UK’s first Accommodation Business Improvement District (BID) approved.
The Liverpool BID Company has announced a successful ballot of accommodation providers in the City Centre and the remaining Liverpool City Council area, the majority of the latter businesses being in the proximity of Liverpool John Lennon Airport. The new BID encompasses over 80 hotels and apartments with a Business Rates, rating set at a minimum of £45k. As a consequence, Liverpool City will have first accommodation-based BIDs in the UK from 1 January 2023 to the end of 2027, generating an estimated £4.3m revenue over that 5-year period. Perhaps not unsurprisingly this genuinely welcome, good news headline is on closer examination a little more complicated than it might first appear.
Those of us involved in, or aware of, the detail of the inception of BIDS in the early 2000s, the amendments to allow multiple local authority area BIDs, the subsequent creation of a few dozen plus genuine Tourism or Destination BIDs and, until now, several failed attempts to build support for similar accommodation BIDs elsewhere, will recognise that this a potentially seminal moment, and one which undoubtedly will soon begin to be touted as the “way forward” for all. It is therefore all the more important to understand the warts and all background, the rational and the complexities and, importantly, the local happenstance advantages. In particular, those advantages relating to the Liverpool BID Company which has been in existence from 2005 and already runs a successful Retail and Leisure BID covering 35 acres and 670 business in central Liverpool (£10k rateable value threshold) and, since 2011, the larger, adjacent Cultural and Commerce BID that covers 470 acres and 450 businesses (with a £45k rateable value threshold). Both BIDs contain hotel and holiday letting apartment/aparthotel levy payers. For ease of visualisation see the existing BID area map , blue for the retail & leisure, green for culture & commerce. The existing area essential takes up the main central retail area and the surrounding cultural, commerce and hospitality area up to and including the bulk of the iconic Liverpool water front.
Each BID has a Board representing the levy payers and the BID Company, an Executive Board overseeing the strategic direction of the organisation. The new accommodation BID will bolt into these existing arrangements. All of the accommodation provider currently paying into one or other of the existing BIDs by dint of their location will cease to make payment to them and start paying the new accommodation levy from 1 January 2023, this will obviously reduce the revenue of the existing BIDs by some margin. The single BID Company arrangement that allows this to happen, without significant adversely impact on any or all the BID’s over all administration and finances arrangements is perhaps the key happenstance in the Liverpool model. Unfortunately, this model is not necessarily replicated everywhere else in the UK. Nor do that many major destinations have in the order of 80 major, mostly relatively new hotels or at least not 80 hotels with a rateable value over £45k to call on for funding.
For comparison in 2002 there were 22 hotels, with 2,333 bed spaces in Liverpool City Centre. Twenty years and the 2008 European Capital of Culture later, the figures are 77 with 7,321 bed spaces (plus aparthotels, Airbnb etc.) and others in the pipeline. Faced with ever increasing supply and the increasing financial pressures, especially on Liverpool City Council’s budgets and, in particular, the loss of subvention funding for conference, business tourism and sports, cultural and other events, many of which the City Council either own (MS Arena for example), runs (many of the cultural events) or in some way support, Liverpool City Region’s Combined Authority (different to, but often externally confused with Liverpool City Council) made the case to Central Government to allow the City/City Region to undertake a time limited, national pilot of an accommodation-based tourism tax scheme.
Not perhaps, surprisingly that request was roundly rejected on a low tax/no new taxes doctrinal basis by the Johnson administration in 2020 or 2021 (?). However, the principal of businesses needing to pay more towards destination management and marketing had been firmly established. Moreover, it had been strongly supported by Liverpool Hospitality the trade body for accommodation providers in the City (the key partner in any accommodation based scheme). From that point on it became clear that the underlying problems were not going away and that the only feasible solution within existing legislation and therefore in the pressing timeframe, was the Business Improvement District route. Subsequently, Liverpool City Council’s widely report financial difficulties have got considerably worse, culminating in the appointing of a Financial Commissioner by HMG to run the City Council’s finances from 8 November 2022. What the City Council will or will not fund from 2023/24 onward, indeed what may be withdrawn from in what remains of 2022/23 is far from certain.
The two existing BIDs declared a levy income in 2020-21 (I.E. including accommodation providers) was c £950k and other incomes c £230k (C £1.18m) between them, against an expenditure, including contributions from reserves of c £1.75m. Last financial year’s expenditure is quoted at c £2m (21-22 annual report not yet published). To add to the many practical issues, the 5-year term start and end dates for BIDs seldom conform to financial years dates, nor necessarily to the same dates as partner or neighbouring BIDs created in often different years. In Liverpool’s case the Cultural and Commerce BID has only very recently renewed. It is also proposed that when the Retail and Leisure BID next goes to ballot in 2023 for the 2023/24 – 2027/28 5-year term, the rateable value threshold should be raised from £10k to £45k, bring the minimum size for all three BIDs inline. The loss of smaller business levy payers will have some obvious impacts on overall revenues and the overall size of the BID’s combined “membership”. However, it is being convincingly promoted on the basis of smaller business gaining most of their currently paid for benefits for free. Albeit that this may be potentially at the small cost of a loss of an already limited share of voice and of potential influence within the BID and BID company?
Given that, save for a few major hotels near or on route to the airport and potentially a few more to be taken in by what are in effect some minor tweaks to the boundary of the old City Centre area, where does the required financial uplift come from, especially when the vast majority of “hotels” are already paying in to one or other existing BID? Not mentioned in the brief headline published to date but made crystal clear in the financial tables within the Accommodation BID Business Plan are increases to the levy percentages from 1.60% in the remaining 6 months of this financial year, rising to 4.50% for the following two years, then 5.5% in years 4 and 5, the increase being necessary, “to compensate for reducing public sector contributions”. This is a not insubstantial percentage or real term increase in the levy for both existing and new accommodation levy payers. Nonetheless, it is an increase, willingly accepted by an impressive 84% of accommodation businesses in the ballot and now, as a consequence, an increase to be paid by all eligible accommodation providers in the City Councils area. The year 4 and 5 annual levy revenues estimates are shown in the business plan as raising £1.137m pa at 5.5%, plus to be added to that the residual, somewhat reduced, annual currently 1.6% levy over the next 5 years of of £60k and £250k (3310k) from retail & leisure and culture & commerce, respectively.
The additional revenue from the now smaller existing two BIDs gives a key combined annual levy revenue total of £1.447m in year 5. Commercial incomes and critically, already secured levels of Strategic Investment Funding (SIF) from the Combined Authority would see total estimated revenues for the BID Company peaking in year 3 (2025) at £1.937m and then falling back to a steady state of £1.545m in year 5 (assuming no other changes). From the prospective of understanding the pure monetary value of the accommodation and currently separate supporting BIDs, I would suggest the 2027 figures of c £1.5 m, of which a little over c £1.1m will be derived annually from the new accommodation BID levy itself, are the ones to keep at front and centre of mind. They are approximate but memorable.
Subject to ballot, it is intimated that the intent is to role both the retail bid in 2023 for 2024 and then cultural bids 2026 for 2027 into the accommodation BID, presumably creating by design or default a visitor economy BID? (that’s what its called in parts of the business plan). In the lead up to each re ballot the levelling up of the percentage rates payable for each of non-accommodation businesses and other such thorny issues may or may not be up for debate and potential change? An agreed changes could increase the total BID Company 2027 revenue above the currently estimated c £1.5m mark. Despite having one BID company there remains some very trying issue arising from having three legally separately constituted BIDs and BID areas. This is all part and parcel of the bigger BID picture and hopefully helps illustrates the pressing need to understands that where you end up is heavily influenced not only by the journey taken (or not) but often, as much if not more, by the simple practical consideration of where it was you actually started from. Liverpool will undoubtedly be cited in due course as a potentially the model for destinations everywhere, hopefully even an exemplar?
Such accolades are deserved, just as long as is also equally widely recognised that some key components of the Liverpool model kit may actually be unique in time, place, space or pace to Liverpool and not therefore universally available regardless to all other destinations. The analogy comes to my mind of being asked to build a simple flying model aircraft from a kit that then turns out to be missing one of its wings and the elastic band to power the propeller. You might be able to botch something together but if you do, both you and those asking you to build it shouldn’t then be surprised if your version of the model proves not to fly very well or very far, if indeed it get off the ground at all.
Please don’t misinterpret any comment above as being critical of the Liverpool proposal. Far from it as I firmly believe that this new development, is both genuinely exciting and on balance very good news for UK destination management, giving as it does, some larger, most probably City or bigger urban destinations, a potential as yet untried or tested new tool in the armoury to help crack the increasing problem of who and how you pay for necessary destination management and marketing in a frankly increasingly hostile environment for local, regional and national publicly funded support for local tourism and the much wider visitor economy. I am firmly convinced it will work well and is the right solution for Liverpool City Councils area and in particularly the City Centre with it large concentrated accommodation base and by default therefore of direct and indirect benefit to the wider City region. All I am really saying is don’t let us and in particular others with less local practical knowledge but potentially more power, jump to the conclusion that its therefore bound to be right for everywhere else. For the time being, at least until the Accommodation BID has settled in and the higher bills have been paid by businesses, old and new costs and existing and extended services have been covered or delivered by the new revenue model, it is going to remain difficult, if not impossible to tell with any certainty, whether Accommodation BIDs will be suitable for use by anyone, anywhere else.
Having got this far in this missive, please don’t just now read the headline details surrounding the new BID. Read and digest in slow time the full business plan; a plan that got this quite radical proposal firmly over the line. Only then will you be anywhere near being able to answer the quite predictable and, in all likelihood, rapidly approaching question “could this, would this work for us in the specific circumstances we have here and now”. I do genuinely hope the answer for you is yes. However, my initial analysis is telling me that, from the simplistic point of view of required scale v sustainable business costs v meaningful return capable of sustaining the virtuous circle, the cost benefits are by no means universally applicable. Please consider taking the time to judge for yourselves:
One thought on “UK’s first Accommodation Business Improvement District (BID) approved.”
January 16, 2023 at 3:42 pm
[…] Manchester ABID has some notable differences to those in Liverpool. Those “short stay hotels and serviced apartments” in central Manchester and parts of Salford […]