Business rates ‘bringing pain’ to hotel sector, says Colliers

Escalating business rates are “continuing to put pressure” on London’s hotel industry, according to latest figures from Colliers International. Hotel companies are facing new bills for the year ahead which show the third set of rises since the 2017 revaluation, with many bills double what they were three years ago. Such bills will need to be paid from April 1. Colliers analysed the business rates rises of 93 London hotels that saw the highest rises in their rateable value (RV) following the 2017 revaluation and said it found that these hotels in central London will receive a total rates bill of £12.2m this year, compared to £4.8m in 2016/7 - more than two and a half times higher. It found the biggest rise is the Four Seasons in EC3 which saw its rates bills rise from £176,000 in the year before the revaluation to a bill of over £570,000 this year and the Marriot in W14 which paid £414,500 in 2016/7 but will see a rates bill of over £1m shortly. Hotels: Business Rates Rises Since the 2017 Revaluation London Hotels with a Rateable Value (RV) more than £350,000 Hotel Rates Bill 2016/7 * Rates Bill 2017/8 Rates Bill 2018/9 Rates Bill 2019/20** % Increase 2016/7 –2019/20 Four Seasons, EC3 £176,000 £316,000 £401,500 £570,250 +224% St James Hotel, SW1 £80,000 £128,000 £167,000 £244,500 +205% Premier Inn, SE9 £75,000 £120,000 £156,000 £228,500 +205% Zetter Townhouse, EC1 £50,000 £80,500 £104,500 £152,250 +206% Westley Hotel, Euston NW1 £92,500 £145,000 £190,000 £279,500 +202% isis budget hotel E1 £136,000 £210,000 £276,300 £407,000 +199% Arriva Hotel Wc1 £71,250 £110,000 £145,500 £210,250 +195% Holiday Inn Express W14 £ 163,250 £249,250 £329,000 £440,000 +169% MStay Hyde Park Hotel £74,500 £113,000 £149,000 £186,500 +153% Marriot Residence Inn W14 £414,500 £628,250 £830,400 £1,048,000 +153% Lancaster Gate £104,000 £157,000 £207,750 £256,750 +147% Dean Street Town House £223,000 £336,750 £445,250 £547,500 +146% Holiday Inn, E1 £207,000 £312,500 £413,250 £507,000 +145% Premier Inn Chiswick £202,500 £306,000 £404,500 £492,500 +143% Dorchester Collection, W1 £301,000 £452,400 £599,000 £704,750 +134% Abbey Court £107,000 £161,000 £213,000 £250,250 +134% *Pre 2017 Revaluation **Third set of rises post Revaluation Colliers added the reason for the hike is because those with high value properties in England (over £100,000 rateable value), which constitutes a large part of the London hotel world are affected by ‘upwards phasing’ in their bills and will this year see their rises “capped at 49% plus inflation”. This is on top of 42% increases (plus inflation) in 2017/18 and 32% (plus inflation) in 2018/19 - a combined increase in two years of 124% plus inflation. John Webber, head of business rates at Colliers International, said: “The London hotel industry is facing increased pressure at the moment from escalating costs and business rates rises are not helping, particularly at a time when the sector is competing with on-line providers such as Airbnb, who do not pay business rates.” Marc Finney, head of hotels and resorts consulting at Colliers, added: “The indirect tax burden on hotels is now becoming a major issue. About twenty years ago a hotel could expect to pay between 0.5%-1.0% of revenues on property taxes (business rates). This is now closer to 5.0-6.0% of revenues. With profit conversion rates in hotels running at about 30-35% at EBITDA level this makes property taxes equivalent to in excess of 15% and is fast approaching the same levels as corporation tax. “The UK has always boasted a low level of corporation tax as a reason to establish a business in the UK – but this clearly does not apply to hotels. Moreover, corporation tax is only paid on profits and after deductible allowances. Business rates are paid at the time and irrespective of whether or not the business is profitable. It is clear that operated real estate is being unfairly penalised by the current system and care should be taken not to kill the Goose that lays the golden eggs”.