SUMMARY – ZANZIBAR’S HOTEL LEVY IMPLEMENTATION RAISES CONCERNS AMONG HOTELIERS AND TOURISM STAKEHOLDERS. GOVERNMENT DOWNPLAYS IMPACT, WHILE STAKEHOLDERS REQUEST RECONSIDERATION OF THE HOTEL LEVY FOR MITIGATION.
Hoteliers and tourism stakeholders in Zanzibar are expressing concerns regarding the introduction of a $5 levy for every occupied hotel room per night. They believe that this decision of Zanzibar hotel levy, announced during the budget reading on Thursday, June 15, will have a significant negative impact on the sector.
The government, however, maintains that the hotel levy will not meaningfully affect the private sector. Zanzibar’s finance minister, Saada Mkuya Salum, stated in an interview with The Citizen that the new hotel levy would be implemented immediately, starting from July 1. Minister Mkuya assures hoteliers that the hotel levy’s implementation would not severely harm their businesses. She emphasizes the government’s effort to create a favorable business atmosphere, such as the removal of VAT on solar panels.
According to Minister Mkuya, the previous blanket fee of $1, which had been in place for eight years, has now been categorized based on hotel star ratings.
Impact of Zanzibar’s Hotel Levy on Tourism Stakeholders
Starting Monday, June 19, legislators in the House of Representatives will begin debating the budget, leaving hotel stakeholder groups subject to the implementation of the new hotel levy. Hotel stakeholders have expressed concerns, stating that such measures make Zanzibar an expensive and unpredictable place to conduct business.
These stakeholders argue that the presence of multiple levies erodes Zanzibar’s competitive advantage compared to other island nations in the Indian Ocean. They highlight that hotels already charge 15 percent as VAT in addition to the new hotel levy, which directly impacts consumers. As a result, visitors may be compelled to explore alternative destinations.
Stakeholders also acknowledge the ongoing recovery period for the tourism industry after being severely affected by the pandemic. While the sector shows signs of rebounding with increased arrivals, the stakeholders stress the need for considering the current circumstances.
Request for Reconsideration and Transition Period
Rahim Bhaloo, the chairman of the Zanzibar Association for Tourism Investors (Zati), expresses surprise among industry stakeholders regarding the sudden implementation of the new hotel levy. He emphasizes the necessity of prior engagement due to the dynamic nature of the business.
Bhaloo urges the government to reconsider the implementation and requests a delay to allow stakeholders to inform their agents about the rate changes. He highlights that hotel rates for the upcoming season have already been negotiated and signed with agents. Imposing additional costs overnight may lead to alternative destination choices for holidaymakers or force service providers to incur extra expenses to maintain their reputation.
Moreover, Bhaloo emphasizes the importance of a gradual integration and transition period to help hoteliers prepare their clients for the changes. He suggests that the government should explore alternative methods to enhance tax collection from the tourism sector’s value chain rather than burdening a single source.
Potential Spillover Effect of Zanzibar Hotel Levy on Tanzania Mainland
William Chambulo, representing the Tanzania Association of Tour Operators, warns that the new changes in Zanzibar could potentially impact Tanzania Mainland. He notes that 40 percent of visitors to Zanzibar also visit the mainland.
Chambulo highlights the current shoulder season and the fact that holiday packages are typically sold a year in advance. Once the sale is closed, it becomes difficult to adjust rates that require visitors to bear additional costs. He emphasizes the need for a grace period before the new hotel levy becomes operational, acknowledging the necessity of revenue generation but urging the government to consider the implications for visitors.
In her budget speech on June 15, Minister Mkuya defended the changes, stating that the existing $1 fee was no longer realistic in today’s atmosphere.