Our 22nd webinar, held on 10 December, explored the impact of the 2024 Budget on the hospitality sector, highlighting concerns about increased costs from rising NI contributions and thresholds, minimum wage increases and business rates, with one of our experts noting that these changes could lead to a 10% increase in payroll costs, necessitating a 5%-7% revenue growth to mitigate the impact.

The discussion also covered the potential for a tourist tax in the UK, as has already been mooted for Edinburgh, with concerns expressed about its impact on demand and competitiveness and the need for strategic planning, technology adoption and collaboration with government to navigate these challenges and maintain sector growth.

The scene was set by our two keynote speakers. Kate Nicholls OBE, CEO of UKHospitality, struck a note of concern, saying, "Growth is projected to hold steady amid weakening prospects and rising threats. The world needs a shift in policy gear, there are opportunities… and risks all around us." Meanwhile, Racheal Farrington, Head of Tourism Affairs at VisitBritain, highlighted the issues from the consumer’s point of view, noting that “the cost of accommodation is seen as the biggest barrier to people taking domestic trips.”

The research used by Rachael Farrington in her slides can be downloaded at the UK Domestic Travel Sentiment Tracker at VisitBritain.

The panel, chaired by our chairman Russell Kett, then expanded the discussion. Ed Odell, Director at Flint Global, observed that the government's approach to costing is very static. “It says ‘if we do this, it will cost a billion’. But what does it mean in terms of tax take in terms of hotel VAT, for example, because no tourist comes and just buys things and leaves?"

  • James Salford, Partner at Bird & Bird, added that "it is not a flat line application across the sector. Some types of hotels will be far more severely impacted than others."
  • Graeme Smith, Managing Director at AlixPartners, agreed that “it certainly makes things tougher in the full-service mid-market space where the consumer’s ability to absorb higher room rates is probably more challenging than in the luxury end."
  • Emma Young, Corporate Banking Manager at AIB, offered a lender’s perspective. "I think when it comes to the areas of the market that we're interested in funding, where we have experience, it comes down to location, location, location and who is managing? The lender will look to the management team to understand their strategies for dealing with the cost increase."
  • Peter Anscomb, Senior Corporate Director of the Edwardian Group, added: "I should think, on average, the Budget has put £1–£1.5 million in costs onto each of the larger properties in London."
  • Puneet Kanuga, Chief Investment Officer for EQ Group, calculated the impact in stark terms for a hotel’s value. "If you have a million pound impact on profitability in a central London hotel, that's roughly £18 to £20 million of value taken off in one go."

In conclusion, there was consensus that ADR, RevPAR and property values would most likely rise slowly, influenced by inflation and cost increases.