Accommodation Tax and Willingness to Pay: Exploring the Mediating Role of Perceived Fairness

Abstract

Accommodation tax might be a suitable measure to raise revenue from visitors, but it may cause downward pressures on the number of tourists, resulting in unintended shortfall of economic benefits to destinations. Past studies have tried to estimate the impact of accommodation tax, but they failed to incorporate a non-price aspect in their methods. This study explored the mechanism of how tourists react to accommodation taxes using perceived fairness as a mediator between various independent variables and willingness to pay. The study found that loyalty and past experience (i.e., how often tourists have paid accommodation tax before) might have a significant indirect effect on willingness to pay through perceived fairness. On the other hand, earmarking and justifying, which are common practices in an accommodation tax, did not generate enough evidence to cast any effects over people’s willingness to pay.