The proposal would have raised between £1.5m and £2.6m per year, according to the council.
The scheme, known as an accommodation business improvement district (ABID), could achieve “significant investment in the visitor economy in the Greater Cambridge area at a level previously unseen”, according to the document.
It would have only affected hotels with more than 10 rooms and a rateable value over £34,500 where the core function of the businesses is as a hotel.
The city and surrounding area attracts more than 7.6 million visitors a year, according to Cambridge Visit.
Before the pandemic, about 1.1 million visitors stayed overnight and it had more than six million day trippers, according to a city council report in 2023.
The same report said footfall levels in the first quarter of 2023 exceeded pre-pandemic totals, with one in 10 city employees directly employed in tourism.