Cutting air passenger duty (APD) in Scotland could help save some tourism businesses from closure, a Holyrood committee has been told.
The industry is facing an unprecedented rise in costs and many firms are at risk of going under, the Scottish Tourism Alliance (STA) said.
Scottish Government plans to slash air tax by 50% could be part of a “rescue package” by helping boost visitor numbers, it added.
The reduction in the levy will begin when a Scottish replacement to APD is introduced in April 2018, and will be delivered in full by the end of this Parliament.
Ministers hope reducing the tax, and eventually abolishing it, will increase the number of direct flights to and from Scotland.
Cuts to the duty have been welcomed by Scottish Chambers of Commerce, the Scottish Chambers of Development and Industry (SCDI) and the STA, which gave evidence to the Finance Committee on the Air Departure Tax (Scotland) Bill - which will replace APD.
STA chair Stephen Leckie said: “The massive uplift in costs for this industry may mean that some businesses in tourism will close, they just can’t afford to keep their doors open - it’s as blunt and simple as that.
“Part of the potential rescue package might be that if we pour more visitors into Scotland we can increase our yield and our revenue, and that might be enough to save and rescue some businesses.”
Mr Leckie said increasing costs include a “significant rise” in business rates, and higher energy and food and drink prices.
Some businesses have reported a 20% rise in costs for food and drink alone, he added.
“The impact of the living wage, the impact of the apprenticeship levy, this industry has never faced such tough times in terms of costs,” he continued.
“Revenue growth is our big challenge.”
The Tourism Strategy 2020 aims to achieve an overnight visitor spend of between £5.5 billion and £6.5 billion by 2020, generating an additional £1 billion or more.
The industry is currently £300 million short of achieving this, Mr Leckie said.
“The chief executive of Edinburgh Airport indicated that if the Air Departure Tax were reduced by 50% it would soak that up by 2020, if that decision was made back then a year ago.”