While the Government has signalled support for pubs through an expanded business rate relief fund, hotels have so far been left out – despite facing many of the same, and in some cases more severe, pressures.

Policy context: relief for pubs, but not hotels

Darsh Shah, Partner, said:

The Government is planning to boost the £4.3 billion relief fund they have put in place to help pubs with increasing business rates. This fund should be extended to hotels, who are bearing the brunt of a number of tax and running cost increases.

At the heart of the issue is the Valuation Office Agency’s (VOA) latest revaluation, which has resulted in sharp increases in ratable values for many hotel properties.

The scale of the cost challenge facing hotels

Some hotels face their ratable values going up by over 300% this year. On top of this they are contending with the increase in National Insurance Contributions (NICs) and Higher National Minimum Wage (NMW).

Employment costs have risen rapidly across hospitality, while energy, food and supplier costs remain elevated. These pressures come as the sector continues to recover from the pandemic, during which hotels were among the hardest hit.

A targeted relief fund, similar to that available to pubs, could provide breathing space. A support fund, like the one in place for pubs, would allow hotels to phase business rates bill increases over three years, taking some of the financial pressure off.

Tourist taxes: risk or opportunity?

English mayors can now introduce a tourist tax on hotels on overnight stays. Hotels have to pass the additional cost of this levy on to their guests, who may not be prepared to pay extra. This could further harm hotels finances, risking the jobs of their employees.

However, the levy could benefit hotels if a proportion of the funds generated goes towards supporting them with the rise in ratable values. Alternatively, it could go towards utility costs, such as energy; between 2021 and 2023 average electricity unit price for non-domestic UK users increased by 92%.

Mayors could also use levy money to support hotels indirectly by funding hospitality training and apprenticeships in their jurisdiction. This also benefits young job seekers or older workers who want to re-train and expand their skillset.

Industry reality: limited ability to pass on costs

From an operator’s perspective, the challenge is not just higher costs, but limited pricing power.

Frazer Callingham, Managing Director of Starboard Hotels, commented:

Hotels, as do all other hospitality businesses, face the same cost increases across every area of the business as the pub industry and have done so for several years post Pandemic.

Hospitality as one of the industries worst hit during COVID, seem to be bearing the permanent brunt of the most damaging cost and taxation changes. To add to this pain with unconsidered increases in business rates is both unfair and unjust.

In the last three years alone, there has been a double figure increase in employment costs (National Minimum Wage and NIC Taxation), rise in the general cost of sales, pass through price increases from all other suppliers and middle line expenditure has also risen.

We are the last line of business to bear the burden of any changes before the end consumer, our guests. And while we have the ability to flex our pricing unlike other industries, our business is demand driven. We can only pass on cost changes at a price the customer is willing to pay.

Why business rates reform matters now

While a review of the business rates multiplier by the Chancellor was welcome, it was irrelevant when compared with the revaluation figures released by the Valuation Office Agency (VOA) of all assets issued the following day.

Before review or challenge, some hotels have seen increases of up to 300% with our estate average at an 85% increase. All of hospitality needs to be reviewed alongside pubs in order for it to survive.

Darsh concluded:

During and after the Covid pandemic, businesses in hospitality had a 75% discount on rates. It has been reduced to 40% this financial year, and will end completely in April 2026. The Government should consider extending the discount or phasing it out more slowly alongside providing funds to help hotels with the business rate rise.

What you should consider or do next

Hotels and hospitality groups should model the cash-flow impact of business rate increases now, including worst-case scenarios based on VOA valuations.

Operators may wish to review eligibility for reliefs, challenges or appeals, and factor potential tourist levies into pricing and demand forecasts.

Local authorities and policymakers should consider parity across hospitality, ensuring hotels are not disadvantaged relative to pubs.

Businesses and investors should engage early with advisers to understand how changes to business rates, employment taxes and local levies interact.

Without targeted support, rising business rates risk becoming a structural threat to the hotel sector. A more balanced approach could help protect jobs, sustain regional tourism and support long-term growth across hospitality.