Rising payroll costs squeeze UK hotel profits

The study, Benchmarking Beyond RevPAR, which polled a consistent sample of nearly 45,000 hotel bedrooms across the UK over 15 years, revealed that payroll costs now make up almost a third of a regional hotel s cost base. In the last 15 years payroll costs in regional hotels rose by an average of 26 per cent while profit per available room fell 26 per cent – from 41.67 in 2000 to 30.49 in 2015. The 80 per cent increase in the National Minimum Wage during that period is said to be main driver of increasing staff costs.

While profit has already taken a notable drop, the gulf between pay and profit is expected to widen further this year with the introduction of the National Living Wage in April and prospective annual increases, said HotStats.

Challenge

The hospitality intelligence firm predicts that managing payroll levels will remain a challenge for UK hoteliers as the number of hotel staff employed on minimum wage contracts in the UK is projected to increase to 40 per cent by 2020. HotStats CEO Pablo Alonso said the findings went some way to explaining the growth within the budget hotel and serviced apartment sectors.

It is not hard to understand the acceleration in the development of limited-service hotels when it is the service which is now the biggest cost of a hotel operation,” he said. Alonso said hoteliers should prepare for a further squeeze following Britain’s vote to leave the EU.

According to law firm Simpson Millar, businesses wanting to hire staff from outside the UK after Britain leaves the EU could face a bill of almost 3,000 per employee.

The ability of UK hoteliers to manage payroll levels could be further tested if the fall out from Brexit triggers a significant policy change regarding immigration to the UK,” he said.

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