Hotels ‘fighting to maintain profits’ as costs rise
Britain’s hotels are struggling with rising costs despite increasing demand, according to the latest data.
Profits were flat for UK hotels between September and October at just over 38 per cent, and fell slightly from 43.3 per cent to 43.1 per cent in London, according to the RSM hotels tracker.
This was despite a rise in the average daily rate from £151.81 to £155.03 in October across the UK, and a rise from £217.80 to £222.64 in the capital.
Overall occupancy, too, rose from 80.9 per cent to 82.4 per cent in the UK and from 84.2 per cent to 85.8 per cent in London.
“Hoteliers are having to work harder but are getting less in return,” Chris Tate, partner and head of hotels at RSM UK, said.
“Just as the sector adjusts to the National Insurance rise, they now have to factor in another increase in National Minimum Wage next April,” Tate added.
“For many, this means finding further ways to create efficiencies to avoid hitting the bottom line.”
Hotels struggle with high tax
The rate of employer’s National Insurance contributions was lifted in last year’s Autumn Budget, up to a total of 15 per cent.
The minimum wage will increase to £12.71 for all over 21-year-olds and to £10.85 an hour for those between 18 and 20, despite business warnings that the rise will hit growth and increase inflation.
Tate added that the decision to freeze income tax thresholds will “leave consumers feeling worse off in the future… unless consumer confidence makes a recovery, it may just be a matter of time before it hits the hotel market”.
Thomas Pugh, economist at RSM UK, said that the labour market is “still weakening, and wage growth is set to slow”.
He added: “Real household disposable income growth is set to fall to just 0.4 per cent over the rest of this decade as future tax rises eat into incomes.
“The outlook is therefore far from rosy for consumer spending, despite the lack of imminent tax rises.”