Apartments, villas and cottages engaged in tourism have been directed to pay a two-per cent levy in line with regulations introduced last year.
The Tourism Fund, gazetted in November last year, also requires homestays, hostels and supermarkets running restaurants to pay the levy.
Any tourism establishment whose gross sales on food, drinks and accommodation amount to at least Sh250,000 a month is required to pay.
Hotels, among other establishments, have been remitting the levy.
On Thursday, Tourism Fund Chief Executive Joseph Cherutoi warned establishments that fail to comply that they risked prosecution.
He said owners of apartments, villas and cottages that were not paying the levy were competing with hotels unfairly.
“We have a mandate to auction the property of businesses that do not remit the two per cent levy,” Mr Cherutoi warned.
He also called on the owners of new establishments to register with his organisation. “All tourism establishments are required to register with us within 30 days of operation,” he said.
Mr Cherutoi said apartments that had complied with the regulations, include Medina Palms, Watamu in Kilifi County, Cowrie Shell Beach Apartments and Nyali Holiday Homes in Mombasa County.
Supermarkets that have complied are Eastmatt in Nairobi County and Maathai in Nyeri County.
Kenya Association of Hotelkeepers and Caterers Coast executive officer Sam Ikwaye said the levy was an excellent regulation that would address unfair competition in the industry.
He said hotels had been facing unfair competition from apartments, villas and cottages, which were not paying the levy.
“The regulation will realise more revenue to fund marketing campaigns in international markets and help revive the sector,” he said.
“The financing of hospitality training institutions will create more opportunities for hotel workers and youth,” he added.