It's costing hoteliers in the United Kingdom more and more to operate their hotels with little relief in sight, and industry experts are now warning that could soon lead to series consequences partially due to a lack of government support.
Across the country, U.K. business leaders are faced with inflation, increases to employees' minimum wage and higher, widely opposed business rates. And one of the hospitality industry's key sources of aid — the Retail, Hospitality & Leisure Relief Scheme that gave companies discounts on business rates — just ended on March 31.
Business rates are considered the biggest ill, according to UKHospitality. In the current business rates’ code, there exist two multipliers updated on April 1 that apply to U.K. hospitality businesses: a small business RHL multiplier of approximately £0.38 ($0.51) and a standard RHL multiplier of £0.43.
“This will be funded by [an approximate £0.51] high-value multiplier for properties with a ratable value of over £500,000, meaning operators with larger premises will pay more than the standard multiplier,” UKHospitality published in a report earlier this year.
Tim Rumney, CEO of BWH Hotels GB — the largest group of independent hotels in the U.K. with more than 230 hotels — said higher operating costs are pinching hoteliers. Independent hoteliers often are unable to tap into savings inherent in larger hotel portfolios and global distribution and procurement platforms.
“The latest minimum wage rise is the fifth blow in a relentless run of cost hikes for independent hoteliers,” Rumney said in an interview with CoStar News Hotels. “Volatile energy bills, rising business rates, the deeply flawed ‘holiday tax’ proposal, the increase in employers’ national insurance and now yet another sharp jump in payroll burden. At some point, something has to give.”
The U.K.'s minimum hourly wage rose to £12.71 for employees 21 and over starting on April 1. Rumney reiterated it's a significant cost on hospitality businesses.
“For a typical 60-room hotel, this wage increase alone could add £30,000 to £40,000 to annual costs, before any of the other pressures are even considered. Hospitality is one of the U.K.’s biggest employers of young and diverse talent, yet it is being hit hardest, with changes like this projected to add £1.4 billion in costs across the sector,” he said.
Rumney added that “no one disputes the importance of fair pay, but increases of this scale, delivered at pace and without offsetting measures, risks undermining the very businesses that provide those jobs in the first place.”
Rising costs could force closures
In January, UKHospitality predicted that rising costs would contribute to a wave of closures across the country's hospitality industry this year. The organization predicted that 963 restaurants, 574 hotels and 540 pubs would have to close “if the government doesn’t introduce a hospitality-wide solution to avert significant business rate increases in April.”
According to UHY Hacker Young Group, 789 pubs and bars filed for bankruptcy in 2025, up 2.6% year over year. That number is up more than 50% when compared to 2020 during the initial outbreak of the COVID-19 pandemic.
The U.K. government responded with a 15% cut in business rates for bars and pubs that also started last month. But this cut will only increase by the rate of inflation across the next two financial years to March 31, 2029.
Rumney said he, too, predicts some hotels, restaurants and pubs across the U.K. will be forced to close this year.
“Sadly, the consequences are entirely predictable. Industry data shows 64% of hospitality businesses are planning to cut jobs, 42% are planning to reduce trading hours and 1 in 7 fear closure as a direct result of rising costs,” he said. “Without proper support, increasing costs will inevitably lead to fewer jobs, higher prices for consumers and ultimately lower tax revenues for the government. Those price increases will also fuel inflation. Nobody benefits from that outcome.”
While independent hoteliers in the U.K. are resilient, they cannot absorb continual shocks, Rumney said.
“Independent hotels are the backbone of Britain’s tourism economy, operating on tight margins while supporting local jobs and communities,” Rumney said.
UKHospitality also is continuing to lobby for a reduction in value-added/sales taxes for hotels and hospitality businesses.
More than ever, U.K. hoteliers need to come together to pressure politicians and show the sector's value to the country's overall employment picture and gross domestic product, Rumney said.
“What we need is a balanced and pragmatic approach, one that supports workers while recognizing the limits that businesses can carry. … A reduction in VAT for hospitality would be a simple yet effective lever for the government to help operators protect jobs and sustain their businesses. Without that balance, the long-term health of the sector is at risk,” he said.
In the first quarter, U.K. hotel revenue per available room rose 1.2% year over year, according to CoStar hospitality data. But with ongoing tensions in the Middle East and high costs of international travel, U.K. residents might choose to book more domestic vacations this year.