Auckland hotel rate: Mayor Phil Goff's 'levy' survives High Court challenge

Friday, 7 February 2020

Auckland has the hotel rooms but not enough staff to cope with the influx of visitors expected for major events in 2021.

Auckland Mayor Phil Goff has survived a legal challenge with the High Court rejecting a case claiming an additional $14 million rate on city hotels was unlawful.

Goff said he was 'pleased but not surprised' by the decision, while the challengers said they had yet to decide whether to appeal.

The tourism industry had opposed the rate from the moment Goff unveiled his plan soon after election in 2016, to make hotels and motels pick up half the tab for Auckland Council's promotion of tourism and major events.

Phil Goff's first fiscal initiative in 2016 has been upheld by the High Court

The rate took effect from mid-2017 and the industry's case against Auckland Council, challenging the legality of it, was considered by the High Court in 2019.

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The High Court has rejected all the main planks of the case argued by hoteliers who formed the Commercial Accommodation Ratepayers group (CARP) to challenge the council's Accommodation Providers' Targeted Rate (APTR).

In a statement responding to the decision, Goff called the APTR a 'commonsense tool'.

'When we introduced the targeted rate, we did so in a fair and transparent manner, following significant public consultation and good faith engagement with the accommodation industry. More than two thirds of Aucklanders who submitted on the rate supported it,' he said.

Auckland Council has spent more than $1.2 million defending the legal action brought by a representative group of hotel owners backed by about 40 others, and the decision has surprised some observers.

The hoteliers' main argument was that the rate imposed an unfair share of the cost of tourism promotion, on their part of the visitor industry.

Justice Moore did not accept that argument.

Hoteliers also argued imposing a rate based on the value of a hotel's premises, did not necessarily allow them to pass the burden on to guests.

The additional rate on hotels and visitor accommodation was Goff's first major initiative and was unveiled within weeks of his election in 2016.

His original plan was to raise $28 million from the sector to cover the cost of tourism marketing and major event promotion by the council agency ATEED, but by the time it came to councillors for approval in June 2017, it had been halved, and was supported in a vote 10-7.

The new rate was an important political victory for Goff, who campaigned for office partly on finding new sources of funding.

However, the accommodation sector argued it received only 10 per cent of visitor spending, and was shouldering the lion's share of the burden.

The Singaporean owner of Auckland's Stamford Plaza said in 2017 its rates bill would almost double from $620,000 to around $1.2m.

Tourism Industry Aotearoa (TIA) and Hospitality New Zealand slammed the new rate in 2017, labelling it 'extremely disappointing' and unfair.

TIA chief executive Chris Roberts said at the time, it was based on bad information and a poor understanding of the workings of the visitor economy.

Goff has been adamant the rate passed legal scrutiny before he unveiled it, but the council invoked legal privilege as grounds to not release the timing or details of the legal advice offered.

'Clearly, I would not have proceeded with this without legal advice from council lawyers and our legal firm that it is legitimate for council to act in this way,' Goff told RNZ in 2017.

The following year, partly to placate the tourism industry, the council extended the additional rate to private dwellings rented to visitors through websites such as Airbnb.

CARP said in a statement it was very disappointed by the decision and 'remains of the view that the APTR, which was imposed by Auckland Council in 2017, is unfair, inequitable and very poor public policy'.

TIA hotel sector manager Sally Attfield said she was disappointed by the ruling and reiterated TIA's belief that the rate was an unfair tax on hotels when other businesses also benefit from tourism.