The Bookster Podcast: The Visitor Levy

Transcript

Hello, I'm Simon and welcome back to the Bookster podcast from inside the SaaS holiday rental software company Bookster based in Edinburgh, Scotland.

Follow along as Bookster discuss their inner workings and their journey to where they are today.

Thank you for joining us and we hope you find these conversations insightful but ultimately helpful.

Now, as always, I'm joined by Robin Morris, Managing Director and Co-Founder of Bookster.

Morning, Robin.

Good morning.

Morning.

Minute 1

Nice to see you again.

Nice to see you too.

We're lucky enough as well today to be joined by Colin Guthrie, a technical director with Bookster.

Morning, Colin.

Good morning.

And also co-founder as well, actually.

I'm co-founder as well.

So you can blame me for that.

Co-co-founder.

Co-co-founder.

Lovely.

How are you, Colin? Very well, thank you.

Yes.

Good, good.

Interesting conversation we're going to have, I think.

Some strong views on it, I can tell already without even starting.

Today's conversation is going to be about, well, initially about the visitor levy and how it has impacted Bookster and what you do at Bookster.

Yeah.

So perhaps, I don't know if one of you wants to kick off with what sort of the visitor levy is we're talking about and sort of take it from there, shall we? Yeah, I mean, I could.

So, yeah, I wanted to, I suppose, even more broadly talk about the impact of various bits of legislation or changes in the law that have affected us over the years.

But, you know, the one that's

Minute 2

looms for us because of our geographic location is a visitor levy.

So I suppose broadly speaking, there's been a few things that have kind of crossed our paths and we'll maybe not go into too much depth on them, but Before the visitor levy there was the STL licensing, so there's a sort of licensing legislation for our clients that was Scotland-wide but has been in other locations where we operate and a couple of other previous things, GDPR, so regulations around storing private information that well personal information or information that can identify people that had a reasonable impact on us too in terms of having to change change coding etc and and the first time we really kind of were hit by anything in kind of our context was copyright where uh one of our clients uploaded a bunch of photos onto their website but um sort of ultimately came back to us being

Minute 3

sued for the copyright holder of those images.

So that was quite a few years ago now, but those are the kind of the things that have kind of come in, flown into at us from the side, I suppose, in terms of legal battles or things where laws have changed and we've had to react.

But yeah, but at the moment, right now, the one that we're wrestling with, and I suppose, be interested to hear Colin's views because he's kind of leading implementation of our attempt to model it inside our software is

Minute 4

the impact of something called the visitor levy, which is a Scotland wide thing, but it's happening in Edinburgh first.

And essentially what it is, is like a tourist tax basically, but Colin, yeah, I'll let you maybe explain and then you can talk about the pros and cons.

some of the cons of the way that it's being done.

Yeah, absolutely.

Yeah.

So just on broad strokes, the Scottish Government have created a framework that local councils and areas can implement in order to collect a visitor levy as they call it.

They're going to great lengths not to call it a tax but I think we can all agree it's a tax.

It's not just for tourists, it's for anyone who doesn't live there so it could be for anyone coming to work.

So if someone's coming to work on a temporary contract or anything like that they're liable for the levy.

Minute 5

You can argue not calling it a tourist tax, but visitor tax would be a fairer name.

However, the framework that the Scottish Government has created is essentially giving a lot of rope to the councils on which to hang themselves, really, by creating quite a flexible structure that allows them to charge in different ways.

Now, having looked at different tourism taxis, city taxis and stuff like that around various geographies that we work in, most of the systems are very separate.

you've probably been to places yourself where you make a holiday booking and they just say there's a tourist tax when you arrive and you have to pay it in cash at the desk or whatever and I've had to do that several times and it's almost always a per person per night or number of nights based fixed fee might be a couple of euros a night per person or something like that.

Now

Minute 6

In their wisdom, the government's created a framework that's allowed for different pricing models, namely a percentage-based model.

Now, that creates, by its very nature, creates a much bigger problem because it has to tie together the two systems.

Rather than having a levy that is just very easily collectible, And, you know, fair enough for places that have a front desk, they can collect it and remit it on your behalf.

But such a system could easily be implemented with a very basic QR code these days that takes the guest to a link, says how many people, how many nights, here's how much it is, press your thumb, pay by Apple Pay, it's all done.

The money goes to the government straight away.

There's no administration, there's no hassle whatsoever.

Minute 7

the people at the front desk, all they have to do is make sure that the person does it really.

You know, that's a very, very simple structure, but by making it percentage based, you're pulling in a lot more stakeholders.

You're pulling in the people who that are the booking when the bookings made.

So due to European legislation on price transparency, you have to show what you will pay ultimately at the end of the day.

You don't necessarily need to collect all the money.

So when booking a holiday, you might be £1,000 for a holiday and either that includes the visitor levy or you have to state there is an additional visitor levy and you'll be liable for this and it's this much.

So if it's percentage based, at the time of booking that calculation has to be made.

Now, it's gone through various iterations of including the channel markup if it's booked through, for example, Airbnb.

So do they take a percentage of that additional percentage that they take? Do they not? Do they charge for linen and cleaning? Do they include all this? This has gone through various rounds of discussion over the months leading up to now.

Minute 8

they've eventually come to the model where they just they have to take the percentage of everything that's basically not optional and so if you opt for something extra an additional change an additional clean and you're not charging the levy on that but anything that is that is part of the basic cost you will charge the levy on and that includes any channel markup so At the moment, the levy is a 5% charge in Edinburgh.

Now, that is limited to the first five nights only.

So this is the framework that we've basically, the council has been given to work within.

And this combination of two things, the percentage-based model and the limiting to the number of nights model is causing problems.

Minute 9

quite a few issues in the supply chain as a result of that.

So as I said, the place where you book has to show the price, either inclusive of the tax of the levy, sorry, or a breakdown of what it will be.

If you don't show it, then the host has to be liable for paying on the guest behalf.

That's due to price transparency legislation.

So like severe BNB booking.com verbal, they all have to display this information calculated correctly.

The people that are further down the chain, like ourselves, we have to be able to calculate it.

and store the relevant values, note when it's been paid, when it's not been paid, and ultimately produce to our clients the sufficient data that they will need in order to subsequently remit the levy funds that they have collected.

Now, this is due to go live in about 26 days time.

As things stand at the moment, we have no guidance on how to remit the tax.

Now,

Minute 10

That is a crazy situation to be in that we don't know what data we need to actually store in order to remit it.

We can take a good guess at what we need to store, obviously, but the fact that things are getting pushed ahead without the whole pipeline being known, tested and available for implementation prior to launch is quite frankly mind blowing.

Can't understand why anyone would push ahead with a platform like this.

A further issue around this is one that's typically affected by workers coming in for contracts.

So there's been various guidance on who's due the levy or how it's due, et cetera.

Now, say I'm a company and I have several workers staying at a property.

So I've booked my property.

I've booked it for ten days.

Minute 11

Now, it just so happens that it's a one bedroom apartment.

And for the first five nights, Bob is coming to stay and he's doing some groundwork on a building site.

And then after five days, Bob's done, he leaves and Frank comes along and Frank's now doing the block work, building up from the building site.

Now, both of them stay for five days, but the booking is for 10 days.

Now, under the examples given, they wish to charge the levy twice.

because it's two different people, they're both staying for five days, that is full five nights for both of them.

Even though the booking made by the company is for 10 nights, they will have to pay the levy twice.

Now, the problem with that is that you now have to break down that booking into two bookings in order to calculate your levy as a percentage of the first five nights.

So all of these platforms out there from airbnbbooking.com, everything down,

Minute 12

At the time of booking, you now have to say if you're booking it for one person or if you're going to have a changeover in the middle of the stay in order to calculate the levy, in order to show the price transparency, in order to go that through.

So there's a whole bunch of problems in this whole supply chain that are just not being addressed.

And we're expected to implement it now to start charging in 26 days time.

So it's a bit of a crazy situation to be in, to be frank.

So, yeah.

I think some things it's just, you know, it's kind of easy just to write it down, but then implications, I mean, certainly splitting up bookings like that.

Also, I mean, I suppose for us, because most of our clients are, most of the time it's tourists that they're,

Minute 13

So a single booking does represent a single stay.

So for us, most of the time that doesn't apply.

But just the very fact that it sits there saying, well, this is a thing.

It's like, well, how do you, can you represent that at all? Can you represent this kind of serial stay situation? And maybe the entrepreneur is...

You know, no, it's very, very difficult.

The other thing that they seem to be saying as well, which was essentially say you had a seven night stay and, you know, cost of the booking was 700 pounds or whatever.

They want the five nights.

So the 5% of the first five nights to be based on the rate, not the price of the booking.

Minute 14

So it's whatever the rate of those five nights would be, not.

So like if you decided to stay for five nights and not seven nights, it's what that price would be, maybe.

It's not entirely clear.

rather than doing it pro rata and just dividing it by seven and multiplying it by five but that's insane because you might not even have a five night price you might literally just always you know market your property at seven night stays because you don't so there is no nightly rate basically but you could also if you were being a total idiot about it you could say right well first five nights are free if you book a seven night stay and the two nights that's where all the rate is so um The levy is zero.

Right.

Okay.

Okay.

So it's not just a silly thing to put in.

It doesn't make any sense.

It's a silly thing to put in, but that is what they've written down.

And what they, you know, when we've asked the question, they've clarified it saying, yeah, that, that is what we want.

It's like, well, that's actually impossible.

Yeah.

They say the advertised nightly rate, but you've, you've pricing is rarely just here's the nightly rate.

Minute 15

add up how many nights you're staying and that's the price.

There are various things layered on top.

Cleaning costs that might be based on the length of stay.

You might have prices that are higher at the weekend, etc.

So your nightly rate will go up.

You might have discounts that are based on the length of stay.

So as you stay longer, the price gets cheaper.

Therefore, the effective nightly rate is changed.

I mean, the way our pricing works is we don't calculate a nightly rate once a booking is made.

We might have nightly rates somewhere.

They ultimately get compounded, discounted.

Minute 16

adjusted for various rules around length of stay, how many people are staying, etc.

We never actually back calculate that to an effectively nightly rate that varies over the booking stay.

We just have the price for the booking.

So we really have no way of implementing the levy without massively changing our architecture or simply saying we're going to have to do this in a sort of pro rata way.

We're going to take the price of the booking and divide it by the number of nights and times it by five.

That's pretty much the only way we can do it without radically changing our whole architecture.

So again, the implementation of this by going down a percentage model, by going down a limited percentage, number of nights model, they're creating a whole bunch of problems.

Now, I think that's that this is almost the most galling thing is that there seems to be no communication with the stakeholders or the people involved when devising the scheme.

And all of these problems are obviously coming to light.

Now,

Minute 17

The other thing as well that I think irritates me particularly is, you know, for years in Britain, we've been told about austerity and how everyone needs to make efficiency savings and we need to cut down on complicated processes and this, that and the other.

And here they are, they've implemented a scheme where they're pushing all of the administration practically down onto the people in the industry to run this system for them.

They're pushing all of the complicated bits that need to be done to keeping records, getting the money from the guests, taking the payments, however it is, submitting that on behalf of the guests.

They're basically pushing out all of the administration of the whole system into the wider economy.

And I don't think there's been any kind of economic impact assessment as to how much that actually costs.

So they can't then do an analysis of say, well, what if we were to centralize the system? This would cost us X amount to run.

But we don't know how much saving for the economy that would actually produce.

Minute 18

So, I mean, that's more of a political point than a technical point, but it just seems insane that things have got to this level and at the 11th hour that we're in this situation.

I suppose, broadly speaking, it's just one of these things where it's like, you know, a lack of thinking about the complexity of what you're asking people to do and...

you know, not just thinking, right, okay, well, if we just keep this nice and simple, I mean, the other sort of end of this, which Colin did touch on before in terms of getting the money from the guest to the council.

So that's the kind of next bit, which we haven't really talked about.

But again, like it would be very obvious or very clear, sorry, very easy, I suppose, if you just said, right, guest has to pay the council.

Okay, here's a QR code.

It's very simple.

Minute 19

money goes from the guest to the council, done.

If there was some thought of that, but that's not what they're doing.

Instead, the money goes to who knows where.

It goes to booking.com and then it goes to the agent.

Then it maybe goes to the owner.

And then the owner is actually the person who's responsible for paying it.

So it has to go through all these hoops.

And at each of those moments, what does it increase to? you know, turnover towards the VAT threshold, which yes, it does.

So you're going to get people who were under a VAT threshold are pushed over a VAT threshold.

So it means all of their services, some quickly become 20% more expensive, plus the 5% or 20% more expensive.

But there's also just that complexity.

Why bother with that? Why bother with any of that? It's not needed.

Just, you know, if you set up one system that said, right,

Minute 20

okay, you've got to push your guest to this system basically at some point, tell us the value of the booking and we'll tell the guest how much they need to pay and they pay the council directly.

So yeah, we still have to work out the value of the booking or whatever and it might be a little bit, there's a little bit of complexity there, but there's totally no need for us to be the ones collecting it all and then going through some other system to remit it to the council to the council it's sort of it's just stupid too many steps yeah it seems like a very unnecessary step yeah um and i guess i mean what obviously a lot of work involved for you guys to get this up and running properly and do it and then is there a chance in six months time they say actually it's not working we're gonna stop again

Minute 21

I think the issue, things like this that the Scottish Government have trialled in the past, I think some other schemes like the deposit return scheme and a few others as well, They very much go to the 11th hour until people, the industry voices that have been shouting loudly all the way through the process are finally heard.

And someone who has been spearheading these campaigns have finally had their blinkers forcefully removed.

and admit that there is a climb down.

Now, I'm still hopeful that that will happen in Edinburgh, and at very least it will be delayed from starting at the 1st of October.

But the problem is that all of the people need to start doing the work a long time ago in order to meet the deadline that they've introduced.

So if they cancel it on literally the 11th hour,

Minute 22

The work still has to be done and we've still invested in that.

We are kind of fortunate that Bookster has quite a complex layered pricing system.

So while we don't calculate an effective price per night, we do have a system which ultimately is duration based pricing.

extra calculations.

So we can vary the calculation that we implement depending on how long someone is staying.

Now, in a percentage model, we can use a little mathematical trick that 5% of a five-night stay, that's very easy to calculate because that's that, but 5% of the first five nights of a 10-night stay, that on the face of it is a bit more complex, but we can just use percentages in a clever way.

And as long as we're pro-rattling the whole price of the holiday and not back calculating to an individual price, then we can say, well, actually, 5% of the first five nights of a 10-night stay pro-ratted

Minute 23

is the same as 2.5% of the whole state because that's maths.

So we can use our existing duration-based discounting platform calculation that's built into our engine in order to calculate that levy.

It's not totally trivial for us because when you're dealing with percentage-based extras, you also have to be careful about compounding.

So we have...

You can have fixed cost extras, you can have percentage based extras, and these can be add-ons, mandatory fees for cleaning or for service fees or concierge fees or however people want to structure it.

However, the order of which you apply them can affect what price you get at the end of it.

So if you add in your fixed fees first and then take a percentage, that's different to taking a percentage and then adding in your fixed fees.

So we have effectively levels that we chunk these calculations into.

Minute 24

We do one, the accommodation cost, and then a whole bunch of extras that comply at the accommodation cost.

And they all apply, percentages are all calculated from the same base value.

The value that you calculate the percentage of doesn't change within that column.

We then add that all up and get a new total.

And then we go on to the next stage, which is a total rather than accommodation costs.

and then we can have another round of extras that are percentage based that work off the total and again they all work off the same base value they don't compound within their lane.

Now unfortunately we don't really have one that is then beyond that for a calculation of a levy which has to happen after everything else has been done

Minute 25

So we do need to change architecture a bit to introduce a new way and not another sort of stage of being able to do these calculations and being a bit more flexible.

Is that the council phoning us to tell them to delete it? So, yeah, so we do have to make some architectural changes.

It's a bit more work.

It'll probably take quite a lot of profiling to make sure that it's as efficient as before.

It might not be because of the way that we're having to change things in order to introduce this.

So, yeah, there's a lot of effort that we have to make up until the point at which they may or may not delay it.

And so already it's costing the economy money as a result of that, you know.

So, yeah.

And is there any, obviously from your point of view, it's a pain and, you know, a lot of work.

Have you had feedback from your clients about...

Minute 26

You know, in terms of, like Robin said, it takes people into a different threshold of tax and all that sort of stuff.

Yeah, very much so.

Yeah.

I mean, clients are already rattled.

Again, the guidance, although it's relatively clear, there's a lot with the STL industry, there's a lot of smaller stakeholders.

It's not dominated by five or six big supermarket chains that have to collect bottles and return them in like the deposit return scheme.

There's a lot of very small stakeholders, so they get the information.

They have to interpret the information.

Not everyone can interpret it correctly or 100% accurately.

So we do have our clients asking us about it.

We do have some clients actually who incorrectly started adding in an extra within our platform currently within the current pricing structure that is wrong because we don't support the new mode that I've just been talking about yet.

It's not released yet.

So they started charging it now for bookings now, and that is wrong on three fronts.

A, they shouldn't have been doing it at that particular time.

B, the calculation was wrong.

And C, it's only actually we were supposed to start taking the levy now on the 1st of October, sorry, but only for bookings that are arriving after the 24th, I think, of July next year on 26th.

Minute 27

So any bookings that come in between now and then, the levy won't apply to.

And it's only the bookings that come in after the 1st of October for holidays that are staying on or after the 24th of July that the levy is actually liable for.

So clients were rushing it.

They were panicking.

They were doing things.

They were getting things wrong.

So we have to be clear that we are going to be implementing something to support them.

and we will release guidance as soon as we can.

But by the same token, we couldn't realistically have done development and implementation on this too early because they've been changing it quite frequently.

And there is still the hope, beyond hope, that it will be delayed, it will be made simpler, it will take a lot of pressure off the actual industry.

Because the industry has...

Minute 28

been fairly under pressure of late due to other issues in especially in Edinburgh as this is one of the focuses the STL licensing which is one of the other issues that Robin mentioned and we're short term let properties and owners have to go through a licensing scheme that should have been a simple registration process but again has been slightly misconstrued I would say from what it should have been into essentially a council decision to try and cut down obviously on the number of short-term let properties within Edinburgh so I mean yeah with the STL licensing scheme looking at it from our perspective in terms of software I actually didn't

Minute 29

have any effect really on us at all there wasn't anything we needed to do really i mean a very small amount um obviously it has an enormous effect on our clients and then as a result you know it's it's definitely had a very negative effect on us as a business but we didn't actually need to do anything technically as it were so um it's kind of different issues whereas the you know the levy um I think almost it's the reverse in a way.

To our clients, they'll need to do it.

And well, maybe not the reverse.

I mean, there's still a lot of stress and a lot of effort for them.

But yeah, there's just a much bigger impact on us trying to do it, trying to figure out how to.

And I think the other, I mean, if there was no STL licensing scheme or if there wasn't such a big...

Minute 30

push to reduce the number of STLs or whatever if they weren't so punitive.

To some extent, this could be an advantage for us because it sort of has slightly localised some of the requirements to run an STL in Edinburgh and maybe by extension in Scotland that some other competitors of ours may not actually support.

this thing and therefore it actually might give us a competitive edge.

So as though, although Colin hates it with a passion that you can hear coming out of the screen.

There is a kind of maybe, it certainly would have been if there wasn't such pressure on reducing the number of STLs.

It would have probably almost certainly been an advantage for us.

But it may still prove to be the case if it's rolled out to other

Minute 31

areas of Scotland it might be that the number of property management systems like ours that implement something quickly we might be just just purely by our location we might just be ahead of the game there and it might be that we get a bunch of people who have to switch PMS property management system our system so although I yeah I really don't like it on many many many levels there is Maybe something pushing in the other direction for us that's not, might be.

I don't know.

We need to see our hands out.

Spoken like a John.

I think it's one of those things.

The industry has supported a licensing scheme and a registration scheme for years.

just not the completed version that has actually come to pass.

Well, I mean, it certainly sounds like you've got your work cut out for you anyway at the moment in the long days, I'm sure.

Yeah, I've got the next four weeks will be interesting.

It's probably worth, in terms of this podcast, doing a follow-up on this one in a couple of months' time and see

Minute 32

see where it all is um absolutely that'd be quite interesting as well um okay well look uh we've run slightly over but i think it's probably worth it because it's obviously a huge topic for you guys and uh like i say it's interesting to hear about it sounded very much like a math lesson there for a while you've explained it very well very well i thought you kind of had a good uh uh title for a new podcast there Colin that's maths that's maths that's number way right okay gentlemen on that note we shall leave it there thank you for your time both of you this morning thank you Colin for joining us thank you for having us good luck with it And for everyone listening, thank you for listening.

I hope you enjoyed it.

Please join us again on our next podcast, which will come out very soon.

And we'll talk about something equally as interesting then.

Until then, goodbye.

Goodbye.

Bye-bye.