Effects of Increase in VAT Rate for the Hotel Sector

This project investigates the economic and social consequences of increasing the VAT rate on hotel stays in the Netherlands from 9% to 21%.

Project leader

Project leader Centre of Expertise Leisure, Tourism & Hospitality (CELTH)

Duration

3 months

Domains

Hospitality Management

The research supports evidence-based policy by quantifying the impact on turnover, employment, and government revenue, with a specific focus on regional and sectoral effects.

Policy Context

The Dutch government plans to increase the VAT rate on accommodation to raise tax revenue and simplify the tax system. However, the hotel industry fears significant adverse effects on employment, investment, and regional economies. Commissioned by Koninklijke Horeca Nederland, this project aims to model and understand these effects, informing public debate and policy considerations with independent, data-driven analysis.

Purpose and Relevance

The project provides clarity on the actual economic impact of the VAT increase, challenging government revenue projections and highlighting unintended consequences such as decreased tourism, reduced local spending, and declining hotel margins. It helps assess whether the fiscal gains justify the potential social and regional economic costs, especially in price-sensitive or tourism-dependent areas.

Research Team

The research was conducted by Decisio and CELTH, with contributions from Sasja Vermeulen, Freek Lier, Menno de Pater, John Hornby and Sander ten Hove. Collaboration involved expert economic modelling and consultation with hospitality professionals.

Methodology

A macroeconomic impact model was developed to simulate how hoteliers and tourists respond to price increases. Key variables included price elasticity, regional differences, and guest composition (business vs. leisure). Scenarios were tested for sensitivity, and results were validated against literature and official government assumptions. The report provides national and regional estimates of tax impacts, turnover loss, and employment effects.

Key Findings

The VAT increase is estimated to yield €250 million for the government – €114 million less than projected – while costing the Dutch business community approximately €391 million in lost turnover. Hotel margins are expected to fall by 35%, with smaller, tourist-focused hotels in border regions hit hardest. Regional economies may lose €220 million in additional indirect turnover. The social role of hotels, especially in rural and historic areas, is also at risk.