The Minister of Trade demands the hotel giants tighten up

Tourism in North Norway broke all records with over 30 billion kroner in revenue, especially driven by explosive growth in private rentals and foreign winter tourists. This is shown in a recent report by Menon Economics commissioned by the Arctic-365 cluster, NordNorsk Reiseliv, and the NHO Reiseliv Regionforening Nord-Norge. A new report also reveals that the operating margins for accommodation in North Norway are a solid 8 percent – and a full 11 percent in Troms. In comparison, the average in Norwegian business – excluding oil and gas – is around 7 percent. These figures stand in stark contrast to the latest debate, where hotel chains like Strawberry and Scandic fear that the new tourist tax will wipe out profitability. In protest, several hotels have withdrawn from the local destination companies. The hotel chains argue that the introduction of a municipal tourist tax changes the entire financing model for tourism, and they fear that hotels and guests will end up paying double if they maintain current memberships. They therefore demand that municipalities redistribute some of the new tax revenues back to the destination companies. Asle Prestegård, COO of Scandic Norway and Scandic Finland – When introducing visitor contributions to finance destination development, we believe it is important to consider how future development will be financed and organized, says Asle Prestegård, who is director of the Norwegian and Finnish Scandic chain. – The market can withstand price increases Cluster leader Børre Berglund of Arctic-365 believes the hotels' fear is to take a little hard blow. He points out that the hotels have all the possibilities to handle the fee without affecting their own margins. Børre Berglund, Cluster leader of Arctic-365 – Hotels can increase the overnight price to cover the visitor contribution so that it does not wear down their own margin. And we see that the market can withstand these price increases. Hotel prices in North Norway are now as we have not seen before, says Berglund. Berglund believes that the main problem with the system is that it includes everyone who stay in hotels, but not in line with the principle that the guest who is struggling with nature and local communities should pay. He emphasizes that while hotels in some destinations in North Norway have solid figures to show, the destination companies struggle to finance their activities and measures. – The simple answer must be that the hotels can add the cost to cover the fee, given that the market can handle it. The destination companies and local communities, however, cannot handle the hotels stopping their contribution to the community. The head of Scandic does not fully agree. – Our point is that price matters when people decide where, when, and for how long they want to travel. This is not just a tax on foreign tourists. This is a tax that should largely be paid by Norwegians who stay in hotels, whether on vacation, business trips, courses, or conferences. In Norway today, it is Norwegians who account for two-thirds of hotel stays, says Asle Prestegård. The Prime Minister addressed the hotel chains Minister of Trade and Fisheries Cecilie Myrseth (Labour Party) is pleased with the growth in the report but gives a clear message to hotel chains that are now losing their footing. – I must admit that I have little understanding of this type of argumentation. This is how the challenges are solved around all of Europe, says Myrseth. The Prime Minister emphasizes that the purpose of the taxation is to create a sustainable partnership between residents, municipalities, and visitors, so that the pressure on nature and local communities is managed. – It is the tourists who should pay this visitor contribution, not the accommodation places themselves – the industry knows this well. The contribution will make our tourist destinations even better and thus more attractive to the right tourists. Now is the time to be constructive instead of being on the sidelines, the Minister of Trade and Fisheries urges. Cecilie Myrseth, Minister of Trade and Fisheries (Labour Party) – What do you think the hotel chains have misunderstood in this debate? – I am a little unsure what the misunderstanding is actually about. We have had this discussion repeatedly over the years. Scandic – Will not bear the burden The head of Scandic denies that the hotel chains are losing their footing. – We neither said nor meant that the tourism industry in North Norway is not doing well. And we have never said that a visitor contribution will bear the burden or ruin for us, says Prestegård. He emphasizes that the Scandic chain is happy for the positive development in tourism in North Norway. – We would like to invest surpluses in hotels, new jobs, and further development. Therefore, we are concerned about what new taxes do to competitiveness over time. We want North Norway to continue the same strong development, and we believe that new measures must be designed to support development, not weaken it. Mayor believes hotels can handle the fee But if municipalities must channel some of the new tax money back to tourism, how will poor municipalities manage the massive tourist pressure? Vågan mayor Vidar Thom Benjaminsen (H) has no plans to give in to the hotel chains' complaints. Vidar Thom Benjaminsen, Mayor of Vågan municipality – There are already quite clear guidelines in the regulations on how the visitor contribution should be distributed. As it is today, we cannot just step in and cover the membership fees for the destination companies. Vågan – one of the five municipalities that is scheduled to introduce a tourist tax from January 1st. The mayor emphasizes that the visitor contribution is not a tax on the business, but a fee that visitors must pay. With solid margins on accommodation in the region, he believes the industry fears more than it has reason to. – If the hotels have 8 percent margins, they are on safer ground than one might fear. It is the guests who should pay, not the business, says Benjaminsen. Investigation clarifies from the authorities At the same time, the mayor of Vågan acknowledges that there are real, practical gaps that need to be solved – especially for smaller and unstaffed accommodation places, pre-booked group sales, and bookings through third-party portals like Hotels.com. – There are some unclear questions out there. The department should address this and answer the uncertainties as soon as possible, says Benjaminsen. He emphasizes that the municipality wants good dialogue with the business community to find flexible transition arrangements, but that the main point remains: The municipalities in Lofoten must have income to handle the massive tourist pressure.