Report warns of rising hotel costs and Brexit fears

The UK’s hotels have seen a boost thanks to rising inbound travel spurred by a continuous slump in the value of sterling, according to a report.

But future profitability could be hampered with rising operating costs amid Brexit uncertainty.

Hotel profits are being hit by higher running costs, with business rates and the minimum wage having both increased in April.

Many hotel groups are having to increasingly rely on more expensive temporary agency staff to fill vacancies.

There is continued uncertainty over the status of European Union nationals, many of whom work in the hospitality sector.

A recent survey revealed that more than 10% of all workers in the UK hospitality sector are considering leaving the country because of Brexit.

Profitability at the UK’s top 100 hotel groups rose 13% in the last year, with pre-tax profits of £689 million, up from £609 million in the previous 12 months, figures from accountancy firm Moore Stephens reveal.

Hotels are benefiting from the ongoing drop in the value of the pound that has led to rising numbers of overseas tourists coming to the UK.

Last year was record for inbound tourism to the UK, with 39.2 million visits, up 4.3% year-on-year.

Moore Stephens business tax partner Vincent Wood said: “UK hotels are well hedged from Brexit turbulence. A fall in sterling should pull in more tourists. A minority of UK hotels’ purchases are in foreign currencies.

“However, hotels should ensure they are on a sound financial footing should tourist numbers fall back from their current high levels over the long-term.

“It is also up to the government to find ways, including changes to business rates, of continuing to help hotels – a key sector that employs hundreds of thousands of people.”

Hotels were helped this year by many big events that helped attract record numbers of tourists to the UK, including the royal wedding.

“Hotels are also being helped by a growing trend of more domestic breaks being taken in the UK and people choosing to go on staycations,” said Wood.

“Rising numbers of tourists are helping to reduce headwinds, but that won’t last forever.

“The lower value of sterling has already proved to be a mixed blessing for some. It saw input costs, such as food, beverages and other imported goods like linen, soar.”

Image of hotel staff: ©VisitBritain/Rod Edwards