Tourist Tax for Destination Sustainability. Influencing Factors of Tourists' Willingness to Pay

Table of Contents

Abstract

List of Tables

List of Figures

1.0 Introduction

2.0 Literature review
2.1 Tourist tax
2.1.1 Types of tourist taxes
2.1.2 Motives for implementing a tourist tax
2.1.3 Impacts of tourist taxes on the different stakeholders
2.2 Willingness to pay
2.3 Sustainability
2.3.1 Sustainability in tourism
2.3.2 Negative impacts of tourism on a destination

3.0 Research design
3.1 Methodology
3.2 Hypotheses
3.3 Questionnaire design
3.4 Data collection

4.0 Results
4.1 Data analysis
4.2 Discussion
4.3 Limitations

5.0 Conclusion

6.0 Recommendations and further research

7.0 References

8.0 Appendix
Appendix a – Questionnaire
Appendix b – Survey results
Appendix c – Coding table

Abstract

As the overtourism problem increases around the world, many popular tourist destinations are resorting to measures, which are supposed to solve the problem totally, or to at least find ways to compensate the adverse effects created by tourism. One of these measures is the implementation of tourist taxes, which has become increasingly popular amongst several tourism destinations. Depending on how the funds created by these taxes are used, they could for example ensure the sustainability of a destination.

This paper aims to explore different types of tourist taxes and the motives for implementing them, as well as the impacts they induce on different stakeholders. Further, the topic of sustainability in tourism is elucidated. The research then deals with the willingness of German tourists to pay those taxes under different circumstances. As the literature review revealed a few qualitative studies on this topic, a quantitative approach was chosen, in order to test the results of these studies and the resulting hypotheses.

It was expected, that tourists are likely to change their travel behavior due to the implementation of taxes, it was rather expected that they would not be willing to pay them. However, the study showed, that most participants are willing to pay a tourist tax, if the allocated funds are used to ensure the environmental sustainability of a destination. The factor which mostly influences the willingness to pay, is the respondents’ attitude towards sustainability. Secondly, it was discovered that confidence in the implemented action seems to be of big importance. Participants who trust that allocated funds are used for the mentioned purposes, show a higher willingness to pay.

Concludingly, local governments of tourist destination should increase their trustworthiness, by being more transparent, not only in collecting taxes, but also in finding appropriate purposes for spending the money on. Tourists are more likely to pay, if it is for the ‘right’ cause.

List of Tables

Table 1: Variations of an accommodation tax (Hughes H. L., 1981)

Table 2: Rule of Thumb for Interpreting the Size of a Correlation Coefficient (Hinkle, Wiersma, & Jurs, 2003)

Table 3: Mean values of demographics

Table 4: Results – Tax utilization preferences

Table 5: Results – Impact on travel behavior

Table 6: Pearson correlation – Age

Table 7: Anova – Gender

Table 8: Anova – Highest level of education

Table 9: Anova – City trippers

Table 10: Anova – Cruise passengers

Table 11: Anova – Party tourists

Table 12: Anova – Destination of travel

Table 13: Pearson correlation – Attitude towards sustainability

Table 14: Pearson correlation – General willingness to pay

Table 15: Pearson correlation – Impact on travel behavior

List of Figures

Figure 1: Conceptual model

Figure 2: Results – Sustainable behavior

Figure 3: Results – Perception of adverse effects and costs

Figure 4: Regression analysis – Attitude towards sustainability

Figure 5: Regression analysis – Trust in correct utilization of tax money

Figure 6: Resulting model

1.0 Introduction

As a means of improving destination sustainability, many destinations are now opting for implementing some form of tourist taxes (Song, Seetaram, & Ye, 2019), to be able to keep up with the fast growing visitor numbers (Bennett, 2018). Until a few years ago, tourist taxes were often used to get more tourists into a country, for example by increasing the destination marketing and funding tourism boards (Spinks, 2019). Nowadays, a shift can be witnessed from promotion of the destination, towards trying to adequately manage the visitor streams and the effects of overtourism (Boffey, 2019; Spinks, 2019). In these times, headlines like “Venice to introduce visitor tax in latest bid to manage impact of mass tourism” (Squires, 2019) or “‘We must act now’: Netherlands tries to control tourism boom” (Boffey, 2019) are only a few of many, announcing the implementation of taxes for tourists.

Venice is a drastic example, with 24 million tourists per year and around 15 million of these being day-trippers. They come for example with cruise ships, making almost no economic contribution, as they do not require a hotel and bring their own food or eat on the ship when they get back (Spinks, 2019; Squires, 2019). Still, they enjoy and use all sights and facilities that the city offers and therefore are partially responsible for the costs arising. These costs include, but are not limited to: increased costs for rubbish disposal or restoration of sights due to the increase of use. (Squires, 2019) In other destinations, tourism makes up a high proportion of the country’s income, however it is also producing high environmental and social costs. For instance, picturesque sights and landscapes are often overcrowded which harms the nature and culture, due to increased amounts of food waste and pollution and residents being driven away from their homes to make room for more tourists. (Boffey, 2019) An implemented tourist tax could therefore directly give visitors the chance to contribute to the preservation of facilities, infrastructure or environment they use and enjoy. The money collected from taxes may be used to increase the sustainability of a destination, for example for the protection and conservation of the natural environment and landscapes and to compensate for the damages caused by overtourism. (Leasca, 2019)

Many EU member states already collect occupancy taxes or accommodation taxes from visitors. The amount of these taxes often varies depending on the class of the hotel, the exact location and its attractiveness to tourists, or the season. Since currently these taxes can only be collected from visitors staying in hotels, excluding day-trippers or cruise ship guests, there are thoughts to establish newer adaptions, to be incorporated into the costs of airline, cruise or train tickets. (Brain, 2019; Squires, 2019)

While some destinations are planning on deterring the number of tourists with the taxes, others are rather worried about the maybe incurring decreasing demand. Therefore, it becomes necessary to evaluate tourists’ willingness to pay. The research consequently aims to identify factors that influence the willingness to pay, such as demographics, the traveler profile or the behavior of the tourist in regard to sustainability. Further, the utilization preferences of tax money are assessed to show, which investment choices could increase the willingness to pay. Lastly, the effects of such taxes on the travel decisions is tested.

This research can be of relevance for local governments, who are contemplating about implementing tourist taxes for a certain tourist destination. With the help of the conducted research, advice to them can be outlined, whether to implement these taxes and under which circumstances, without harming their business’ profitability.

2.0 Literature review

Tourism remains one of the fastest growing industries worldwide, with an expected growth rate of 3,3% per year for the next twenty years (Cetin, Alrawadieh, Dincer, Dincer, & Ioannides, 2017). In 2018, international tourist arrivals reached the mark of 1,4 billion, which is an increase of 6% compared to the previous year. This number was reached two years ahead of the long-term forecast conducted by the World Tourism Organization (UNWTO) in 2010, making 2018 the strongest year since 2010. Especially the Middle East and Africa benefited, showing increases in tourist arrivals of 10% for the Middle East and 7% for Africa. The strong results are said to be driven by a rather favorable economic environment and increasing outbound demand. For 2019, the UNWTO has forecast a growth of 3-4% in international tourist arrivals worldwide. (UNWTO, 2019) Even though, tourism stakeholders are becoming more aware of adverse environmental and social impacts caused by tourism, the emphasis seems to stay on expanding the visitor volume instead of adding value to the product. Therefore, even in ‘greener’ countries like Iceland, dramatic increases of tourist numbers can be witnessed. (Cetin et al., 2017)

2.1 Tourist tax

As the awareness of adverse effects and overtourism becomes more prominent, many measures are being implemented, with the intention of reducing such effects. One of these measures, are taxes that specifically target tourists. They are becoming increasingly popular and are reformed regularly in order to ensure efficiency. (Song et al., 2019) Without a doubt, such taxes do not only have advantages for the destinations. The main concern arises, that tourist taxes would negatively affect the competitiveness of a destination, as prices would need to be raised. Some argue that the burden, placed on consumers and producers through taxes, is excessive and that tourists could then be over-taxed, since they already pay value-added taxes and other sales taxes at home, as well as in their travel destination. (Song et al., 2019) Even though there are many advocates for implementing specific tourism taxes, the practice is often rejected by tourism businesses, who consider them disrupting for their activities (Gago, Labandeira, Picos, & Rodríguez, 2009) and who fear that it might distort the economy (Forsyth, Dwyer, Spurr, & Pham, 2014). Further hesitation arises, because of the effect, tourist taxes might have on demand (Hughes H. L., 1981), as well as the global share of international travel (Forsyth et al., 2014). It is difficult to tax international tourism in an efficient way. Often, the taxes must be paid by industries, which sell to tourists and therefore have the possibility to pass the taxes on, for example hotels (Forsyth & Dwyer, 2002). Though, especially where long-term contracts exist between hotels and tour operators, taxes might result in lower profit margins for the hotels, as the tax cannot simply be added on (Gago et al., 2009). Other times, tourists are directly charged, for example with airport or departure taxes. (Forsyth & Dwyer, 2002)

Generally, tourism is regarded a ‘soft target’ for taxation, as visitors are an easy source of taxation revenue (Lipman, 1996) and create an important financial resource for local governments (Cetin et al., 2017). Despite of negative consequences that could come along with tourist taxes, there are some benefits as well. Especially when it comes to environmental problems, which can be associated with tourism, tourist taxes are a favored measure. Following the “polluter pays principle” (do Valle, Pintassilgo, Matias, & André, 2012, p. 1408), tourist taxes can be a way to reflect the extra costs that are imposed on a destination by tourists (Hughes H. L., 1981). Also, they can make the inconveniences, which residents experience because of tourists, more tolerable (Murphy, 1985). Tourists bring financial benefits to a destination and generate extra income for local governments. Nonetheless, they also generate extra costs. A tourism tax might not truly reflect these costs, but could be an attempt to equalize them with further benefits arising through tourists. (Hughes H. L., 1981)

According to Cetin et al., (2017) tourist taxes can ensure sustainability, enhance the quality of the tourist experience and combat social and environmental costs. There are different kinds of taxes that could be raised and some can be collected to create funds for improving the quality of a destination and to conserve the environment (Gago et al., 2009). So called earmarking of taxes, meaning that these tax revenues can only be used for previously determined purposes, has become a frequently used approach (Dwyer, Forsyth, & Dwyer, 2010). Such earmarking seems to be attractive on the first note, but it might encourage wasteful expenditure (Forsyth & Dwyer, 2002). It limits the possibilities to spend tax revenues and therefore might lead to excessive or inadequate funding of the chosen purpose (Gago et al., 2009). The case of the ‘ecotax’ on the Balearic Islands, illustrates an example where the accommodation tax was earmarked for environmental protection (Aguiló, Riera, & Rosselló, 2005; Palmer & Riera, 2003). However, this tax was very short-lived, as according to Gago et al. (2009) it was lacking the incentive for tourists to change their behavior in order to reduce adverse environmental effects. Taxes of any kind, which are supposed to be used for environmental purposes, should somehow integrate the cost of the environmental damage into the prices of goods and services and therefore create incentives for involved parties to turn away from their environmentally irresponsible behavior and to adopt clean technologies instead. Further, the goal of environmental taxes should be, to accomplish environmental improvement at a minimum cost of the externality producer and to raise enough revenue to do so.& (Ekins, 1999)

In order to create a ‘good tax’ the optimum level needs to be found. According to Aaron and Boskin (1980) and Jha (1998), an optimal tax should comprise three things. Firstly, it should be efficient, meaning it should create maximum funds, while putting minimum pressure on tourism demand and creating as little distortion from the untaxed situation as possible. Second is the equity. Even though this is likely to be a more subjective matter, it should be attempted to distribute the tax burden evenly among different income groups and other groups. Lastly, administering the tax should be kept simple and the administration cost should be in relation to the income received from the tax.

2.1.1 Types of tourist taxes

There are more than forty different applications of specific tourist taxes around the world (World Tourism Organization, 1998). It can be distinguished between direct taxes, such as city taxes, lodging taxes or entrance and visa fees, and indirect taxes like regular sales taxes or value added taxes (Cetin et al., 2017).

It is rather difficult to tax all products and services which not only tourists buy, but also locals. Identifying which of the purchasers are actually tourists and which are not, would lead to problems. (Hughes H. L., 1981) The lodging tax, which is also called accommodation tax, therefore is the most common, as it offers a possibility to almost directly and only charge the tourists (Gago, Labandeira, Picos, & Rodríguez, 2006). The accommodation tax can easily be collected and targets almost all tourists, except of those who only stay in the destination for one day (do Valle et al., 2012). Often, these taxes are directly levied on the providers of accommodation in form of a hotel tax, who then pass it on to the visitors, by adding it onto the room price. Other times there is a visitor tax, which may also be collected in the hotel, but is collected separately upon arrival. (Burkart & Medlik, 1981)

Abbildung in dieser Leseprobe nicht enthalten

Table 1: Variations of an accommodation tax (Hughes H. L., 1981)

Table 1 presents the different ways in which accommodation taxes may be collected. An ad quantum tax refers to a fixed amount, payable per visitor, per night that is spent in the destination, or it can be a fixed amount that has to be paid by the hotel per year, depending on the capacity. Ad valorem taxes, on the contrary, describe that the tax is a percentage value of the room price paid by the visitor, or of the hotel’s turnover from accommodation. (Gago et al., 2009) All four forms could vary, depending on the hotel class, the exact location of the hotel and the season (Logar, 2010). Especially ad quantum hotel taxes could otherwise pose problems for small and cheaper hotels, which are highly dependent on seasonality and have low occupanccy rates in low seasons, as they would have to pay the same price as more expensive, higher class hotels. Also for visitors an ad quantum tax could be regarded as unfair, since it creates a disproportionate tax burden, if all hotel guests have to pay the same amount, regardless of the class of hotel they are staying in. It can be assumed that tourists with higher income stay in higher class hotels, while those with lower income choose cheaper accommodation. Ad valorem taxes thus are the preferred variant, as they avoid such disproportion and partially ensure that the tax is within the tourists’ ability to pay. However, the disadvantages of accommodation taxes have to be looked upon as well. Some argue that there is limited justification for these kinds of taxes, as only a portion of tourists would have to pay them, while those, who stay with relatives and friends or are only visiting the destination as a day trip, remain tax free. Moreover, it can be difficult to keep track of all accommodation types, like camping or caravanning or privately rented appartments. (Hughes H. L., 1981)

Another form of tourist taxes, are the so-called departure or aviation taxes. This kind of tax charges all passengers leaving a country, regardless if they are foreign visitors returning home or residents flying out for vacation with the intention of coming back. It is usually collected by airlines or shipping companies, which include it in the ticket price and then transfer the resulting revenue to the government. (Forsyth et el., 2014) Consequently, it can be regarded as an export tax on foreigners and an import tax on residents who travel abroad (Tol, 2007). Sometimes it is varied depending on the travel distance or flight class and equated with carbon taxes meant to raise awareness about greenhouse gas emissions (Song et al., 2019). In the case that it is a fixed rate, it is often considered discriminatory towards short haul tourists, as the tax then makes up a larger portion of the total price of the ticket. There is some criticism about departure taxes, which is reinforced through several studies. However, their techniques and results should be treated with caution. The studies often highlight negative effects of aviation taxes on the output of tourism, while not taking into consideration the costs of providing such output. Therefore, they cannot make estimations of the net gains or losses to the economy. (Forsyth et al., 2014) Further, such input-output analyses, are approaches which are more or less guaranteed to produce negative results for any tax in the tourism industry as they do not consider the substitutes available (Dwyer, Forsyth, & Spurr, 2004). The Netherlands are an example, where an aviation tax has failed and was abandoned after just a year. In this case it is suggested, that the failure occurred due to airports of close proximity in other countries, which served as substitutes, in order to avoid the taxes when departing from a Dutch airport. (Gordijn, 2010)

2.1.2 Motives for implementing a tourist tax

There are many reasons why local governments may choose to raise a tourist tax for a certain destination. Often local communities have to bear all costs which are arising from tourism, such as providing additional police and fire services, maintaining public roads and parks or collecting litter, by themselves. With growing tourism numbers and due to often lower incomes, this can become increasingly difficult for locals and therefore create the need to relocate the burden. Tourists use all these services and facilities without directly paying for it. (Hughes H. L., 1981) This justifies why they should return something to the economy and compensate for these costs when visiting a country. A tax would be a possibility to do so and create a balance. (Combs & Elledge, 1979; Hughes H. L., 1981) Taxing tourists results in a good new source of government revenue and can somewhat be regarded as receiving economic rent from tourists, for using the destination’s facilities (Gooroochurn & Sinclair, 2005).

There is a high revenue potential, as tourist taxes could make up around 10% of all collected taxes in some countries (McAleer, Shareef, & da Veiga, 2005). Revenues could be used for physical investments, such as highways, airports or convention centers, in order to facilitate tourism development (Okumus, Avci, Kilic, & Walls, 2012), or for financing the needed increase of water supply, sewage sanitation or garbage collection (Gago et al., 2009). Some studies favoring tourist taxes claim, that the collected funds “should be spent in areas related specifically to tourism” (Cetin et al., 2017, p. 4). However, often this is not the case and the revenue is rather regarded as free revenue, to be spent where needed (Hiemstra & Ismail, 1993).

Another well established reason for collecting tourist taxes, is for the reduction and correction of negative and external effects, as mentioned by several authors (Forsyth & Dwyer, 2002; Gago et al., 2009; Gooroochurn & Sinclair, 2005). It is known that tourism does not only benefit the destination in which it takes place, but also harms the environment and reduces the quality of life for locals. A tax could therefore ensure a sustainable development by regulating the tourism streams, preventing overuse of crowded facilities and compensating for environmental damages, to be able to repair these. (Forsyth & Dwyer, 2002; Gagoet al., 2009; Hughes H. L., 1981) This would not only be beneficial for the environment, but would also result in an improvement of the tourism product in the long run.

Generally speaking, revenues collected from tourist taxes should be spent carefully, in order to ensure a long-term growth in revenues. If done so, it could result in a self-reinforcing cycle. The money will be spent on issues, which directly or indirectly improve the tourist experience. This will have a positive impact on demand and further increase tax revenues. (Cetin et al., 2017)

2.1.3 Impacts of tourist taxes on the different stakeholders

The different stakeholders of tourism, are tourists, locals, tourism businesses (e.g. hotels, restaurants, car rentals, souvenir shops, etc.) and the industry as such. The impacts of tourist taxes on tourism activity and these stakeholders are likely to depend on the kind of tourist tax that is implemented. In the following, the main two variations, namely accommodation taxes and departure taxes will be assessed.

Accommodation taxes

The main concern for tourism businesses regarding accommodation taxes, especially hotels and tour operators, remains that of decreasing demand, while having an increased amount of work and costs, as they are the ones having to collect the taxes (do Valle et al., 2012). Researchers cannot find a point of agreement on this topic. While some claim that an additional tax is insignificant on demand (Bonham, Fujii, Im, & Mak, 1992), others say that even slight changes of price may pose a significant burden for the hospitality industry, due to the slim profit margins (Hiemstra & Ismail, 1993).

Forsyth and Dwyer (2002) agree, that tourism related taxes will have negative effects on tourist activity and further argue, that this would negatively affect employment in the industry as well. However, it is also explained that these claims must be treated with suspicion, as they are “superficially convincing, but they are based on incomplete and misleading analyses”. (Forsyth & Dwyer, 2002, p. 387) In fact, it is true that accommodation taxes may have restricting effects on the growth of tourism, in cases where the demand for tourism is very price sensitive. Also, the psychological factor plays a role, as it maybe is not so much the tax itself that causes decreased demand, but rather the negative associations we have with the word ‘tax’ that can result in a low willingness to pay. (Hughes H. L., 1981)

Gago et al. (2009) agree with the contrary side, claiming that taxes could eventually result in a positive impact on demand. If invested in the right causes, a tourist tax can increase the value added to a destination, for example by reducing congestion of tourist activities. This could improve the tourist experience and therefore lead to an increased demand, which then results in an improved economic performance. (Gago et al., 2009) A study conducted by Cetin et al. (2017) in Istanbul, has come to the conclusion, that a tax would not have a negative impact on demand, even if the total travel cost was increased by one third. However, the tax payers, namely the tourists, should be consulted on how to spend the tax funds. If the funding is adequate, tourism may benefit from extended services and improve in their quality. (Cetin et al., 2017)

Departure taxes

Departure taxes are another very common form of tourist taxes. Just like with any other tax, the producers who have to collect them are worried of losing market share, as they have to increase their prices (Song et al., 2019). Often the concept of price elasticity of demand is used to assess the impacts of taxes on demand. If demand is inelastic, a tax and price increase will not affect demand, whereas elastic demand is affected even by only slight changes in price. Across the literature, there is no widely accepted value of elasticity of demand on tourism. Instead, it highly depends on the destination. Elasticity is further influenced, by the possibility of opting for substitutes when prices increase. In the case of departure taxes, substitutes could either be going through airports in other countries that do not raise a tax, or choosing domestic destinations for a vacation instead of flying abroad. Often the resulting opportunities for the domestic tourism market are not granted enough acknowledgement. Especially on islands like the UK, where the primary form of travel is air travel, the numbers of outbound tourists might decrease, but at the same time domestic spending may increase. (Forsyth et al., 2014) Hereby, domestic spending is not limited to tourism activities in the home country, but can also mean higher spending on for example home goods and services (Seetaram, Song, & Page, 2014). Consequently, departure taxes may actually be beneficial to the economy as a whole, since consumer spending will stay in the home country (Song et al., 2019).

Still, some stakeholders argue that additional charges and too heavy taxation will negatively affect the price competitiveness of the destination and therefore “reduce the economic significance” (Forsyth et al., 2014, p. 126). Lower competitiveness as a tourism destination could lead to losses for the entire industry. The extent to which a destination will be affected by departure taxes, depends on the “balance of inbound and outbound travel and on the extent to which domestic tourism is a substitute for outbound tourism” (Forsyth et al., 2014, p. 135).

Altogether, the impacts of taxes will most likely depend on the way in which the burden is shared between tourists and businesses. The magnitude of the impacts would as well be influenced by the level of the tax and the elasticity of demand in a specific destination. Even if the demand suffers at first sight, the environmental improvements that could be achieved with the tax money could potentially outweigh the decreased demand in the long run. (do Valle et al., 2012) Moreover, it should be attempted to levy the taxes as close to the source of the problem as possible and on all those who contribute to the problem, regardless if they are locals or tourists (Forsyth & Dwyer, 2002). As an example, for a national park it would be best to implement an entrance fee instead of paying for compensation of damages with tourism taxes. Not only tourists visiting the park impose damage, but all visitors including locals. Only taxing tourists would therefore be an inefficient solution for the externality problem. (Clarke & Ng, 1993) Lastly, the impacts of taxes will depend on the substitutability of a destination. Many tourist destinations have no direct substitute, due to unique landscapes or geographical and climatic reasons and other reasons. Therefore, there is only a low elasticity of substitution, resulting in only minor changes in demand when prices are modified. (Gooroochurn & Sinclair, 2005)

2.2 Willingness to pay

When researching the willingness of tourists to pay for tourist taxes under different circumstances, the term itself has to be defined and it should be outlined what general factors could have an influence on it.

The term ‘willingness to pay’ can shortly be defined as the highest price a consumer would pay for a given quantity of a product or service (Anastasia, 2016; Le Gall-Ely, 2009). Some economic researchers further argue that willingness to pay cannot be set at a specific price, but rather a price range (Market Business News, n.d.). The research on this topic has been developing quickly in the past years, as it represents an alternative to the model of price elasticity of demand, in the case that there is no market data available (Le Gall-Ely, 2009). Knowing their costumers’ willingness to pay is crucial for businesses in order to find the best price, which will satisfy the producer as well as the consumer (Anastasia, 2016). In regards to this paper, a local government can be regarded as a business, which wants to set a tax rate (price) for its destination (product). The consumers then will be the tourists. It is important to estimate the consumers willingness to pay as precisely as possible (Market Business News, n.d.). Choosing the right price can increase the sales volume and therefore improve profitability, while the wrong price on the contrary could result in losing sales (Anastasia, 2016).

There are different methods to measure willingness to pay. These are helpful, but should not remain the sole factor to consider, when setting a price. As most measuring approaches are carried out in hypothetical circumstances, they can potentially be biased. (Anastasia, 2016) In a questionnaire, for example, respondents are often directly asked how much they would pay for a certain product. While this approach gives the respondents a chance to state the perceived value of a product, they often do not consider all circumstances, which would usually influence them in a real purchasing situation. Ultimately, the amount respondents claim they would pay, is often higher than what they would actually pay. This difference is called hypothetical bias. (Le Gall-Ely, 2009) On the contrary, respondents could as well strategically understate the price, as an attempt to keep prices as low as possible, which will result in a strategic bias (Breidert, Hahsler, & Reutterer, 2006).

Willingness to pay for example depends on the “perception of usefulness” (Market Business News, n.d.). Consumers are more willing to pay for something they really need, instead of something which would just be nice to have. Further, satisfaction with the purchased product can increase the price a consumer is willing to pay (Le Gall-Ely, 2009). Another factor is the so-called reference price. In a purchasing situation, the customer will compare the price of the item to the price of an alternative product, in order to determine whether it is a good or bad deal (Monroe, 1979). In this case, a tourist could use the price of his last vacation as a reference price for the next one, to decide if they will book or not. If due to a tax the price increased too much, the tourist might not book the vacation after all.

2.3 Sustainability

The overall concept of sustainability is often hard to grasp and the different definitions are criticized for being hard to follow, as they do not provide specific instructions for actions. Basically, what sustainability aims at, is the current generations can meet all their needs, while leaving enough resources for the following generations to meet theirs (Marshall & Toffel, 2005). In other words, sustainability can be achieved, if exhaustible resources are used in a way, that ensures the well-being of following generations (Solow, 1974). In the business world, this definition is often adapted to their individual wishes. The example of the Dow Jones Sustainability Index, mentioned by Marshall and Toffel (2005), shows a case where sustainability is defined as an approach to create long-term shareholder value regardless of may emerging risks for the business. However, if this was what is actually meant by sustainability, then all businesses would behave sustainably, which is not the case.

Sustainability approaches should include a set of specific goals. A good example, are the UN Sustainable Development Goals created by the World Travel and Tourism Council (WTTC) in 2015. They came up with 17 sustainable development goals, comprising a total number of 169 specific targets. (World Travel & Tourism Council, 2015)

There are different frameworks for describing sustainability, which all aim at describing the indicators. One of them is the ‘triple bottom line’ approach. It focuses on the balance of economic, social and environmental goals, to ensure sustainability in all three categories. (Marshall & Toffel, 2005) Environmental sustainability describes the adequate use of environmental resources, while ensuring to keep the destination competitive and enhance the tourist experience (Hassan, 2000). This topic often goes along with responsible tourist behavior to protect these resources and is gaining increased attention from research who try to asses tourists’ willingness to support environmental sustainability (Dodds, Graci, & Holmes, 2010). Economic sustainability can be achieved, when the economy remains stable and efficient (Stavins, Wagner, & Wagner, 2003). It should only be spent as much as is earned during a set time period, to be able to keep the same standard of wellbeing at the end of said period (Hicks, 1946). Lastly, social sustainability aims at understanding and respecting local cultures, traditions and values and the protection of such (Pérez & del Bosque, 2014).

The three elements (economic, environmental, social), can be combined in three different ways. Eco-efficiency is a combination of following environmental and economic goals simultaneously. Fair trade on the other hand, are economic activities that take social consequences into consideration. The last combination regards social and environmental protective regulations and is called environmental justice. (Elkington, 1998)

Consequences of unsustainable behavior may include the endangerment of the survival of humans and other species, the impairment of human general health and the reduction of the quality of life (Marshall & Toffel, 2005).

2.3.1 Sustainability in tourism

The ability and motivation of the tourism industry to implement sustainable principles is questionable, as it is difficult to achieve without financial support and tourism in general often makes use of free shared resources (Hughes G. , 1995). However, this is often the problem, as those free resources tend to be overused by tourists, as well as locals, exceeding their limits to regenerate. In most cases there is no control or monitoring of usage, which may ultimately lead to its destruction. (Hardin, 2009) Generally, in order to achieve sustainability, tourism has to be controlled. This can be done for example by limiting the land use, which would help with the preservation of natural and socio-cultural resources (Cooper, Fletcher, Fyall, Gilbert, & Wahnhill, 2008). At the same time, the amount of newbuilt buildings should be restricted or controlled in terms of height or architectural style, to not overload a destination with concrete buildings and manage to keep its character and charm. (Logar, 2010)

Economic sustainability in tourism can be achieved when an optimal growth rate is established, that allows the destination to keep tourist activity within their limits (Choi & Sirakaya, 2006). Economic instruments, like tourist taxes may help with these intentions as they could be exclusively earmarked for certain projects (do Valle et al. 2012).

Additionally, goals for sustainable tourism include improving the wellbeing of locals, for example by improving their working conditions and involving them in decisions regarding tourism that will affect them as well. Moreover, maintenance and preservation of the natural and cultural heritage should be supported to ensure diversity. Lastly, tourists need to develop respect for their host community, which could be done by giving them the chance to participate in the local culture to increase their awareness and understanding. (World Commission on Environment and Development, 1987)

In the end, the level to which a destination is sustainable, highly depends on the way they define it. The central points, however should always include keeping the quality of life for locals, as well as the quality of the environment and the tourist enjoyment at a high level. Therefore economic, social, cultural and environmental implications of tourism have to be considered. (Taylor, Fredotovic, Povh, & Markandya, 2003) If this is not done, the costs of tourism may eventually outweigh the benefits derived from it (Cetin et al., 2017).

2.3.2 Negative impacts of tourism on a destination

While tourism undoubtedly has the potential to be beneficial for countries, the adverse effects cannot be left out in the context of destination sustainability. Tourism was once believed to have almost no negative effects, however recently they are being researched increasingly.

One major factor that brings adverse effects with it, is the high level of seasonality that some destinations experience. In the low season, hotels and other tourism businesses have to deal with very low occupancy rates. On the contrary, for locals, many employment opportunities only exist in the high season, where the carrying capacity of a destination is often exceeded. (Logar, 2010) In these times, the destinations have to deal with the problem of people pollution. In cruise destinations, the cruise ships further contribute to this problem, due to their increasing sizes and increasing amount of ships in port at the same time. (Klein, 2011) Going side by side with this, is congestion and heavy concentrations of tourists at popular or historical sites, causing an excessive use of public facilities (Timur & Getz, 2009). Locals then need to compete with tourists for simple resources, like space, shopping lines or spots for viewing the scenery. Ultimately, this reduces the quality of life for locals, while they deal with growing frustration. (Cetin et al., 2017)

An effect that arises from overcrowding, is the growing level of pollution, due to littering or emissions from higher amounts of vehicles, and higher pressure on wastewater treatment. Water pollution can lead to serious health issues, due to waterborne diseases, especially if drinking water is affected (Taylor et al., 2003). Further, partially due to cruise ships and other recreational vessels, the marine environment is negatively affected, because of dumping waste at sea (Davies & Cahill, 2000). According to Dixon, Hamilton, Pagiola and Segnestam (2001), tourists generate up to twice as much waste as locals during the peak season. This damages the countryside, rivers and seas, and eventually harms the value of the destination (Hughes H. L., 1981).

Another adverse effect resulting from tourism, is the degradation of the cultural heritage. If tourism were properly managed, its positive effects could include increased community pride, support for the economy and increased employment opportunities. However, the opposite is often the case, leading to cultural commodification, increased crime and the undermining of traditional ways of life. (Jamieson, 2000) Landscapes and views are often blocked with high rise buildings, causing visual pollution and the destruction of the destinations character. Furthermore, the loss of traditions may incur, as tourists may turn away from traditional jobs to work in the tourism sector instead. (Logar, 2010)

Ecologically speaking, the presence of too many tourists can adversely impact some environmentally sensitive regions (Dixon et al., 2001). Excessive consumption of resources, meaning a “consumption beyond sustained yields” (Marshall & Toffel, 2005, p. 676), can lead to a collapse of the eco system, as there is no time for it to regenerate. This may further lead to the extinction of some animal species and plants due to the loss of wetlands and forest habitats. (Taylor et al., 2003)

All these effects not only recude the quality of life for locals, but also worsen the tourist experience. The long-term performance of tourism relies on the attractions, which often are offered naturally (e.g. beaches, lakes, mountains), and the conservation of those (do Valle et al., 2012). The potential economic benefits of tourism are often overemphasized, while adverse impacts of any kind are disregarded. The proctection of the environment is often only discussed, when it is expected to lead to direct advantages for the economy. Otherwise, a lack of discussions on the prevention or compensation can be witnessed. (Cetin et al, 2017) A tourist tax for destination sustainability could be an effective measure to ensure the preservation of the environment and heritage and compensate for arising problems. Further, the awareness of tourists may be increased, leading to higher levels of sustainable behavior. (Hughes H. L., 1981; Taylor et al., 2003)

3.0 Research design

In the following, the methodology of the research, as well as the target group and the design of the questionnaire will be explained thoroughly.

As Cetin et al. (2017) stated, the findings of his study are hard to generalize, as it was conducted in a specific destination with a limited sample and the results “should be validated in a quantitative study in various destinations” (Cetin et al., 2017, p. 12). Further, tourists develop their opinions on tourist taxes based on the tax rates and prices in their home country. Tourists from Europe, for example Belgium and Germany, are more used to taxes, according to Cetin et al. (2017). Prior studies often focused on one specific destination, rather than different nationalities of tourists (e.g. do Valle et al., 2012 & Taylor et al., 2003). For the research of this paper, it was therefore decided not to target another destination. Further, it was not possible to compare different nationalities with each other. In order to receive a representative result in the end, a much higher number of participants would have been needed from each nationality, to be able to compare them to each other. However, as it was pointed out that Germans were supposed to be more used to taxes and therefore more willing to pay them, it was decided to focus on German tourists only. Consequently, the questionnaire was written in German, in order to avoid misunderstandings for those, who do not speak English very well.

A further limitation of the target group that was made, relates to the age of the participants. As the study deals with the willingness to pay taxes on vacation, it was decided to only include participants, who are able to pay for their vacation themselves. According to the German Youth Work Protection Law, teenagers below the age of fifteen are only allowed to work a limited number of hours per month (Bundesministerium der Justiz und für Verbraucherschutz, 1976). It was assumed, that with these limited hours they could not earn enough money to afford a vacation themselves. Additionally, there is a high possibility that children below the age of fifteen do not travel alone, but rather with their families or youth groups, in which cases the parents will most likely pay for their way as well.

3.1 Methodology

As the literature had revealed some qualitative studies and cases on the topic of tourist taxes in general as well as tourists’ willingness to pay them, it was decided to test the resulting hypotheses in a quantitative approach. A quantitative approach allows to test different theories and examine the relationships between variables in statistical procedures (Creswell, 2014). The main arising research questions for this paper are:

- Which factors influence the willingness of German tourist to pay tourists taxes on vacation?
- How will the travel behavior of German tourists be affected by tourist taxes?

As described by Creswell (2014), if the research question aims for the “identification of factors that influence an outcome” (Creswell, 2014, p. 50), a quantitative approach is the best option. This further backs up the decision for this research method.

In order to test the hypotheses, that resulted from the literature review, statistical analyses will be conducted. For this matter, the open source tool PSPP was used, as it offers a free alternative to the software SPSS. After examining the descriptive statistics, further tests will be carried out, to find the relationships between different variable.

3.2 Hypotheses

On the basis of previous qualitative studies, as well as case studies regarding tourist taxes, several hypotheses could be concluded. The two most relevant studies are “Willingness to Pay for Tourist Tax in Destinations: Empirical Evidence from Istanbul” by Cetin et al. (2017), who interviewed twenty-two tourists in Istanbul on their opinion of tourist taxes to fund destination sustainability, and “Tourist attitudes towards an accommodation tax earmarked for environmental protection: A survey in the Algarve” by do Valle et al. (2012) who conducted a survey in the Algarve, about tourists’ attitudes towards a tax earmarked for environmental protection.

In the following, each of the hypotheses will be explained briefly. Hypotheses H1 through H4 deal with the demographics of the respondent. Although they are often found to be of no significance, it was decided to test them. The following four (H5-H8) are all related to the traveler profile of the respondent. This is followed by H9 regarding the attitude towards sustainability, which is most likely to be the most important factor to influence the willingness to pay. As it is a widely discussed topic in the literature, H10 deals with the utilization preferences of tax funds. Lastly, H11-H13 are related to effects on the travel behavior due to taxes.

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