Hoteliers still undecided on price hike after VAT rise

02 December 2010
Hoteliers still undecided on price hike after VAT rise

Hotels and accommodation providers are leaving decisions about whether to pass on next month's VAT rise or to try and absorb the hike until the last minute.

Most have still not decided if they will adjust prices to take into account the 2.5% hike which will see VAT charged at 20% or if they will wait out the traditionally "difficult" early months of the year before rethinking their pricing strategy, according to a straw poll of members of the British Association of Hotel Accountants (BAHA) at the BAHA conference last week.

Only about 30% of respondents said that they would definitely pass on the 2.5% increase, which comes into effect on 4 January.

The majority said their organisations were still trying to work out how to deal with the rise which, as Hilton's vice-president of sales, Michael Prager, pointed out, is "more an issue for the (weekend) leisure and short-break market."

Doris Bernard, group financial controller for the Rocco Forte Collection, which has three properties in the UK, said the group always quoted London rates excluding VAT.

She added: "I don't know what we'll do about the Balmoral in Edinburgh or the Lowry the company's Manchester site which has strong corporate business] yet."

Angela Vickers, managing director at Apex Hotels, which has several sites in Scotland as well as two in London - with a third due to open next year - said there had been much debate within the company about what strategy to take.

"I think we'll be waiting to see how things go," she added. "We're not automatically going to adjust our prices by 2.5% at the start of January. We will review our pricing structure - as we do at the start of every year - but we'll take into account F&B as well and may put room rates up by 2.5% or even 5% after our January sale time."

At Lucknam Park, however, chairman Harry Murray was clear about what line his hotel - winner of this year's Independent Hotel of the Year Catey - would take.

"We will be looking at our rates like anyone else at the start of the year. On 4 January we'll review our prices and take into account our costs and look at value for money. We don't want to price ourselves out of business, so rather than do it in two bites we'll do it in one."

Professor Ian Millar from the Ecole Hoteliere de Lausanne agreed that the rise came at a time of year when many properties find business was significantly quieter, but said that hotels were going to have to bite the bullet and pass on the cost to the customer.

Restaurants ask customers to take the strain

Meanwhile, many restaurant and pub companies looked set to pass the increase on to consumers.

Julie McDonald, HR director at PizzaExpress, said: "We will most probably put VAT up. At the end of the day we are not a hugely expensive restaurant and we hope that we will continue to give value for money and that when people come they come for an experience and not just for pizza."

But Paul Cutsforth, operations director at pub and restaurant company Orchid Group, said his firm would take a more tailored approach to its brands.

"We have been thinking long and hard about the increase, particularly at the moment when the economy is in a fragile state, and any price rise that is passed on to the customer is one that needs to be thought about very carefully," he added. "Next year we will definitely have the 2.5% VAT increase and then we will probably have a further duty increase coming up in March/April time, too. So we have decided take an individual approach within each business and are undertaking competitive price surveys right across the whole business."

Tell us your own views on Table Talk.

By Elizabeth Mistry

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