The UK hospitality industry is facing significant financial changes from April 2025, following announcements made in the latest government budget. These tax adjustments will impact everything from staffing costs to business rates, forcing hospitality businesses to rethink their strategies for maintaining profitability.
The Key Changes Impacting Hospitality Businesses
National Insurance Contributions (NICs) Increase
Employers’ NICs has risen to 15%, a significant increase that will add pressure to payroll expenses. Contributions will now be required for earnings starting at £5,000 instead of the current £9,100, further increasing costs for hospitality employers.
UKHospitality, Hospitality Ulster, The British Beer and Pub Association and the British Institute of Innkeeping are all calling on the government to delay changes to NICs, enabling the hospitality sector to sustain its contribution to economic growth.
National Living Wage Increase
The national living wage has risen by 6.7% to £12.21 per hour. While this is a positive step for employees, it creates additional financial strain on businesses that are already operating on tight margins.
According to data compiled and produced by Hotstats and analysed by RSM UK, total hotel payroll costs already rose 10.8% between December 2024 and January 2025, and 12.3% in London specifically.
Reduction in Business Rates Relief
Business rates relief have dropped from 75% to 40%, significantly increasing costs for hospitality venues that have relied on relief measures to offset financial challenges in recent years.
Statutory sick pay will also increase to £118.75, increasing business expenses.
Meanwhile Irish businesses have felt the pressures of Pay Related Social Insurance (PRSI) contributions rising to €527 per week in January, with pension auto-enrollment coming into effect this September.
The Industry’s Response
With hospitality already feeling the pressure of rising customer expectations and staffing shortages, it is no surprise that increasing regulations have created widespread concern.
The Hospitality Market Monitor has revealed that between October and December 2024, 748 hospitality venues closed their doors due to escalating costs.
Meanwhile, a joint survey conducted by leading hospitality trade associations has demonstrated the stark realism of what the new budget changes mean for businesses across the UK:
70% of businesses plan to reduce employment levels to manage increased costs.
29% intend to cut trading hours.
60% said they would cancel investment plans due to the tax changes.
15% believe they will have to close at least one site.
The Dilemma: Raising Prices vs. Reducing Staff
With the average daily rate (ADR) for hotels at an all-time high, rising from £122.09 to £123.09 in the UK in January year-on-year, many businesses are facing a tough choice - should they pass the additional costs onto guests through price increases, or should they operate with fewer staff?
Increasing ADR poses the risk of pricing out potential guests - with London’s ADR showing a reduction from £175.20 to £173.99 in the same period. Alternatively, reducing staff could impact service quality, leading to lower guest satisfaction and reduced repeat business.
To navigate these challenges, hospitality businesses must explore strategies to maximise Total Revenue per Available Room (TRevPAR) by leveraging ancillary revenue streams. These could include experiences, spa services, food and beverage offerings, events and add-ons or upsells.
The Role of Technology in Overcoming Staffing Challenges
With impending staff reductions, the adoption of automation and technology will be crucial. Hotels should leverage technology to optimise operations, minimise manual tasks, and enhance the guest experience.
How Journey Helps Hoteliers Adapt
Journey helps hotels sell more, increasing total revenue and improving guest satisfaction.
Maximizing Ancillary Spend
Journey’s online booking engine increases AOV by offering multi-basket orders and effortless upgrade options. Guests can build their own experiences, increasing revenue while simplifying the booking process.Automating Administrative Tasks
While automation presents its own challenges, when implemented effectively - on tasks such as online booking, reporting or rota management - it can streamline administrative tasks and free up staff to focus on delivering exceptional in-person service
Optimizing Experience Management
Journey’s experience management system (EMS) helps hotels manage and monetise a variety of services - from spa treatments to tee times. This reduces operational costs, improves efficiency, and creates new revenue streams. If you can manage it, you can sell it.Seamless System Integration
Journey’s platform integrates with leading PMS systems, ensuring that all operations, from reservations to revenue management, are synchronised and streamlined. A more unified system means a more cohesive and efficient hotel team.
Preparing for the Future
The April 2025 tax changes will bring significant financial challenges for hospitality businesses, but by focusing on revenue diversification, operational efficiency, and smart technology adoption, hotels can adapt and thrive.
With solutions like Journey’s, hospitality businesses can offset rising costs, improve guest satisfaction, and future-proof their operations in an increasingly complex economic landscape.
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