The government has thrown its support behind a bed tax for Queenstown.
It follows a non-binding referendum in June where more than 80 percent of voters supported a levy to help fund infrastructure in the resort town.
The levy would be a five percent cost added on to short-term room rates.
It means the Queenstown Lakes District Council will draft and introduce a local bill to parliament so legislation for a visitor levy can be introduced.
District Mayor Jim Boult said Queenstown ratepayers have been footing the bill for visitor infrastructure.
"This decision reinforces the view that Queenstown and the wider lakes district is the jewel in the crown of Aotearoa New Zealand's tourism offering and that the pressure of funding a premier international destination via 24,000 ratepayers is unsustainable," Mr Boult said.
"Our significant growth pressures and increased visitor numbers put a huge strain on local infrastructure and our ability to support growth in Queenstown Lakes through rates alone is simply not possible. Such a cost threatens to undermine the wellbeing of our communities."
But mayoral candidate Nik Kiddle said it unfairly targeted accommodation providers.
He said a broader local sales tax across all tourism operators should be introduced instead.
Mr Boult hoped a levy would be in place in 2021.
The government has agreed to help the council prepare the bill to establish legislation so the visitor levy could be introduced, he said.
Work on the bill is expected to start immediately with it ready to go to parliament in 2020.