Willingness to Pay for Tourist Tax in Destinations: Empirical Evidence from Istanbul

What is it about?

Revenue generated from tourism taxes constitutes an important financial resource for local governments and tourism authorities to both ensure tourism sustainability and enhance the quality of tourist experiences. In order for tourism policy makers to create an efficient and fair tax system in tourism destinations, it is crucial to understand travelers’ perceptions concerning willingness to pay (WTP), tax rates, and their optimal allocation. The objectives of this paper, therefore, are to evaluate tourism taxes as a compensation tool to cover the costs of tourism and to measure tourists’ WTP. The paper also suggests a fair allocation of tax revenues based on tourists’ perceptions. A qualitative approach was used and data were collected through semi-structured in-depth interviews with international travelers to Istanbul, Turkey. The findings suggest that tourists are more likely to pay an additional amount of tax when this is earmarked for improvements in their experiences, but they are reluctant to take on liability concerning matters relating to destination sustainability. Based on the travelers’ perceptions, the paper also identified areas that need investment to improve tourist experiences. An interesting highlight of this paper is that the majority of surveyed respondents reported that their travel decisions would not be negatively affected even if the total cost of their vacation increased by one-third. The findings are expected to offer fresh and much-needed insights into tourist taxation for tourism policy makers and stakeholders.

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Why is it important?

This paper is a preliminary qualitative study offering a general framework for tourists’ WTP for taxes and their perceptions about alternative uses of tax money. The study suggests a rate of reasonable tax and price sensitivity ratio. The paper provides various insights into WTP and areas of investment that would be considered when spending the tax money received from tourists. These results should be validated in a quantitative study conducted in various destinations with different characteristics (e.g., sun and beach resorts) and on a larger sample.