Does an industry-promoted tourist tax per night affect hotel performance? Quasi-experimental evidence from Manchester

Abstract

There is an ongoing debate about whether introducing a tourist tax deters tourism demand. Moreover, it remains unclear whether accommodation establishments adjust prices following the implementation of a tourist tax and, if so, how this policy impacts their revenues. This study examines the causal impact of introducing an industry-promoted tourist tax per room and night, aimed at boosting the tourism economy at the destination, on hotels' key performance indicators (average daily rates, nights sold, occupancy rate, revenue and revenue per available room). The analysis focuses on Manchester, the first city in the UK to levy such a tax on hotel stays since April 2023. We employ the Synthetic Control Method considering other cities in the UK as control units to estimate the causal impact of the policy. Our analysis shows the tax had no significant effect on hotel performance, raising relevant implications for policymakers and hotel managers.