With the Autumn Budget 2024 changes now in effect, there are higher costs for everyone in hospitality…again. So surely the UK is becoming a tougher place to run a travel or hospitality business? Funnily enough, some hoteliers and industry experts are saying the opposite.
There’s been something new putting a dent in hospitality’s earning potential for several years now.
Brexit’s impact on hospitality continues to bite, with a 9% decrease in spending from visitors since 2019, when you take into account inflation.
The requirement for an Electronic Travel Authorisation (ETA), costing visitors £16 each, is something experts in the sector fear will push inbound tourists to other destinations.
Then there was the news that energy costs for UK hotels doubled in a timespan of just four years, and costs remain high today.
And there’s the Autumn Budget 2024, now implemented with full effect, that will increase the annual tax bill for UK hospitality businesses by a projected £3 billion per year. “That money will have to come from somewhere,” said James Clarke, General Manager at TravelZoo UK. “So you’re either adding it to the consumer or you’re reducing your costs.”
You can take your pick of the hurdles out there hampering business success for the hospitality sector at the moment. But despite all this, we’re seeing the resilience of hospitality come into its own once again.
Business hurdles…or opportunities?
The PwC hotel forecast for 2025 shows 1.9% RevPAR growth in the UK regions, and a 2.3% occupancy growth. In London, the figures are even more heartening – 3% RevPAR growth and 3.8% occupancy growth this year. Simon Hampton, Partner in Real Estate & Hotels Corporate Finance at PwC UK said: “The 2025 outlook for the UK hotel market is cautiously optimistic… Despite global uncertainties, resilience in travel, especially from the US, Europe and Asia, offers encouraging signs.”
Indeed, where other sectors in the economy are struggling, travel is in growth. “Travel is outperforming,” said Martin Alcock, Director at Travel Trade Consultancy. “There are investors sitting there with capital to invest. They’re looking at consumer businesses and saying ‘travel is the standout class – let’s go for it.'”
Business asset disposal relief – which is the relief you get when you sell your business – is driving a lot of activity in the sector too. The amount of tax businesses will pay on the first million pounds of gains will go up again in April 2026. People thinking of selling hospitality businesses want to do it by then to save money.
Where some people are bailing out of hospitality businesses, others are finding new opportunities in the travel space more generally. “One of the big areas that we’ve seen a massive rise in the industry is the tour operator space,” said Claire Steiner, UK Director of Global Travel and Tourism Partnership. “But it’s actually in the homeworking travel franchisee space. Every week we see the record-breaking numbers of homeworking businesses. They’re doing really well.”
Hoteliers are getting creative with Budget-beating ideas , too, such as increasing part-time staff numbers to keep more employees below the threshold of employer contributions.
Technology is also coming into its own. “By automating operational processes, hotels can save hours of staff time, and therefore save money overall,” explained Andrew McGregor – VP Accommodation from Access Hospitality. “With the Budget changes now in effect, hoteliers are realising it is perfect timing to ramp up their use of technology.”
With some stories of hope out there for hoteliers, what else is making travel and hospitality businesses work harder in this economic context?
Competition like never before
The current economic situation in the UK doesn’t negate all the usual competitiveness of operating in hospitality. And the sector is particularly competitive this year. “ATOL says there are 31.5 million packages on sale,” said Alcock. “Huge capacity is being added this year. There’s a question of whether it can all be sold.”
So how can travel and hospitality businesses stand out in such a competitive environment? Alcock says it’ll be the operators with a differentiated product that will do well. “If you’ve got something you can’t get elsewhere, if your company is a specialist in some way, you will do very well.”
The ‘popular’ demographics
There is always so much in the travel news about the wants, needs and desires of Gen Z and Millennial travellers. And while the spending power of these ‘popular’ demographics is gradually increasing, they are also juggling priorities in a tough economic context. They’re trying to get on the property ladder while they still can, have children, and get ahead in their careers. Their lives are expensive, and travel companies targeting them have a tough sell.
Hospitality businesses wanting to get ahead should really be looking towards Gen X and Boomers instead. Alcock says that travel companies with specialist products are typically “selling to a demographic that have money, aged 55-65. They’re a population that’s generally ageing, and it’s the older people that have all the money.”
Mass market is out
With a focus on experiences, personalisation and specialisation, hospitality businesses working on a mass market model are going out of fashion for many consumers. This means travel and hotel businesses need to adapt their strategies to stay competitive.
Using technology to gain insights into guests means hotels can be much more targeted with their approach.”Simply sending emails to everyone in your database without a strategy won’t yield the best results,” said Haydee Fernandez,Associate Director, eMail Deliverability, Cendyn. “Understanding the importance of reaching your customers’ inbox and focusing on email deliverability is critical. Hoteliers must use data intelligently to gain commercial insights for profitable gain. There’s no way to enjoy a successful Find, Book and Grow strategy in the current context if you don’t do this.”
According to Will Plummer, CEO of Trust My Travel, this also presents an interesting opportunity for new businesses. “Travel is still in demand, and you can go into it knowing what Labour’s blueprint is for the economy and for employment,” he explained. “You’ve also got all these tools such as AI. So if you innovate and if you look at where the opportunity is in the sector, I actually think we’re going to see a really interesting wave of start-ups coming into the industry.”
Business or leisure? Business AND leisure
There are hotels that have traditionally attracted business guests. And those that have targeted the leisure segment. But the lines are only getting blurrier between the two, with bleisure trips increasing in popularity. The pandemic also showed hotels how risky it is being in just one segment, with many ‘business hotels’ quickly adapting to the leisure market when business travel stopped for a few years.
Hoteliers need to stop thinking about either business or leisure, and craft a strong market strategy for both. “The GDS is a stalwart of the travel sector that enables hoteliers to gain visibility with both business and leisure travellers,” said Daniel Simmons, CCO, at HotelREZ. “It’s proving really effective for independent hotels as it gives their properties visibility next to the big brands, and there’s a growing demand for more homely and personalised accommodation for business stays.”
Constant upheavals in the global political climate, shifts in international relations, tensions in the supply chain and fluctuating costs – the challenge of working in the business of travel is real.
There are so many hurdles right now, and some hoteliers are having a really tough job of making the numbers viable. Yet creativity, innovation and clearheaded strategising in some parts of the industry demonstrates that it is possible to be resilient and be in it for the long haul. With some savvy hoteliers proving its possible to be highly profitable despite the challenges.
