Legal snags mount for Goff's proposed rates increase for hotels and motels

Even if Auckland Council votes on Thursday to slap a targeted rate of 150% on hotels and motels,  a legal opinion says the accommodation providers won’t be able to recover the cost from guests.

A new legal opinion from Lane Neave Lawyers for Tourism Industry Aotearoa says adding a surcharge to cover council rates potentially breaches both the Fair Trading Act and the Commerce Act.

Although the council’s budget document suggests the cost of the rate could be passed on “as occurs with bed night taxes in many other international cities,” Lane Neave’s opinion leaves no doubt it can’t and cites legal precedents to support its contentions, TIA chief executive Chris Roberts says.

“It’s clear this is also quite a different situation from public holiday surcharges applied by some hospitality businesses.”

Hotels, motels and other commercial providers in Auckland city are set to be hit with the proposed rate, which would be the new source of funding for the city’s tourism and event marketing efforts. Mr Roberts says the sector will be paying 100% of the cost, even though it receives only 9% of the visitor spend in Auckland.

“Mayor Phil Goff and the council have been insistent the targeted rate could be added to room costs as a surcharge, despite the commercial accommodation sector being clear this couldn’t happen.

“Now we have legal advice that leaves the situation in no doubt. Adding a surcharge to cover council rates potentially breaches both the Fair Trading Act and the Commerce Act. Lane Neave’s opinion cites legal precedents to support its contentions,” he says.

TIA is sharing the legal opinion with Mr Goff and councillors before their targeted rate vote.

Mr Roberts says the tourism industry wants the council to reject the targeted rate. “The proposal is based on bad information and a poor understanding of how the visitor economy works.

“We want to work with the council to find a fair and sustainable way for the commercial accommodation sector to make an appropriate contribution to the city’s visitor and event promotion activities,” Mr Roberts says.

Read the Lane Neave legal opinion here.