR number owners miss shows how to bring cost into the rate decision.
One more thing the spreadsheet does not show: food and beverage and parking spend leave with the guest. If your hotel earns meaningful ancillary profit per occupied room, add it back to Option B and C as a loss, and the case for absorbing on soft nights gets stronger.
Bottom line: In this example, passing a 5 percent levy through loses less than absorbing it unless demand is more price sensitive than an elasticity of about 1, so absorb only where your own data shows that.
Percentage levies vs flat per-person fees
Percentage levies and flat per-person fees affect hotel pricing in opposite ways. A percentage levy, like Edinburgh's 5 percent, costs every hotel the same share of its rate. A flat fee, like £1.30 per person per night in Wales, weighs far more on a budget room than a luxury one, so the response depends on price point.
This is the part most commentary in 2026 skips, and it is where I see the biggest pricing mistakes.
| Levy and room | Room rate | Levy on the stay night | Levy as share of rate |
|---|---|---|---|
| Wales flat levy, budget double, 2 guests | £70 | £2.60 | 3.7% |
| Wales flat levy, midscale double, 2 guests | £120 | £2.60 | 2.2% |
| Wales flat levy, luxury double, 2 guests | £250 | £2.60 | 1.0% |
| Edinburgh percentage levy, any room | Any | 5% of the price | 5.0% |
| Kyoto tier, per person charge just under 100,000 yen | 99,000 yen | 4,000 yen per person | 4.0% |
| Kyoto tier, per person charge at 100,000 yen | 100,000 yen | 10,000 yen per person | 10.0% |
The Wales and Kyoto figures use the published levy rates; the room rates are illustrative examples.
Flat per-person fees punish family rooms
A flat per-person levy grows with occupancy per room, not with price. A family room with four guests in a Welsh council that adopts the levy carries £5.20 a night, four times what a solo business traveller pays. If your hotel sells family rooms, quadruples or interconnecting rooms, review the price gap between them and a standard double. In some cases I narrow that gap slightly so the total price a family sees, levy included, still sits in the range they compare.
Tiered taxes create price cliffs
Kyoto City's revised accommodation tax, as published for March 2026, charges 400 yen per person for stays from 6,000 to under 20,000 yen, 1,000 yen from 20,000 to under 50,000 yen, 4,000 yen from 50,000 to under 100,000 yen, and 10,000 yen at 100,000 yen and above. Crossing a threshold by one yen raises the guest's total by thousands. A hotel that prices at 100,500 yen per person instead of 99,500 yen collects 1,000 yen more in room revenue but costs its guest 6,000 yen more in tax. In tiered markets I build the thresholds into the rate grid and either price clearly below a tier or well above it, never just over the line.
Caps change length-of-stay pricing
Edinburgh charges its 5 percent levy for a maximum of five consecutive nights, so a seven-night stay carries the levy on five of seven nights, an effective rate of about 3.6 percent. Glasgow, according to VisitScotland, applies its levy to every night. A cap is a small but real argument for length-of-stay offers: the longer the stay, the lower the effective levy, which gives you room to protect ADR on long stays.
Bottom line: Match the response to the levy's shape: absorb more of a flat fee at the budget end, price around tier thresholds, and use a night cap to support longer stays.
How does a tourist tax change your comp set?
A tourist tax changes your comp set comparison because hotels display it differently. Some competitors show rates with the levy included, others add it at checkout, and OTAs vary by market. If your rate shop compares your tax-exclusive rate with a competitor's tax-inclusive one, every positioning decision you make in 2026 rests on a false gap.
When I review rate shopping data for hotels after a levy change, I usually find that half the comp set has changed how it displays price and nobody on the hotel's team noticed. The reports keep running. The numbers look normal. And the hotel concludes it is "5 percent cheaper than the market" when it is actually level.
How to clean the comparison
- Shop the comp set on the same channel and the same length of stay you sell most, and record whether each rate includes or excludes the levy.
- Normalise everything to one basis. I prefer tax-inclusive, because that is the number the guest compares.
- Check your own brand.com and each OTA extranet: the levy must be loaded as a tax or fee, with the right basis (percentage or per person) and the right cap, so the guest sees the same total everywhere.
- Re-baseline your positioning targets. If you used to sit 8 percent below the leader, decide again whether that gap is measured before or after tax.
Display rules differ by country
In the United States, the Federal Trade Commission's rule on unfair or deceptive fees, in force since May 2025, requires hotels to show mandatory fees in the headline price but allows government taxes to be shown separately. Other countries treat a city levy differently, so check your local consumer rules before you decide how to present it. Revenuenaire's team has written about how total price display rules affect hotels, which is worth reading alongside this.
The quickest test I know: book your own hotel and your two closest competitors on the same date through the same OTA, all the way to the payment page, and compare the final totals. If those totals differ from what your rate shop says, your rate shop is wrong.
Bottom line: Compare competitors on a tax-inclusive total in 2026, or the levy will make you think you are cheaper or dearer than you really are.
Hotel tourist tax in contracts and budgets
A hotel tourist tax must be written into contracts and budgets explicitly. Corporate rates, group contracts, wholesale agreements and the 2027 budget should each state whether the rate excludes the levy. Hotels that leave the wording vague in 2026 end up absorbing the levy on business they priced months earlier, often without noticing.
Contracts already signed
Many contracts say "rates are subject to applicable taxes." That wording usually protects the hotel, because a new levy is an applicable tax. Contracts that quote "all-inclusive" or "net" rates do not. Edinburgh's rules show why timing matters: the City of Edinburgh Council applies the levy to stays from 24 July 2026 that were booked and paid for, in part or in full, on or after 1 October 2025. The City of Edinburgh Council's levy announcement sets out these dates. Glasgow's levy starts on 25 January 2027, so group and corporate contracts being signed right now for 2027 dates should name it.
The 2027 budget
Budget room revenue net of every tax and levy, and show the levy as a separate line if the hotel's reporting system allows it. If your 2026 actuals in Edinburgh are partly levy-inclusive because of how a channel booked them, clean them before you use them as the base for 2027. A budget built on a gross ADR will overstate revenue by up to the levy rate, which for a 5 percent levy on an £8 million rooms budget is £400,000 of revenue that was never yours. For the wider 2027 picture, Revenuenaire has a guide to ongoing hotel revenue management plans that covers how we run budgets and forecasts month to month.
Owner reporting
Owners in levy markets are going to ask why ADR looks flat while the guest is paying more. Report ADR net of levy, report the levy collected separately, and show what share of nights you absorbed it on. That turns a confusing number into a pricing decision the owner can see.
Bottom line: Every contract and budget line for 2027 should say "excluding visitor levy" in plain words, so the tax never becomes a hidden discount.
Hotel tourist tax checklist before 2027
A hotel tourist tax checklist turns the levy from a surprise into a managed cost. Before the 2027 season, a hotel should confirm the levy rules, load them correctly on every channel, set a date-by-date absorption policy, clean the comp set, and fix contract and budget wording. Each step takes hours, not weeks.
This is the list I work through with hotels facing a new or higher levy:
- Confirm the levy rules from the official council or government page: base (percentage, per person, per room, tiered), cap on nights, exemptions, start date and booking cutoff date.
- Load the levy in the property management system, booking engine and each OTA extranet with the correct basis and cap, then test a booking end to end on each channel.
- Decide the display: tax-inclusive or exclusive on brand.com, and check what each OTA shows guests in your main source markets.
- Set the absorption policy by demand band (compression, normal, need), not one rule for the year.
- For tiered taxes, mark the thresholds on the rate grid and remove rates that sit just above a tier.
- For flat per-person levies, review family and multi-occupancy room pricing.
- Re-baseline the comp set on a tax-inclusive total.
- Add "excluding visitor levy" wording to all new corporate, group and wholesale contracts for 2027.
- Build the 2027 budget on net ADR and show the levy as its own line.
- Agree on one owner report format that shows net ADR, levy collected and nights absorbed.
If the levy also changes how often you move rates, my earlier article on whether to cut rates when demand drops covers the soft-date decisions in more depth. And if you are deciding how to reset your pricing structure for 2027 in a levy market, that is exactly the work behind my hotel pricing strategy service.
Bottom line: Ten checks, done once before 2027, stop a 5 percent levy from turning into a 5 percent loss of margin.
Frequently Asked Questions
Should a hotel include the tourist tax in the room rate?
A hotel should show the tourist tax however its local consumer rules require, and otherwise choose the display its guests compare most easily. I usually prefer showing a tax-inclusive total on brand.com in levy markets, because guests compare the final price, but the pricing decision about who pays the levy is separate from how it is displayed.
Does a tourist tax reduce hotel occupancy?
A small tourist tax usually has little effect on hotel occupancy, while a large combined tax increase can. A University of Memphis study of eight US destinations found hotels absorbed lodging tax rises with little impact, but Horwath HTL forecasts a 2.5 percent fall in Dutch hotel demand in 2026 after the VAT rise and Amsterdam's 12.5 percent tax.
Should I raise my hotel rates in 2027 because of the visitor levy?
You should not raise your base rates in 2027 just because of a visitor levy. Pass the levy through as a separate charge on strong dates, absorb part of it on need dates, and keep raising or lowering the rate itself based on demand, pace and the comp set, exactly as you would without the levy.
How do I handle the tourist tax on bookings made before it started?
Bookings made before a levy started follow the cutoff date in the official scheme. In Edinburgh the levy applies to stays from 24 July 2026 that were booked and paid for, in part or in full, on or after 1 October 2025. Check your own council's rules and flag affected reservations in the property management system before arrival.
How does a per-person tourist tax affect family rooms?
A per-person tourist tax makes family rooms more expensive than doubles in absolute terms, because the levy multiplies with the number of guests. At the Welsh rate of £1.30 per person per night, a four-person room pays £5.20 a night. Review the price gap between family rooms and doubles so the total stays competitive.
Can a hotel absorb a tourist tax on some channels and not others?
A hotel can absorb a tourist tax on some rates and channels, for example on member or direct rates, while passing it through on public OTA rates. The hotel must still collect and remit the full levy, so absorbing simply means pricing the room lower to cover it. Keep the guest's final total consistent with your parity agreements.
When should a hotel hire a revenue management consultant to deal with a new levy?
A hotel should hire a revenue management consultant when a new levy arrives alongside other pricing pressure and nobody on the team has time to rebuild the rate grid, comp set and budget. A small hotel in a stable market with one clear percentage levy can usually do it in-house using the checklist above. When it is more complex, Alaa Elhadi and the team at Revenuenaire set up the levy pricing policy, the comp set and the 2027 budget, and can manage pricing month to month afterwards.
My Verdict on Tourist Taxes
A tourist tax is a cost you cannot control, but who pays it on each date is a pricing decision you can. My answer for 2026 and 2027 is to pass the levy through by default, absorb it only on the soft dates where your own data shows guests will walk, and adapt the response to the shape of the levy: percentage, per person or tiered. Then clean your comp set, your contracts and your 2027 budget so the levy is visible everywhere. That is how a levy stays a cost line instead of becoming a margin leak. A single blanket decision gives away the most on the nights that matter most.
If you want a second pair of eyes on your levy pricing before the 2027 season, book a call with Alaa's team and we will go through your dates together.
