What are the key Budget 2021 changes for Hotels to consider?

05 March 2021

Measures announced by the Chancellor in the Spring Budget last week were eagerly awaited by the hotels sector as it was one of the most important in years.

The big news in the first budget of 2021 was business rates: hospitality businesses will continue to receive a 100% business rates holiday for the next three months when they will then see their bills discounted by up to two-thirds for the rest of the financial year. Removing this cost during the exit from lockdown is critical and reducing it for the remainder of the financial year will be a lifeline to the sector. It will provide hotel businesses with opportunities to focus on other key areas of their business without worrying about losing their property. 

However, as always the devil is in the detail and it may not be as simple as it sounds. It could be hard for businesses to compute the rates because after the first three months it may be burdensome for businesses to apply and it will be up to the already over-stretched billing authorities to sort out. 

There was also further good news around VAT where the 5% rate will be extended for another six months followed by a 12.5% rate for a further six months. However, even with the expected pent-up demand due to arrive when lockdown is eased, it may take hotel businesses until 2022 to fully get back on their feet. Therefore extending the VAT rate of 5% until the end of 2022 to take advantage of the staycation trend this year and next would be much more beneficial.  

We were also pleased to see the Government announce grants of up to £18,000 for hospitality and leisure businesses as part of a new £5bn ‘restart’ grant scheme. Whilst this is a welcome boost to the sector the key point now is ensuring these grants are sent to businesses quickly and efficiently to allow them to restart their business in time for the summer.  

The combination of the above measures along with the extension to furlough, support for airports, recovery loans schemes and funds for other areas of the leisure business will be a powerful injection to the hotels sector. It gives hotels an opportunity to rebuild with the support of the Government as we reopen in line with the roadmap. However, any changes to the plan will need to be matched with appropriate support measures.