What is the hospitality holiday bonus and will it replace the holiday tax?

UKHospitality is fighting back against the government’s proposed “overnight visitor levy”, which would give local mayors the power to charge tourists an extra fee per room, per night when they stay in hotels, B&Bs, or campsites.

The trade group warns it could add an extra £100 to the price of a family holiday and is urging the government to adopt a “Holiday Bonus” scheme instead, which would incentivise tourism rather than taxing it.

With hotels already exempt from Burnham’s hospitality business rates cuts, further cost pressures could push an already stretched sector to the breaking point. But what would the Holiday Bonus scheme mean in practice, and how likely is it to triumph over the levy?

Burnham pushes ahead with the tourist tax, despite criticisms

The overnight visitor levy was first proposed by Keir Starmer in 2025, as part of the government’s plans to devolve power from the central to local government. 

The levy would apply to a wide range of short-term accommodation, including hotels, B&Bs, and caravan parks, with local leaders having the power to set their own rates and exemptions. 

Local government secretary Steve Reed argues that giving mayors in England the option to introduce a tourist tax on overnight stays would help “unlock economic growth” and “make a place attractive for visitors and residents. 

Andy Burnham’s recent “Rewiring the State” paper confirms the government intends to roll it out to all the first wave of mayors in April 2027, but the levy hasn’t yet been approved through formal legislation and has been attracting a backlash from trade bodies and business owners since it was first proposed. 

UKHospitality has opposed the plans since the beginning. The trade body warns the levy could add £100 to the cost of a family holiday, costing the hospitality industry 33,000 jobs, and reducing national GDP by an estimated £2.2 billion as a result.

The trade body’s own research suggests the public shares its scepticism. A UKHospitality poll of more than 10,000 people found 56% opposed the levy, compared to just 24% in favour – a clear signal that its unpopularity extends far beyond hotel owners.

UKHospitality urges the government to replace levy with a “Holiday Bonus”

Instead of allowing local authorities to levy a new tax on holidaymakers, UKHospitality has proposed a “Holiday Bonus” scheme that could incentivize tourism and support tourism by devolving central government revenues to local authorities based on the number of visitors they attract.

In simple terms, the scheme would involve the government handing local authorities a set amount of money for every visitor recorded in their area, working in a similar way to how income tax and business rates are shared between central and local government.

UKHospitality recently set out its proposal in a letter to the Prime Minister, arguing a levy risks doing more harm than good for the hospitality sector. CEO Allen Simpson argued, “A holiday bonus is the right kind of devolution: more revenue and control for local communities, without the lost jobs caused by a holiday tax.”

The plan has received a warm response from the hospitality industry. However, whether or not it will actually drive any real change is unclear. The Prime Minister and London Mayor Sadiq Khan are actively pushing the levy forward, and it’s already in operation in major cities like Manchester and Liverpool. 

While the Holiday Bonus does have the support of the public on its side, in reality, it seems to be acting more like a negotiating chip than a realistic proposal.

How hotels and hospitality businesses can support the campaign

CEO’s of major hotel chains, including Hilton, Travelodge, Butlin’s, and Haven, have already campaigned along with UKHospitality to reject the planned tourist levy, and the trade body is encouraging more businesses to enter the conversation. 

The easiest way to make your voice heard is by writing to your local MP using the UKHospitality’s dedicated campaign site: stoptheholidaytax.uk. This site takes the administrative headaches away from reaching out, allowing businesses and members of the public to send pre-drafted messages to their MP in a couple of clicks. 

UKHospitality also encourages affected hospitality businesses to use local data to bolster their case to MPs. This can include local job numbers, visitor spend, potential pricing impact, or anything else that shows MPs exactly how the tax could play out in their own constituencies. 

Ultimately, there’s a real chance more hospitality businesses will be affected by the tourist tax in years to come. However, the campaign’s strength lies in numbers, so the more businesses that speak out now, the harder it will become for the government to dismiss reasonable alternatives.