Report Says Alberta Tourism Fee Hikes Could Cost $164M in Visitor Spending

A new report says Alberta’s higher tourism fees could lead visitors to take shorter trips, spend less money and slow tourism investment across the province.

The report, released by the Tourism Industry Association of Alberta(TIAA), was based on a survey of 157 tourism and hospitality businesses across the province.

It estimates Alberta could lose about $164 million a year in visitor spending after the province increased its tourism levy on hotel stays from 4-6% in April and introduced a new 6% rental car tax starting next year. The report also projects about $271 million in delayed or reduced tourism investment linked to higher tourism fees and concerns about political uncertainty surrounding a possible Alberta separation referendum.

TIAA estimates higher hotel and rental car fees could reduce spending on accommodations and vehicle rentals by about $42 million a year, while visitors would also spend less at restaurants, shops and attractions, bringing the total projected reduction to $164 million.

“When the cost of a hotel room or a rental car jumps, visitors don't just write a bigger check, they shorten their trips, skip the local restaurant, or look toward our neighbours in B.C. for their next getaway,” the association said.

The report is backed by a series of studies suggesting travellers tend to shorten trips or spend less money when travel costs rise. One study cited in the report from the University of Guelph found hotel room sales historically declined by 0.44% for every 1% increase in hotel taxes increased.

However, the report does not provide evidence of current declines in bookings or hotel occupancy in Alberta tourism communities. Instead, many of the projected losses are based on expected changes in visitor behaviour and survey responses from tourism operators.

The report found 42% of surveyed tourism businesses said they had already postponed, scaled back or redirected investment plans due to recent policy changes or political uncertainty. Another 60% said the possibility of a future referendum on separation could significantly or moderately delay investment.

The survey was not primarily focused on the Bow Valley, with the report noting 69% of businesses reporting reduced investment were located outside the Jasper-Canmore-Banff regions.

The findings differ from comments previously made by Mayor Sean Krausert, who said earlier this year he did not expect the tourism levy increase itself to significantly affect travel patterns in the Bow Valley.

“I think the relatively small size of the levy will not have any discernible change to visitation patterns, length of stay or spending behaviours,” Krausert told Bow Valley Insider in March.

The Alberta Hotel and Lodging Association said affordability concerns remain a growing issue for hotels and accommodation providers.

At a time when affordability and consumer confidence are increasingly important, the AHLA believes increasing the Tourism Levy risks visitor spending and travel in our province,” said Tracy Douglas, president and chief executive officer of the AHLA.

Douglas said most travel in Alberta is driven by Albertans themselves, including families attending events, work-related travellers and residents exploring the province, arguing higher accommodation costs could make Alberta less competitive as a tourism destination.

“About 80% of travel in Alberta is by Albertans themselves,” she said. “Accommodation is the foundation of the visitor economy, and increasing these costs weakens our competitiveness as a destination.”

Douglas also argued the fee has increasingly become a sales tax on hotels rather than a dedicated tourism reinvestment tool.

“The Tourism Levy was originally intended to be reinvested into growing Alberta’s tourism industry,” she said. “Today, it is effectively a sales tax on hotels, shouldered largely by Alberta residents.”

The Alberta government has defended the levy increase, saying visitors should help pay for the infrastructure and public services they use while travelling in the province. The province estimates the higher tourism levy will generate an additional $66 million annually, while the new rental car tax is projected to bring in another $36 million per year.

Despite the report’s warnings, Alberta’s tourism industry has continued growing in recent years, with the province still aiming to reach $25 billion in annual visitor spending by 2035.