Rental levy sparks hoteliers’ concern over competitiveness

Hotel and tourism leaders on Tuesday issued an urgent warning that a new $10 daily levy on vehicle rentals risks undermining the island’s tourism sector, penalising compliant operators and deterring key visitor markets.

The Barbados Hotel and Tourism Association (BHTA) argues the charge, introduced alongside the removal of visitor driver permits, could extract over $13 million annually from an already overburdened industry while widening the gap between legal and illegal rental providers.

BHTA chair Javon Griffith told the BHTA’s quarterly media briefing that the policy change, due to take effect on July 1, was a “mixed signal” to industry stakeholders.

“We welcome the government’s decision to eliminate the visitor driver’s permit as of July 1,” Griffith said. “This long-advocated change enhances visitor convenience and aligns Barbados with best practices in key source markets.”

But he cautioned that the simultaneous introduction of the $10 levy-designed to offset an estimated $350 000 in lost permit revenue-would instead extract more than $13m annually from car rental firms.

“This proposal, in its current form, risks inflicting structural harm on one of the most vulnerable segments of the tourism value chain,” Griffith warned. “The car rental industry is already the most heavily taxed within the sector and uniquely receives no sector-specific fiscal relief or incentives. This levy, therefore, represents an unbalanced and regressive policy choice.”

The hotel association chief outlined a series of urgent concerns raised by members, starting with the potential suppression of economic activity.

“A daily $10 fee will significantly increase vehicle rental costs, potentially discouraging visitors from renting vehicles. This could stifle mobility across the island, diminishing economic spin-offs to restaurants, heritage sites, and rural communities dependent on stopover traffic.”

He further argued that the levy would widen the gap between legal and illegal operators, allowing unlicensed companies already evading VAT, insurance, and registration fees to deepen their competitive advantage while eroding regulatory compliance.

Insurance providers are also expected to feel the squeeze, Griffith said.

“The levy will increase their operating costs, which will ultimately be passed on to the domestic consumer,” he explained. Of particular concern is the impact on long-stay travellers.

“Under the current structure, a six-month rental would incur a staggering $1 800 in additional charges,” Griffith said. “This is particularly counterproductive when Barbados is actively courting long-stay and repeat visitors-many of whom drive considerable economic value to our island.”

To mitigate the fallout, the BHTA proposed two alternative models: a fixed $10 levy per rental contract, which Griffith described as “administratively simpler and fairer across different rental durations,” and a reduced daily levy of $5, with exemptions or caps for long-stay visitors.

“These alternatives would help avoid excessively penalising key market segments while still generating meaningful revenue,” he suggested.

Griffith urged policymakers to reconsider the levy’s structure, warning it could damage Barbados’ competitiveness amid fierce global tourism competition.

“At a time of intensified global competition for tourism dollars, Barbados must be careful not to overburden the very sectors that sustain its economic growth. Other destinations are aggressively reducing travel-related costs and eliminating administrative barriers. We cannot afford to move in the opposite direction.

“We reiterate our willingness to collaborate and identify solutions that support fiscal goals while safeguarding the viability of compliant car rental operators who play an essential role in the visitor economy,” he said.

Up to 50 per cent of the revenue generated from the new car rental levy is to be allocated to the Barbados Oceans and Coastal Authority to help preserve marine and coastal assets.

(SZB)