Inflation, Interest Rates, Recession: ‘So?’
Let’s start with some good news :
Occupancy and Revenue are record level high in 2022 and forecasted to surpass 2019 pre-pandemic. The outlook looks fairly positive.
Despite some positivity on the horizon, hoteliers still face various challenges. Inflationary pressures are set to squeeze profits as food, beverage, and energy prices soar, while the ongoing supply chain issue and staffing challenges continue, also driving increases in payroll and operating expenses. As the VAT rate returned to the standard 20% in April and business rate relief is capped at £110,000 per business, hoteliers will feel the pinch to the bottom line in the medium term
So, in spite of higher revenue, are hotel owners really hitting the bottom line?
Do top brands really helping hotel owners or are they just reaping the benefit?
This week, we’re taking a deep dive into some of the latest UK hospitality industry insights, using data from expert reviews.
There are more inflation and cost pressures now in the United Kingdom than in the United States or Europe, and hotel owners are feeling the strain, especially hoteliers.
According to data released by the U.K. Office for National Statistics (ONS) in April, inflation rose 7.8% year over year, up from 6.2% in March. The inflation rate has hit a 40-year high with the risk of tipping the UK into a recession. The Monetary Policy Committee forecast that CPI inflation was expected to average slightly over 10% at its peak in 2022 Q4.
Labour shortages and higher wages, aggravated by the closure of staffing opportunities from the European Union, are driving up prices.
The British pound has devalued against major currencies, including the United States dollar. Bank of England has raised the interest rates by 25bps on 16th June 2022 to 1.25%: this is likely to be increased in the next few months.
In May, the United Kingdom government announced an emergency economic stimulus package valued at £18.8 billion ($15 billion), including rebates on higher energy costs and additional support for lower-income households. The price of energy has already risen substantially, and it will rise even more in October and November.