Hoteliers in the United Kingdom might soon get the government to act on the reevaluation of business rates, the property tax charged on commercial properties.
Hoteliers have long derided the calculation of this tax.
The notion of “Fair Maintainable Trade," which is used to calculate a hotel’s business rate, and those for other types of business, works off the estimate of potential revenue and gross receipts, rather than basic square footage.
Since the end of the pandemic and the tax relief that came with it, U.K. hoteliers say their business-rate bills have been calculated at levels ahead of inflation and not equitable to other High Street businesses. Their argument is that hotels, being high-value and labor-intensive businesses, are overly penalized in the current business-rates calculations system.
Upon taking office in July, new U.K. Prime Minister Andy Burnham lowered business rates by 20% for some hospitality businesses, such as pubs, clubs and live-music venues.
Soon it might be the time for hotels to have similar help, The Financial Times reports.
His Majesty’s Treasury has enlisted Jerry Schurder, former business rates policy lead at real estate advisory firm and chartered surveyors Newmark U.K., to coordinate an independent review into hotel business-rate valuations. The review's findings will be sent to the Treasury by the end of Mar. 2027.
Schurder retired in June after more than 45 years working with U.K. business rates. His LinkedIn profile states that during his career he had “responsibility for campaigning for a fairer, more sustainable rating system and advising on the implications of government policy.”
UKHospitality, the principal membership group for U.K. hoteliers, has long rallied on the issue. In a statement, UKHospitality said this “review signals positive medium-term reform but must be coupled with action at the budget to address rising business rates bills across the whole hospitality sector.”
Tim Rumney, CEO of BWH Hotels GB, a collection of more than 230 independent hotels in the U.K., told CoStar News Hotels that hotels have carried a disproportionate tax burden.
“The business rates system has never properly reflected the realities of running a hotel. High fixed costs, 24-hour operations and seasonal demand mean that sharp increases when trading improves can be almost impossible to absorb,” he said. “What’s important now is that hotels are not once again overlooked. Hotels were left out when additional business rates relief was given to pubs, despite facing many of the same pressures, and, in many cases, carrying significantly higher fixed costs.”
The announcement provides hope that meaningful reform is on the way, Rumney said, although any reform will inevitably take time.
“If this review feeds into the 2029 revaluation, that is still nearly three years away. Many independent hotels are already facing higher rates, rising employment costs and squeezed margins. They simply cannot wait until 2029 for help,” Rumney said.
He urged the government to immediately give hoteliers some breathing room.
“Independent hoteliers don’t need another sticking plaster. They need a fairer tax environment that recognizes the vast contribution they make to the U.K. economy and gives them the confidence to keep investing, employing and welcoming visitors,” he said. “This review could be the start of that. But if the government wants independent hotels to still be here to benefit from that reform, it needs to give them a fighting chance now.”
The U.K. government has hinted its Oct. 28 budget will provide further business relief for hotels and other hospitality entities.
Allen Simpson, CEO of UKHospitality, said in a statement the independent review is a good sign but further action is needed to reform the country's business rates.
“When you have rateable values doubling or tripling at a revaluation, that is the clearest sign yet that the system is broken and in need of proper reform,” he said. “While this much-needed review is positive, it is medium-term reform that will not solve the immediate financial challenges caused by rising business rates bills. … The average hotel is experiencing their rates bills rise by 110% over the next three years, with restaurants seeing rises of 54%. Combined, they employ more than 1.7 million people. They will, justifiably, be expecting to see this addressed at the budget in October.”