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Business rates: what do hotel owners need to know?

Marketing / 7 Dec, 16

In what has been billed as the biggest change in a generation, the process of the 2017 business rates revaluation is well under way. Simon Heather, partner and rating expert, explains how hotels are likely to be impacted.

Most businesses are likely to experience a change in their business rates as a result of the 2017 business rates revaluation. This is because the valuation date is set two years before the last revaluation and since there has not been a revaluation since 1st April 2010, local authorities in England and Wales are still basing their business rates bills on 2008 figures. This will change next year, as all non-domestic properties in England and Wales will be reassessed based on a valuation date of 1st April 2015.

The hotel and leisure market has generally experienced a roller coaster of fortunes over recent years. It is now generally accepted that there was a fairly significant lag in the industry between the wider general economic problems and trading performance and values within the sector. The first half of 2008 was characterised by many operators and, to a large extent, funders talking of stable conditions within the sector with room rates and occupancy figures all holding up.

This contrasted markedly with the latter part of 2008, where statistics generally indicated that occupancy, room rates, REVPAR and profits were all in heavy decline. This is generally regarded as the beginning of what was been four years of very difficult trading conditions in the sector, particularly in respect of independent hoteliers who have found their occupancy and room rates squeezed by the rise in prominence of budget hoteliers such as Travelodge and Premier Inn.

The first thing to note is that those hotels that have seen a change in their income between 2008 and 2015 will see a change in their new rateable value. However, as well as a change in assessment to reflect the economic conditions, the new assessment should also reflect any physical changes to the property – such as additional rooms or new facilities.

Clearly, hotel operators are one sector that will have been penalised as a result of the government’s decision to delay the revaluation by two years until 2017. Had the 2015 revaluation been undertaken, we would have expected to see significant falls across the board. The economic recovery since 2014 is likely to mean that revenues are more in line with the pre-recession position – meaning that many assessments are likely to remain on par.

What happens next?

Although the draft rateable values have now been published, hotels will not be able to calculate their new business rates until the Government announces the multiplier in January. New rates bills will be issued on 1st March 2017 and the revaluation comes into effect from 1st April.

The important thing is to seek advice from a qualified rating advisor as soon as possible to make sure you are not paying over the odds. They can assess your draft rateable values and analyse whether you are entitled to a reduction in your business rates.

Topics: News

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