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French Hotel Industry Reacts to Rising Value-Added Taxes

@SamShankman

Mar 13, 2014 1:30 pm

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Most travelers do not travel frequently enough to note changes in VAT taxes, but gradual increases over time lead to spiked rates that impact guests’ perception of their ability to visit a particular place.

— Samantha Shankman

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Spiterman  / Flickr

The sing on Hotel Europe in the small region of Alsace, France. Spiterman / Flickr


The value-added tax, also known as VAT, for French hotels nearly doubled to 10 percent in 2014 from 5.5 percent in 2011.

The current VAT of 10 percent, instituted on January 1, is still an improvement over the previous 19.6 percent VAT that the French hotel industry successfully fought to overturn in 2009.

The majority of French hotels plan to increase rates rather than eliminate positions or accept profit cuts.

According to a December survey, almost 90 percent of French hoteliers, across all price levels, plan to raise room rates to at least partially offset the increase to VAT.

Hotels on the coast of France were the most likely, 56 percent, to pass the VAT burden entirely on to customers.

“The VAT increase has to be considered in light of yield management practices, which imply permanent adjustments of prices depending on demand,” an Accor spokesperson explains.

“Direct impact cannot be identified, but we can globally say the VAT increase has only marginally impacted public rates.”

Hotel News Now reports that Accor’s Ibis Gerland in Lyon increased standard room rates from a VAT-inclusive €69 to €71 ($95 to $98) to absorb the cost.

Despite the recent increase, France’s VAT for hotel accommodations is close to the European average of 10.8 percent. Its VAT rates are the same as Italy, but more than half those in Spain and the UK.

Denmark and Sweden have the highest VAT rates for hotels at 25 percent. Luxembourg’s hotels deal with the lowest VAT at 3 percent.

The reduced VAT rates for hotel throughout Europe, according to VATLive, are outlined below:

Country VAT Rate for Hotels Standard VAT Rate
Denmark 25 25
Sweden 25 25
Netherlands 21 21
Lithuania 21 21
Spain 21 21
Slovakia 20 20
UK 20 20
Hungary 18 27
Czech Republic 15 21
Croatia 13 25
Latvia 12 21
Austria 10 20
Finland 10 24
France 10 20
Italy 10 22
Slovenia 9.5 22
Bulgaria 9 20
Cyprus 9 19
Estonia 9 20
Ireland 9 23
Romania 9 21
Poland 8 23
Germany 7 19
Malta 7 18
Greece 6.5 23
Belgium 6 21
Portugal 6 23
Luxembourg 3 12

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