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Airbnb could lead to lower business rates for hoteliers

Hotel operators should be able to appeal against their business rates due to the impact of “disruptors” in the market such as Airbnb, say real estate agency, Colliers International.
According to Colliers, the rise in volume of Airbnb lettings should be seen as a “material change” to the hotel industry, and because Airbnb operators don’t pay business rates, the company believes this should be taken into account.

The Valuation Office Agency, who undertakes business rates appeals, normally looks favourably on businesses that can show a “material change in their circumstances” and by definition, Colliers believes hotels in areas where Airbnb is strong and growing should be included in this policy.

Currently, hotel operators are suffering from a massive increase in the business rates that they are liable to pay following the recent April 2017 revaluation.

For example, one hotel in Belgravia is seeing an increase of nearly 194% in its rateable value from the last valuation in 2010, and two hotels in Victoria are seeing rises of over 150%.

Other hotels outside of the West End are also affected, with Hotel Z and Fielding Hotel in WC2 seeing rises averaging 114%.

John Webber, head of rating at Colliers International, said: “This is just not a level playing field. Not only is Airbnb attacking hotel market share, by offering cheaper room rates, but is able to do this through the unfair advantage of not paying business rates.

“The quantity of additional rooms being made available by Airbnb is equivalent to the building of several hundred new hotels across the UK. Yet should these hotels have been built, the Valuation Office Agency (VOA) would accept “a material change of circumstance” to the hotel operators’ business.”

Recent figures from Colliers International and Hotelschool in The Hague has shown that nights booked with Airbnb in London rose 130% in 2016 reaching 4.62 million, (compared to just over 2 million in 2015) with market share of overnight visitors doubling to 9%.

Colliers predicts that the trend will continue with the number of properties listed in 2017 increasing by 80% year on year and the first four months of the year showing an additional 55% uplift in the number of nights booked through Airbnb compared to the same period in 2016.

In addition, of the 2016 listings, almost 54% were offered by hosts with more than one listing, up from 48% the year before, reinforcing concerns about professional lettings via the site.

Bookings in the boroughs of Westminster, Tower Hamlets, Kensington, Chelsea and Hackney accounted for nearly 50% of all Airbnb stays last year. Webber says hotels in these areas of London should take note, and begin appeals against their rate bills, as should hotel operators in other cities such as Oxford and Bath that attract tourists and hence Airbnb operators.

Webber added: “We would argue that the advance of Airbnb rooms let in close proximity is a “material change” and hotel operators should appeal their rateable value and hence their rates bill, before they take a financial turn for the worse, which would affect both profits and jobs in the trade.”

Colliers Manifesto for Business Rates Reform includes:

1. More frequent revaluations, three-yearly, at least, by 2022
2. Increase funding for VOA in order to deal with existing appeals’ backlog
3. Release VOA from pressure exerted by local councils and HM Treasury
4. Introduce a register of appeals professionals – removing the ‘cowboy’ element
5. Root and branch reform of current business rates exemptions and reliefs

Rateable value of major hotels in London:

 

FIRM NAME POSTCODE RATEABLE VALUE 2010 RATEABLE VALUE 2017 PERCENTAGE BETWEEN 2017 & 2010
Corbigoe Hotel Ltd SW1V 2BH £31,500 £92,500 193.65%
London Continental Hotel W1U 6HR £69,000 £173,000 150.72%
St Georges Inn Victoria SW1V 1RB £29,750 £74,500 150.42%
Gosfield House Hotel W1W 6HA £15,000 £37,500 150.00%
The Dover SW1V 1RG £41,250 £103,000 149.70%
Astor Victoria SW1V 2BG £21,250 £53,000 149.41%
St George Hotel W1U 8JE £35,500 £87,000 145.07%
Dorchester Collection W1K 1PN £582,000 £1,345,000 131.10%
Romany House Hotel SW1V 1JQ £15,000 £34,500 130.00%
The Rathbone Hotel W1T 1LB £210,000 £465,000 121.43%
Palace Hotel W1H 7TA £108,000 £238,000 120.37%
The Z Hotel WC2H 7ED £272,500 £585,000 114.68%
The Fielding Hotel WC2B 5QZ £67,000 £143,000 113.43%
Hotel Indigo London – Tower Hill EC3N 1LS £266,000 £472,000 77.44%
The Montcalm at The Brewery London City EC1Y 4SD £1,375,000 £2,431,500 76.84%

About Shekina Tuahene

Shekina Tuahene
Shekina is a multimedia journalist who has lived in London all her life. She is an alumnus of University of Greenwich and Brunel. Shekina loves to read, travel, socialise and listen to music. If you have any story or feature ideas, feel free to drop her a line.

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