04What needs to change

Patterns of domestic visitor spending provide new insights into the visitor economy across UK cities. The stylised facts provide a useful resource to local leaders to understand the size of their local visitor economy, where it sits relative to other places, and (through looking at the size and types of spending by visitors) the potential visitor offer in their place.

Given the chance, all cities would happily receive more visitors and the benefits they bring. But different places should have different approaches to attracting visitors based on the role their visitor economies currently play. This is crucial to get right as local leaders set out their Local Growth Plans in 2025, setting out their strategies for the economic development of their cities over the next few years.

For destination cities with an existing visitor economy, the focus should be on how to attract more visitor spending while managing the success of their visitor economies.

In these places, attracting international visitors could be a good approach to boost the local visitor economy. International visitors concentrate in just a few cities, particularly London. The majority of domestic destination cities, which have a proven visitor offer, could benefit from taking this offer abroad and bringing in additional spending outside of the national economy. Destination Marketing Organisations, working in combination with Local Visitor Enterprise Partnerships, could help these destinations achieve this by encouraging collaboration across stakeholders to tailor their existing visitor offer to international visitors, as well as boosting the domestic offer to those destinations outside the top ten.

National legislation in England should be passed to give local authorities the power to raise revenue through a tourism tax on accommodation. This would help large destination cities cover the costs that visitors generate. There are a number of things to consider within this:

• A tourism tax will only raise meaningful amounts in a select few destination cities. Given the concentration of visitor spend within cities, city regions should be aware that significant amounts are only likely to be raised in the central authority, with implications on how that revenue is distributed across the region.
• In popular destination cities, a tourism tax could help cities cover the operating and infrastructure costs of having a large visitor economy. Implementing this levy should not, however, be seen as a broad solution to problems in local government finance. Instead, it should be part of a larger strategy of fiscal devolution that better addresses these problems.⁴⁷
• Administering a tourism levy through Accommodation Business Improvement Districts could be a short-term solution for English destination cities. This model, as currently used in Manchester and Liverpool, should be seen only as a temporary solution in absence of a change in national legislation. These schemes are limited in scope, restricted to a select few accommodation providers concentrated in the city centre.
• Allowing local authorities and city regions to implement a levy directly would increase the scope, effectiveness and revenue-raising ability of this tax (e.g., capturing short-term lets and other accommodation more dispersed around the city), and allow cities to tailor it to their local visitor economy. England and Northern Ireland are outliers on this matter – such levies have been in place in other countries for many years, and either have been or are being introduced in Scotland and Wales too.
• The level of a tourism tax must be set with clear understanding of the existing visitor economy. As raised in roundtable events, any devolved power to set local visitor levies must be wielded with caution. Destinations setting rates out of proportion to their local visitor economy may see negative impacts on visitor spending and numbers. And many places must consider whether a levy should be implemented at all, given the limited potential for revenue raising outside a select few cities.

Short-term let registration – as confirmed by DCMS in February 2024 and consulted on the previous year⁴⁸ – would be a step towards understanding visitors’ impact on local housing infrastructure in visitor destinations, particularly as this kind of accommodation seems to respond to visitor demand in destination cities. More broadly, where there is a challenge to the supply of accommodation, destination cities should look to increase both the amount housing and specialised visitor accommodation to benefit both locals and visitors alike – like any other sector, investment in appropriate infrastructure is necessary to support the visitor economy. This can be achieved through short- and long-term reforms to the planning system advocated by Centre for Cities in previous research.⁴⁹

For the majority of cities that are not domestic visitor destinations, policy makers must give the right level of priority to visitor strategies in the context of local economic development. These cities where the visitor economy currently plays a small role must grapple with two main issues:

• The first is to be realistic about the visitor offer their city has, and what its potential could be. This involves not only understanding the assets – the retail, hospitality, and cultural amenities – they can offer to domestic visitors but also, given the regional pull of cities, those of their neighbours. A city like Hull may struggle competing against York on its visitor offer of pubs and restaurants in the same way that Southend, in the orbit of London, may not compete as a retail destination. For those destination cities outside the top ten, a better understanding of their visitor offer could be the route to realise their visitor economy potential.
• The second, bigger issue is getting the balance of focus right between attracting more visitors and the challenge of attracting higher productivity businesses to make cities more prosperous. For many of these cities with a weak existing tradeable sector, prioritising this more fundamental economic issue should be a priority. This can even be complementary to the visitor economy – locals with higher wages spend more on local services, improving the visitor offer (e.g., through supporting a wider range of retail or hospitality amenities).