Vancouver hotel room tax hike to help fund 2026 FIFA World Cup

Oct 31 2022, 10:20 pm

New provincial legislation will allow municipal and regional governments across British Columbia to enact a time-limited tax paid by hotel room guests to help fund significant tourism-generating international events.

BC Minister of Finance Selina Robinson announced today the provincial government is enacting a new Major Events Municipal and Regional District Tax (Major Events MRDT) of up to 2.5% on short-term accommodation sales to help local governments cover the cost of hosting such events.

Local governments can apply to the province for the ability to enact the Major Events MRDT if they are planning to host an internationally recognized event that draws major out-of-province tourism. Safeguards will be in place to ensure all revenues from the Major Events MRDT go towards the event costs.

The temporary Major Events MRDT is in addition to the current MRDT applied to hotels and other short-term accommodations.

The provincial government established the Major Events MRDT policy after the City of Vancouver requested that the MRDT be temporarily increased to help cover the municipal costs of planning, staging, and hosting the 2026 FIFA World Cup.

“We are thrilled that Vancouver was selected as one of the host cities for the FIFA World Cup 2026, the largest single sporting event in the world,” said BC Tourism Minister Lisa Beare in statement. “This tool will support our partnership with the city to ensure the event is a success.”

Robinson notes the Major Events MRDT is not a new concept, as the provincial government in 2007 enacted a temporary additional 4% Resort Area Tax to help the Resort Municiality of Whistler pay its costs for hosting the 2010 Olympic Winter Games.

“We see the potential benefits for other communities that are working to put BC on the international stage and bolster our economy,” said Robinson.

The MRDT on the hotel room rate within Vancouver is 3%. With the additional temporary Major Events MRDT, the total MRDT could increase to up to 5.5%.

The total hotel room sales revenue generated by about 130 taxable hotel properties within Vancouver reached $397 million — down from $1.12 billion in 2019. Hotel revenues from room sales more than doubled between 2010 and 2019.

A Major Events MRDT at a rate of 2.5% could theoretically generate about $28 million annually — based on pre-pandemic 2019 values. Based on 2021’s depressed value of $380 million due to the tourism downturn, a 2.5% tax rate would generate $9.5 million. As of the first six months of 2022 alone, with the rebound in tourism, Vancouver hotel rooms have already collected $397 million in revenue, with such a level of sales theoretically generating $9.9 million for the temporary tax. It is anticipated the Major Events MRDT within Vancouver will come into effect sometime in 2023.

Vancouver and Toronto are the Canadian cities amongst 16 North American cities that will co-host the 2026 FIFA World Cup.

Canada is expected to be assigned 10 of the tournament’s 80 matches, and it is speculated that Vancouver, with its superior venue of BC Place Stadium, will be assigned more matches than Toronto. In addition to the actual tournament matches, the World Cup will also include festivities such as a month-long FIFA Fan Fest in downtown Vancouver, and major qualifying international matches and events leading up to the tournament.

The provincial government anticipates the full public cost of staging the World Cup in Vancouver is up to $260 million for all three levels of government combined. This includes not only event logistics costs and preparing BC Place Stadium, but also security, the FIFA Fan Fest, and practice and training venues.

Just last week, the provincial government announced its decision to formally decline its support for the First Nations-led bid to host the 2030 Olympic Winter Games in Vancouver, Whistler, and Sun Peaks. The rationale for their decision was over financial cost and risk.

The City of Vancouver estimated its municipal costs for its role in staging the 2030 Games would be in the range of $130 million and $200 million. It spent $500 million on the 2010 Games.

Although Vancouver and the provincial government are now tapping into the hotel supply through tax to help support the cost of staging major events, it should also be noted that Vancouver is facing an immense hotel room shortage over the coming years, which would inhibit the growth of tourism and the visitor capacity to host such major events.

About 1,100 hotel rooms were lost over the years before the pandemic due to demolition and redevelopments primarily for residential uses, and lower-cost accommodation properties have largely been wiped out during the pandemic by government decisions to buy hotels to house the homeless. High land costs are also a challenging variable for making new hotel projects financially feasible.

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