Tourist Tax 2026: what it means for restaurants, bars & pubs

London is about to become one of the most expensive cities in Europe for visitors. And for hospitality, that matters more than most people realise.

From 2026, the power to introduce a tourist levy will sit with city mayors. London has already signalled that it will implement one, joining cities like Paris, Amsterdam, Barcelona, and Berlin, where nightly visitor taxes are standard practice.

But layered on top of the 2025 Budget, rising wage costs, and a fragile consumer climate, the new levy isn’t arriving in a vacuum. This tax is another cost on the visitor experience at a time when operators are already fighting for footfall.

This blog breaks down what’s changing with the tourist tax in 2026, why it matters, and how hospitality brands can prepare. 

Key takeaways for operators 

• The tourist tax is a nightly levy on short-term accommodation that local authorities can reinvest into infrastructure, safety, and tourism programmes.

• Even a small levy can reduce visitor spend and footfall, putting pressure on margins for restaurants, bars, and pubs.

• Operators face volatile demand and overproduction risks, but modelling footfall, stress-testing margins, and using real-time data can protect profitability.

• Nory forecasts demand, optimises staffing, and reduces waste, helping operators safeguard margins before the tourist tax takes effect.

What is the tourist tax and why now?

Tourist tax means that local authorities can apply a nightly charge on short-term accommodation like hotels, hostels, serviced apartments, and other tourist stays.

These funds are used for reinvestment in local services, infrastructure, and tourism initiatives. Most major European destinations already apply a similar levy.

So why now? 

Because councils need new revenue streams, and the government is under pressure to let cities fund themselves more sustainably. London faces rising operating costs, transport funding gaps, and increased demand for public services from a growing visitor base.

A tourist levy is a low-friction way to raise money without increasing taxes on residents. 

At the same time, the UK is trying to stay competitive with European destinations that already charge tourist taxes without damaging visitor demand. 

Look at Paris as an example. The city charges between €0.65 and €15.60 per person, per night. Despite this charge, Paris continues to attract millions of tourists each year (912,110 between September and November 2025). This shows that levies, when implemented fairly, don’t necessarily deter visitors.

Introducing a tourist tax brings London in line with global norms. But it also means hospitality businesses must prepare for how even small per-night costs can influence traveller behaviour, average spend, and overall footfall.  

Not to mention, travel costs are rising, inflation is still impacting household budgets, and domestic confidence is at an all-time-low. Any additional cost is likely to influence how visitors behave. 

How long customers stay in an area, where they stay, and how much they spend once could all change – and operators need to prepare for that. 

How big could the impact be?

Industry bodies are already raising alarms. UKHospitality estimates: 

• A 5% holiday tax would add £518 million to the public’s tax burden at a time when budgets are already stretched. 

• Combining 20% VAT with a 5% holiday tax and then charging VAT on top of that tax pushes the effective rate to 27%, making it one of the highest in Europe.

• A three-night stay in London could become up to £199 more expensive for visitors. 

For operators, that has two major implications:

Lower discretionary spend

Visitors arriving with tighter budgets spend less per head. They trade down, skip a course, choose a cheaper drink, or opt out of breakfast altogether.

This lower spend shows up immediately in average transaction value. Pubs and bars see a shift from cocktails to beer and soft drinks. Casual dining venues feel pressure on appetisers and desserts. Premium restaurants face shorter wine lists and fewer tasting menus. 

Even small reductions in discretionary spend create noticeable margin pressure.

Reduced long-weekend trips

When the overall cost of a visit rises, trip length shrinks. For central London businesses, a small drop in visitor nights has a disproportionate effect on F&B spend.

This means less breakfast covers, fewer second or third evening meals, and more unpredictable weekday demand. Hotels with on-site restaurants feel the impact first, but the knock-on effect hits nearby pubs, cafés, and bars that rely on that extended weekend footfall. 

Shorter stays also reduce the chances of repeat visits during a single trip, cutting opportunities to build customer loyalty.

Why pubs and restaurants should take this seriously

London’s food, drink, and cultural landscape is powered by visitors. In many central boroughs:

• A significant proportion of weekly revenue is visitor-driven
• Weekend service depends heavily on tourists, not locals
• Group bookings (families, tour groups, corporate travellers) anchor predictable trade

A hit to visitor volume or spend would be felt quickly, especially layered on top of alcohol duty increases, staffing pressures, and high fixed operating costs.

Simon Dodd, CEO of Young’s, has already been vocal about this compound effect. The combination of higher alcohol duty, rising wage bills, and the Budget’s additional cost pressures leaves little room for another variable that could dent demand.

Operators aren’t facing one new cost. They’re facing the cumulative impact of many.

Competitiveness matters: The European comparison

Kate Nicholls, Chief Executive at UKHospitality, has been clear about the need to keep the UK internationally competitive. But although tourist taxes are normal in Europe the UK hospitality cost base isn’t equipped for this change. 

For example, European operators benefit from:

• Lower VAT on hospitality
• Long-term investment in visitor infrastructure
• Far more stable business rates structures

“The UK already ranks incredibly poorly when it comes to our tourism competitiveness, due to our high rate of VAT. This is in comparison to our European competitors, many of which have VAT set at around half our 20% rate, and a tourist tax will only make us less attractive to visitors.”

Kate Nicholls OBE, Chair of UKHospitality

While London adding a tax aligns superficially with Europe, it does so on top of an already higher operating cost environment. 

This is where competitiveness becomes a real risk. If London feels significantly more expensive relative to Paris or Barcelona, price-sensitive visitors will choose those locations instead. 

Will the levy deliver long-term benefits?

Potentially. 

A tourist tax could pay off in the long run if the revenue is carefully ring-fenced and clearly reinvested. Investments in transport, safety, cultural programmes, and tourism infrastructure could make the city more attractive, helping the visitor economy grow over time.

But there’s a catch: The benefits take time to appear (if they appear at all). 

In the short term, operators feel the impact immediately. Higher costs hit the business before any of the reinvestment improvements translate into increased footfall or spending. This creates a short-term demand shock, where revenue may dip even as the city’s tourism offering improves for the future.

5 ways to get ahead of the tourist tax increase 

The tourist tax isn’t live yet, but its effects will start long before the first guest pays it. Visitors plan months in advance, and messaging around “London becoming more expensive” will influence behaviour early.

Here’s what operators should be doing to protect margins ahead of this change. 

1. Model footfall sensitivity

Tourist-heavy areas will feel demand shifts first. Instead of waiting for the data to hit your POS, start running pressure tests now. 

For example, build scenarios for visitor-driven footfall declines of -2 %, -5 %, and -10 %. Try to: 

• Identify high-risk trading windows. Weekday mid-afternoons and early evenings often rely heavily on tourist walk-ins.

• Quantify the “red zones.” A small dip in footfall may create outsized pressure on fixed costs, especially in high-rent locations.

• Link footfall scenarios to resource allocation. This allows you to adjust prep levels, menu counts, and staffing before losses hit.

Model the impact on revenue, table turnover, and demand patterns across each of these declines. From here, you’ll have a clear idea of how your bottom line might change if these footfalls come to fruition and what to do to protect your margins. 

For instance, if a -5 % drop in mid-afternoon footfall pushes your labour cost above target, you can move to a lighter mid-shift or reduce prep volumes. 

2. Stress-test margins

If visitor spending softens, the impact will show up everywhere in your P&L. To plan for this, take your key cost areas and see what happens when the average customer spends less or buys different items. 

For example: 

• Gross profit % (by category). Understand how reductions in high-margin items impact overall contribution.

• Labour allocation by daypart. Identify periods where labour remains fixed while spend drops.

• Average cover value. Model the effect of more cautious ordering or shorter dwell times.

• Food vs drink mix. Tourists often drive profitable beverage sales – a shift toward food-heavy orders can dilute margins.

Stress-testing reveals where your profitability is most exposed and what levers you can pull (like menu engineering, portion control, and staffing patterns) before you feel the hit. 

3. Reforecast labour weekly, not monthly

If demand becomes less predictable, relying on monthly or quarterly labour planning will erode margins fast. A better approach is to reforecast labour every week then match staffing to actual (or expected) demand rather than outdated assumptions. 

This is where modern restaurant technology can help. With the right software, you can create schedules that meet customer demand and optimise labour costs. 

Nory, for example, analyses historical sales data plus external factors (like weather and local events) to predict customer demand by the hour, with 90–95% accuracy.

Based on these forecasts, the software recommends optimal staffing levels and automatically generates rotas, letting managers quickly adjust shifts if demand changes. The results? Optimal spending on labour while still meeting customer demand. 

Real companies are already seeing the benefits of using Nory to manage labour: 

• Roasting Plant Coffee used Nory to align rotas more closely to demand. In just two months they cut labour costs by -18%. 

• Barge East reported a 10% reduction in labour costs after switching to Nory’s demand-based scheduling and real-time labour tracking.

4. Tighten waste management

Tourists typically create steady, predictable demand – high volumes, consistent ordering patterns, and reliable item-level sales. When that steadiness disappears, even a small dip in visitor numbers can throw off your production planning. 

From here, forecasting errors get amplified and overproduction becomes one of the quickest ways to lose margin.

To protect profitability, operators need tighter control over food waste and inventory. That means:

• Using sales velocity, not guesswork, to set prep levels for each daypart. 

• Reducing batch sizes during softer periods so you don’t tie up cash in food that won’t sell.

• Tracking waste at item level to spot habitual issues like dishes that regularly overrun their shelf life, or ingredients that aren’t rotating fast enough.

• Shortening ordering cycles for high-cost perishables, so stock reflects current demand rather than last month’s patterns.

• Adjusting menus dynamically, highlighting dishes with longer shelf-life or higher yield during low-footfall periods.

Again, this is where platforms like Nory make a measurable difference. 

Nory uses real-time operational data to accurately forecast demand, so your teams can set smarter prep levels and tighten stock management before waste becomes a problem.

Nory helps operators:

• Pull in real-time sales data, rather than relying on old averages.

• Adjust forecasts automatically as trading patterns change or when footfall becomes less predictable.

• Generate ingredient-level prep plans aligned to demand by the hour or daypart.

• Track waste in a structured, consistent way, so managers can fix recurring issues quickly.

• Make proactive purchasing decisions, reducing over-ordering and keeping stock lean.

When visitor demand becomes volatile, this kind of live forecasting helps operators avoid overproduction and keep GP% healthy, even with fewer customers.

Nory in action: CUPP achieved 99% sales forecasting accuracy after switching to Nory’s unified inventory-and-sales platform. As a result, the company optimised inventory management and cut its total food waste by 60%. 

5. Refresh your local customer strategy

Tourists may drive volume, but locals drive stability. Focusing on this segment builds a dependable baseline you can rely on, even when visitor numbers fluctuate.

Here are some of the ways to attract and retain local customers:

• Use weekday-value menus. Create dependable, early-week options that appeal to people living or working within a short walk. These help smooth out the typical Monday-Wednesday dip and encourage repeat diners.

• Offer early-week incentives and loyalty triggers. Small, well-timed rewards (such as double loyalty points or midweek bundles) encourage local visitors to dine with you. 

• Use neighbourhood partnerships. Partner with local gyms, co-working spaces, theatres, and residential buildings to create shared offers. This widens your reach without heavy ad spend and taps into existing local communities.

With the right mix, a stronger local base becomes a revenue stabiliser. Even a 5% lift in local repeat visits can meaningfully offset dips in more volatile tourist-driven trade. 

Prepare now to protect your margins 

The tourist tax won’t break the sector, but it arrives at a moment when operators have no margin for error. Visitor demand is set to become more unpredictable, customers will be more price-sensitive, and existing operational weaknesses will be exposed. 

The operators who stay ahead will be the ones who: 

• Know exactly how performance shifts day by day
• React instantly to demand changes
• Run labour and inventory with precision, not intuition
• Protect margin in real-time, not in retrospective reports

Platforms like Nory make this possible. By combining live sales, labour, and inventory data, Nory lets operators forecast accurately, optimise schedules, and control waste in real time.

2026 isn’t far away. The time to prepare isn’t when the levy lands – it’s now, while you still have room to adjust.

‍Book a chat with the team at Nory to put the right measures in place before the tax takes effect.