Vilnius considers pillow tax to fund tourism promotion

These were the opinions heard during a meeting on Friday with representatives of the Vilnius tourism sector, held in the Vilnius city municipality.

“The general aims understood by everyone are that the city of Vilnius needs better presentation, that the city must have more tourists come and spend money here and that the residents of the city must also benefit. In order to meet these goals, we need extra resources,” the Mayor of Vilnius Remigijus Šimašius told journalists after the meeting.

According to the mayor, providers of accommodation services will take part in working out where to use the collected funds, but the city council will make the final decision. The directions in which the tax money will go will be figured out this week.

The Vilnius city municipality will decide on introducing the so-called pillow tax – a levy on hotel accommodation – in 2016.

In the event that the proposal is accepted, visitors coming to, and spending a night in the city‘s residential establishments, would have to pay a fee of 0,5 euro per night, and in 2017, a fee of one euro.

“If a resident of Vilnius, along with a friend decides to spend the night in a hotel, he will also have to pay the tax. There are no exclusions in this case, and the only people excluded from the tax are people with disabilities and minors,” Mr. Šimašius explained.

People excluded from this tax are medical patients, children, disabled people and visitors staying in the capital for a long period of time.

There are also suggestions not to impose the tax on groups of people that book more than ten rooms, because a number of hotels already have agreements with travel agencies signed for next year.

Next year, the municipality expects to collect 0.5 million euros in fees, in 2017, 1.5 million euros and in 2018, two million euros in tax. The first funds would be spent on international marketing in order to attract new flights to Vilnius.

Unhappy, but sees no other choice

“Of course we aren’t happy with this new tax because it involves additional work for the hotels. However, we can see no other choice seeing as there is a clear lack of marketing funds,” the head of Lithuanian Hotel and Restaurant Association, Evalda Šiškauskienė, said.

She has emphasised the importance of conference tourism, especially now, since the renovated Vilnius Palace of Concerts and Sports (Sporto rūmai) are planned to reopen in 2017.

“Conference tourism and decreasing the reliance on seasons are some of our major priorities. We also need to set our potential markets and priorities straight. If the Vilnius Palace of Concerts and Sports re-opens in 2017, every business client would leave three times as much money as any other tourist. This would be beneficial not only for the hotels, but also for the whole city,” she said.

Ms. Šiškauskienė also noted that in 2018, six new hotels are to open in Vilnius.

President of the Lithuania Tourism House Žydrė Gavelienė remarked that the new tax was the fastest way to raise funds for the city‘s promotion.

“If these fees are used appropriately, I see them as a good investment, because we know what hole the marketing of Lithuanian tourism is in right now. Vilnius must be the flag bearer. The international marketing of Vilnius must be invested in, because we know that a tourist doesn’t choose to go to Lithuania, but to the cities of Vilnius, Klaipėda or Ryga. Vilnius must become competetive since at the moment, we are losing to neighbouring Baltic countries,” she stated.

Ambassador of the online travel accommodation booking website Airbnb, Tomas Grižas, told us that it should not be a problem to collect the tax from individuals who rent their apartments.

“The money flow goes through a reservation platform, which makes it easy to control,” he said.

The pillow tax already exists in Lithuania’s resort towns of Druskininkai, Birštonas and Palanga. For every night spent in Palanga, tourists pay 0.3 euro, while in Birštonas and Druskininkai, the fee is 0.58 euro.

Palanga is doing away with the pillow tax next year and will be introducing a one-off 5 euro fee to everyone entering the city.

With Air Lithuanica gone out of the airline picture in May of this year, appropriate institutions are looking to establish a special fund to attract flights to Lithuania.

The talks of this fund have been going on for about a year, but in reality, it is not in effect yet. It is not clear about what the legal status of the fund will be, because approval from the European Commission is required.