Andy Burnham may be the UK’s new prime minister, but the hospitality industry might view him with a certain familiarity after his recent high-profile role as mayor of Manchester and something of an advocate for the hotels trade.
Speaking at the Annual Hospitality Conference (AHC) in Manchester in 2024, Burnham described the industry as “one of the things that the UK does really well” while warning against complacency. “I think we do need to constantly look, particularly outside London and the Southeast, at how we raise the standard of the offer” he said. He also directly addressed the room’s assembled hospitality investors and operators, to ask: “How do we work with you to make sure we improve UK cities across the board and make them even better places to visit?”
Since taking office on 20 July, Burnham has skirted around the topic with several pro-business bids. The most meaningful ones for hospitality have been a pledge to review business rates for hotels and a commitment to reduce business rates for pubs, clubs and live music venues from April 2027. The 20 percent discount for the latter is expected to translate into an average annual saving of £1,100 per pub. Burnham rolled out the cut, saying: “I said I would protect pubs and local high streets – the beating heart of our communities – and that’s what we will do.”
“Anything that lessens the burden for hospitality is a good thing,” says Thomas Emanuel, head of hospitality thought leadership at Savills. He acknowledges that Burnham benefits from “a strong understanding of how hospitality can positively impact a market” after years of experience in Manchester. He also points to an air of “positivity” ushered in by the new prime minister. Furthermore, if Burnham’s appreciation of development economics translates into widespread planning reform, there is a sense it could inspire confidence right across the real estate industry.
Economic stumbles
Yet Burnham has been dealt a weak hand both in terms of the geopolitical environment and existing Treasury policy. Inflationary factors emanating from conflict in the Middle East dampen prospects for interest rate cuts. Other pressures on business were imposed by former chancellor Rachel Reeves, in the shape of higher employer national insurance contributions, minimum wage hikes and increased business rates.
All of this is already hurting the UK hospitality industry as it impacts margins. David Kellett, head of hotels, Savills, anecdotally describes “some insolvency work coming through” for the firm’s hotels division. While he resists the idea that trading conditions are “bad” for UK hotels, he also says that the new administration has not yet announced anything “that is fundamentally positive from a hotel market perspective”.
Marcus Dixon, UK head of living and residential research at JLL, suggests that Burnham’s appointment of new chancellor John Healey “offers markets a degree of familiarity”, observing some signs of stabilisation for strategies involving debt. Yet as many more industry figures wait for clarity and definite action before passing judgement, the Autumn Budget – slated for Wednesday 28 October – is likely to become a key acid test.
Visitor levy
Another hot topic of discussion is that of hotel levies or tourist taxes, which are a growing feature of the UK market. While universal legislation is not fully in place, Edinburgh recently became the first city in Scotland to introduce a tourist tax, imposing a 5 percent levy on the cost of overnight accommodation, capped at five nights in a row. Other Scottish cities like Glasgow and Aberdeen are likely to follow, while cities in Wales are expected to do the same from 2027.
In England, the cities of Liverpool and Manchester were able to introduce an overnight levy in recent years through a legal loophole. Hotels and serviced apartments in The Manchester Accommodation Business Improvement District (ABID) with a rateable value of £75,000 or more have been subject to a visitor charge of £1+VAT per night since April 2023. The tax, introduced under Burnham’s watch, is intended to fund the development, marketing, and promotion of Manchester as a visitor destination, including support for local events and festivals.
Resources held by the House of Commons Library reveal that The Institute for Fiscal Studies has estimated that a £1 per person nightly charge would raise approximately £420 million per year in England. The Northern Powerhouse Partnership suggested that £428 million could be raised. To place the tax in context, council tax raises about £30 billion per annum, while business rates collect about £25 billion per year.
Rising costs
While visitor levies are a familiar feature on the European continent, hospitality leaders in the UK have expressed doubts about their efficacy in terms of boosting the industry. Industry association UKHospitality has said government plans to expand holiday tax powers to all strategic authorities will cost jobs and increase the price of a family holiday. The body said it had written to the prime minister to propose a “holiday bonus” instead, in which towns and cities that prove to be visitor magnets are rewarded with further funding to incentivise tourism.
Says Allen Simpson, chief executive of UKHospitality: “The cost of lost VAT and increased benefits through reduced economic activity and employment will in many areas outweigh the revenues raised by a tax. A holiday bonus is the right kind of devolution – more revenue and control for local communities, without the lost jobs caused by a holiday tax.”
Earlier in the year, more than 200 hospitality leaders wrote to the government to protest plans for the tax, including signatories from Butlin’s, Haven, Hilton, IHG Hotels & Resorts, Merlin Entertainments, Parkdean Resorts, Travelodge and Whitbread.
Many experts look to the example of Amsterdam as a cautionary tale, where city authorities, keen to limit the effects of mass tourism, are pushing ahead with even more radical visitor levies. The city’s new coalition government has unveiled plans to raise its tourist tax to 16 percent from 12.5 percent as of 2027, before increasing the rate by 1 percent annually until it reaches 20 percent in 2030.