‘Wrong solution for the wrong problem’: Hotel lobby’s war on bed taxes exposed
Saturday, 28 February 2026
The hotel industry launched a scathing attack on local government leadership, labelling mayors and councillors “tourism amateurs” while demanding they be stripped of the power to tax visitors.
Internal documents released under the Official Information Act show Hotel Council Aotearoa (HCA) aggressively lobbied the Government to block local bed taxes in new city and regional deals, describing council-led tax efforts as “the wrong solution for the wrong problem in the hands of the wrong people”.
The lobby group singled out Auckland mayor Wayne Brown, a vocal proponent of a proposed 2.5% levy on hotel stays to help fund infrastructure and major events. It accused his council of “behind-the-scenes lobbying” and “misrepresenting industry’s position”, warning local politicians were too “obsessed with plugging short-term budget holes” to design competent tax policy.
Instead, the industry is pushing a grand bargain: it will support a national accommodation levy ‒ provided a portion of that public money is handed directly to its own industry bodies to fund marketing, data collection and lobbying.
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Under the proposed Tourism Development Contribution, between 5% and 10% of the revenue would be diverted away from public services to fund industry associations, a move the group says would solve a “free-rider problem” among accommodation providers.
While the industry argues this would create an “adequately funded” tourism sector no longer reliant on handouts, the plan explicitly rejects using the funds for core infrastructure such as pipes and roads ‒ costs councils say are being driven by visitor growth.
In 2017, Auckland Council introduced a targeted accommodation rate to fund its tourism and events arm. Hotel providers challenged it in court and the levy was later withdrawn during the pandemic.
Brown revived the idea after the 2024 America’s Cup, saying Auckland could not afford to host the event again (last held in Auckland in 2021) without new funding sources. He argued a bed tax could raise around $27 million a year, enough to attract blockbuster acts like Taylor Swift.
Other councils have followed. Queenstown Lakes District Council has long advocated for a levy, estimating it could generate $30m annually to ease infrastructure pressure.
Mayor Tania Tapsell has backed a similar approach in Rotorua, while Wellington’s Andrew Little pitched the idea on his first day in office, arguing ratepayers were carrying an unsustainable burden.
Lobbying blitz
Against this backdrop, the hotel industry launched a multi-year lobbying blitz aimed at shaping the coalition Government’s post-pandemic tourism recovery.
In September 2024, in a formal letter to Minister of Finance Nicola Willis and Simeon Brown, then Local Government minister, HCA expressed “firm opposition” to local bed taxes, reacting to calls from Local Government NZ.
HCA mocked council efforts as a “cheap stunt” and urged ministers to reject any form of local levy.
It argued councils lacked “the expertise, the mandate or the passion for tourism” to manage such systems.
HCA’s claim that councils lack the competence to run a visitor tax is striking, considering local government already sets and collect rates for thousands of businesses and households.
After Louise Upston became tourism minister in January 2025, the group quickly sent a welcome letter that doubled as a critique of Auckland’s leadership.
Chairperson Lani Hagaman, of the Scenic Hotel Group, and HCA strategic director James Doolan said the city’s tourism recovery was lagging because the council had made a “political choice” to cut marketing spend, calling the situation “close to shambolic”.
The documents reveal a striking level of vitriol directed at local government officials.
“Local authorities in New Zealand simply do not have the expertise, the mandate or the passion for tourism to be entrusted with designing and implementing local bed taxes,” one letter said.
The group dismissed the common argument that levies are minor costs, warning that council-led charges would amount to “death by a thousand cuts” for the sector.
A later policy paper described the industry as being led by “tourism amateurs” and proposed a national levy as a “circuit-breaker”. It also argued the sector’s direction had been hijacked by “lifestyle entrepreneurs and well-meaning amateurs.”
The 18-page paper was explicit about where money should not go: “No tourist visits a first-world destination to experience core infrastructure such as the pipes and roads.”
Instead, the levy should fund “tourism hardscapes” that visitors can ““touch/feel/experience”. It also suggested councils should only receive revenue if they agreed not to introduce competing local taxes.
The industry further proposed that any infrastructure funded through the levy should be branded as an industry initiative, not a government one, to ensure “clear storytelling” and sector buy-in.
It proposed that 5% to 10% of all funds collected via the national levy should be diverted away from public infrastructure to fund the industry’s own associations.
They argued this would solve a “free-rider problem,” where all accommodation businesses benefit from the “industry good” work done by associations like HCA, but not all pay membership fees.
This diverted money would be used to pay for data collection, lobbying and oversight to ensure the Government doesn't waste the remaining 90% of the tax revenue.
Shift to city, regional deals
By mid-2025, the focus shifted to city and regional deals between central government and major regions, where both Auckland and Queenstown had proposed visitor levies.
HCA urged ministers to rule out regional bed taxes altogether, warning that “ongoing regulatory uncertainty” would deter hotel investment.
The group, which represents more than 250 hotels, claimed Auckland’s past tourism funding decisions contributed to a “muted recovery” and positioned itself as the country’s leading authority on hotel investment.
The communications between HCA and the minister’s office were frequent, often occurring multiple times per month to share data, request meetings, or provide policy feedback.
Hagaman was a frequent texter and in one message told Upston: “It’s the first time we have had a minister of tourism that showed any support or interest in tourism.”
Upston maintained her public stance on a bed tax, telling HCA it wasn’t a priority. However, last week Prime Minister Christopher Luxon said the Government was “open to looking” at it if it won a second term.
In a statement to The Post, Doolan said the development contribution proposal was not anti-council.
“Our critique is not of local democracy, but of how tourism taxes are designed and progressed. Fragmented, council-by-council approaches risk inconsistent rules, weak transparency, and ultimately erosion of public trust,” he said.
He stressed that the small portion of funds earmarked for industry capability is not for lobbying, but for supporting compliance, data collection, and administering the levy.
Hotels already contribute significantly to local funding and marketing, and the TDC is intended to complement rather than replace that investment, he said.
“Social licence is not an abstract concern. Tourism only works if communities can see that benefits are real, visible, and fairly shared. A clear, nationally agreed system is the best way to maintain trust while still empowering regions,” Doolan said.
Reasonable contribution
But Brown said the issue was about fairness.
“Tourism is hugely important to Auckland and we want it to thrive. But the cost of hosting major events and supporting visitors shouldn’t fall mainly on Auckland ratepayers,” he said.
A modest visitor contribution was “a reasonable way” to ensure the burden was shared more evenly, he added.
“It’s a bit rich for a lobbyist like James Doolan to be telling Aucklanders how their rates should be spent. The suggestion that Auckland Council is sitting on ‘rivers of cash’ shows a fundamental misunderstanding of how councils work and what they are required to deliver.
“Auckland invests billions of dollars every year in transport networks, water infrastructure, public spaces, stadiums, cultural facilities and major events, all of which accommodation providers directly benefit from. None of that is free, and most of it is funded by ratepayers.”
Brown said he was consistently open to industry input on how a levy would operate.
“We have advocated through regional deal discussions with central government, for a joined-up approach between industry, government and council.
“What I have been absolutely clear about is that any money raised in Auckland should stay in Auckland, and Aucklanders should have a say in how it is invested.
“I reject the claim that I have been misrepresenting industry views. My conversations have been with hotel owners and operators themselves and what I’ve said publicly reflects those discussions … Based on this OIA, it appears as though the only person having conversations behind closed doors is the spokesperson from the Hotel Council Aotearoa.”