Ask Skift: Why Are Destinations Adding Tourist Taxes?

Many destinations around the world have become more expensive to visit in recent years as governments increasingly levy tourist taxes.

Why are destinations doing it? We put the question to Ask Skift, our artificial intelligence chatbot. Ask Skift used information that appeared in our past news coverage and we also did additional reporting.

Ask Skift said:

Destinations implement tourist taxes for various reasons. Here are some examples:

To combat overtourism: Tourist taxes are seen as a solution to the issue of overtourism. They are designed to lessen the strain that tourism can bring and are often framed as a response to overtourism. For example, cities like Amsterdam and Venice, which face an onslaught of visitors, have implemented plans for new taxes.

To generate revenue: Tourism officials use taxes as an easy source of local municipal revenue as tourists don’t vote and are an easy target. This revenue is often used to fill budget gaps and keep local taxes low.

To fund specific projects: In some cases, the revenue from tourist taxes is used for specific causes. For example, Greece introduced a “climate crisis resilience fee” to provide financial support for future disaster relief efforts following natural disasters in 2023.

Preparation for major events: Cities also increase tourist taxes ahead of major events. For instance, Paris more than doubled its tourist taxes as it prepared to host the 2024 Summer Olympics.

Reviving post-pandemic tourism: Iceland reinstated the tax tourists pay for hotel and alternative accommodation rooms and extended it to cruises as well. This tax was suspended during the pandemic January 2024.

In all these cases, the tax is typically levied on overnight stays in hotels or other accommodations.

What else you need to know:

Destinations have also implemented tourist taxes to help raise money for sustainability projects. Bali announced some of the revenue from its new tourist tax, which went into effect on February 14, would go toward measures to protect the island’s environment. The roughly $10 tax (150,000 rupiah) also applies to visitors to any of Bali’s surrounding islands.

The Icelandic government has the same goals for the tourist tax it implemented this year.

“Tourism has really grown exponentially in Iceland in the last decade and that obviously is not just creating effects on the climate,” Prime Minister Katrín Jakobsdóttir told Bloomberg.

“Most of our guests who are coming to us are visiting the unspoiled nature, and obviously it creates pressure,” she said.

Bhutan has long looked to tourist taxes to help mitigate the impact caused by mass tourism, having first introduced a $65 per night sustainable development fee for visitors in 1991. Bhutanese officials increased it in 2022 to $200.

Hawaii could follow in the footsteps of Iceland and Bhutan. Governor Josh Green proposed tourist fees last month to help finance efforts to protect the state’s environment. Green said a $25 fee, applicable to guests checking into a hotel or vacation rental, would generate more than $68 million every year from visitors.

Honoulu adopted its own tourism tax in December 2021, which imposed a 3% surchage on top of the state’s 10.25% hotel tax. The Honolulu Star-Advertiser reported that county would allocate about 8% of the tax’s revenue to a special fund for natural resources.

Venice and Amsterdam aren’t the only destinations implementing tourist taxes in part to stem overtourism. The mayor of Santiago de Compostela, home of Spain’s famed Camino de Santiago pilgrimage, announced plans last July to introduce a tourist tax to prevent overcrowding. The city welcomed close to 439,000 visitors in 2022.

“I want Santiago de Compostela to stop being just a tourist destination and a theme park,” said mayor Goretti Sanmartin. “I want a Santiago from which there is no need to flee due to uncontrolled tourism.”

Spanish officials said funds from the tax would be used to enhance Santiago de Compostela’s city center.

Improving infrastructure was also a major goal of why Japanese authorities a tourist tax for Hiroshima Prefecture’s Itsukushima Shrine, a UNESCO World Heritage Site. Local officials said they plan to use revenue to improve public bathrooms and maintain the shrine’s architecture.