UK hotel sector sees pre-Christmas boost - but warns on inflation

UK hotels experienced a hike in occupancy rates in November, a sign of a pre-Christmas uplift, but there are concerns that the accompanying higher prices could contribute to inflation worries.

Figures show that the average occupancy rate of UK hotels went from 76.6% to 79.1% year-on-year in November, with London witnessing an uptick from 79.6% to 82.8% for the same period, as reported by City AM.

Chris Tate, head of hotels at RSM, commented on the positive trend, saying "Christmas came early" for the hotel industry owing to "the start of the festive season and an uptick in airport passenger numbers". This marks a positive development for the UK's recovering tourism sector post-Covid-19.

RSM UK's Consumer Outlook suggests the demand will persist, with 28% of consumers planning a longer holiday in the UK this year (a rise from last year’s quarter) and one-third intending to take a weekend break in the country. The broader international interest is expected as well, particularly from the US, with a strong USD highlighting the UK's appeal to American travellers.

However, there's a note of caution from Tate, who highlights that following the Autumn budget's "raft" of cost increases, the hotel sector must "think strategically" about handling costs. Strategies may include leveraging artificial intelligence to increase efficiencies.

Hospitality businesses such as hotels are particularly vulnerable to the tax increases announced in the Autumn budget. These firms will be required to pay an additional 1.2 per cent tax on each employee's wages, and tax on all employees' wages above £5,000, a significant decrease from the previous limit of £9,100.

UKHospitality's CEO, Kate Nicholls, has labelled this a "tax on jobs", warning that it could deter companies from hiring staff, given that "staffing costs are the biggest business expense". Industries impacted by the tax have also suggested it may lead to price hikes.

RSM economist Thomas Pugh cautioned that any signs of rising room rates would likely concern the Bank of England. The average daily rates (ADR) for occupied rooms in the UK increased from £143.71 to £148.46 year-on-year in November, and from £214.80 to £217.86 in London, representing increases of three per cent and 1.5 per cent respectively.