KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...
KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...
KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...
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Commercial-in-Confidence<br />
<strong>KI</strong> Traveller’s <strong>Levy</strong><br />
<strong>Impact</strong> <strong>Assessment</strong><br />
EXECUTIVE SUMMARY<br />
Access <strong>Economic</strong>s was engaged by the <strong>Kangaroo</strong> <strong>Island</strong> (<strong>KI</strong>) Council to undertake a study of<br />
the likely economic impacts of a levy on travellers to <strong>Kangaroo</strong> <strong>Island</strong> (a ‘Traveller’s <strong>Levy</strong>’).<br />
The aim of the study was to explore whether the <strong>KI</strong> circumstances justify the introduction of a<br />
Traveller’s <strong>Levy</strong> and to analyse what impacts such a levy would likely have on the local<br />
tourism industry, as well as residents, visitors and the broader economy. In addition, the<br />
study was tasked with canvassing options for design and administration and identifying<br />
practical impediments to the introduction and collection of such a levy.<br />
Context and background<br />
The financial position of <strong>KI</strong> Council necessitates it securing alternative sources of revenue<br />
and the <strong>KI</strong> circumstances warrant the introduction of a charge such as a Traveller’s <strong>Levy</strong> as<br />
one option for achieving this. The combined impacts of a small rate-payer base and higher<br />
than average per-capita service-delivery costs, together with significant levels of tourism<br />
activity – a key contributor to these service-delivery costs – provide a rationale for a userpays<br />
motivated levy on tourists.<br />
Assessing the impacts of a levy<br />
The impacts of a Traveller’s <strong>Levy</strong> on the <strong>KI</strong> economy will be determined, among other things,<br />
by its effects on tourism visitation and expenditure, which in turn are a function of the<br />
responsiveness of visitation to changes in price. Demand for visitation to <strong>KI</strong> is likely to be<br />
less sensitive to price (and hence a levy) than tourism on average due to the relatively<br />
unique nature of the <strong>KI</strong> tourism experience (i.e. the limited number of substitutes) and high<br />
level of visitation by international visitors.<br />
Raising Council’s revenue target of $1.8 million annually is estimated to require a per-visitor<br />
levy of between $8 and $11, depending on its specifications. Considering purely the price<br />
effects of a levy of this magnitude and taking no account of the impacts of any associated<br />
improvement in tourism infrastructure, the reduction in visitation to <strong>KI</strong> – and by extension<br />
tourism expenditure on the <strong>Island</strong> – is estimated to be relatively modest at between 2 and<br />
3%. The analysis suggests this finding can be readily scaled to revenue targets of other<br />
magnitudes within a reasonable range.<br />
Five alternative levy options have been modelled (Table A, below).<br />
TABLE A: SUMMARY OF MODELLING RESULTS, $1.8 MILLION REVENUE TARGET; 2011<br />
<strong>Levy</strong> specifications <strong>Levy</strong> rate Reduction in<br />
visitation<br />
Reduction in tourism<br />
expenditure<br />
Per-visitor levy<br />
All travellers $ 8.55 4,260 $1.87m<br />
All travellers excluding children $ 9.41 4,550 $1.84m<br />
All travellers excluding residents $10.23 5,530 $2.06m<br />
All travellers excluding res.& children $11.34 5,480 $2.03m<br />
Per-night levy $ 2.99 5,110 $2.42m<br />
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