A new report commissioned by Central London Forward (CLF), and undertaken by PRD, shows that the overnight visitor levy announced last week by the Government could raise hundreds of millions of pounds a year for London to support growth, highlighting the need for this revenue to be fairly distributed.
An overnight visitor levy could raise over £350 million across London, with £275 million annual revenue raising potential for CLF boroughs. The boroughs are calling for at least 50% of this revenue to be retained locally.
Central London boroughs are key to supporting and driving the growth of London’s visitor economy yet receive no dedicated funding to manage the pressures that come with it.
The report suggests a slightly higher rate should be levied on short-term lets than hotels, recognising the economic and employment benefits which hotels bring to local economies. CLF boroughs host most of the capital’s visitor accommodation, including 71% of hotel rooms and 67% of short-term lets, and therefore absorb the bulk of the costs associated with essential municipal services.
Local authorities are calling for at least 50% of the revenue raised by the levy to be retained by boroughs, to mitigate the increased costs caused by tourism, putting further pressure on already-strained council budgets.
The analysis demonstrates that even a modest, globally standard levy could help Central London boroughs manage visitor pressures more sustainably, support the growth of the visitor economy, and protect the essential services that communities rely on.
To assess how a levy could address this imbalance, the report modelled two internationally common approaches:
- A £2 per person per night flat rate, which would raise £169 million a year for CLF boroughs. This approach provides a predictable and stable revenue stream and is easy for both visitors and accommodation providers to understand, though budget and luxury travellers pay the same rate. Also, it would require regular uprating to keep pace with inflation • A 3% charge on room cost, which would raise £275 million a year. This method is fairer because it rises with room prices and adjusts automatically to inflation and demand. However, the revenue may fluctuate.
