Originally Posted by
Raffles
You are missing the point completely.
Hotel prices are based on supply and demand. The VAT rate is irrelevant to the hotel in setting its room rates, because the only thing that matters is what the 'clearing price' is to the customer.
If the rate needs to be £100 to get heads on beds, rooms will be priced at £100 irrespective of whether VAT is 1% or 25%.
What hotel in its right mind after 3 months of zero revenue is going to reduce its room rates from £100 to £85 when it can fill its rooms at £100?!
The only exception may be at hotels which are reliant on business customers, but there aren't many of those open at the moment. The £100 room that used to cost me £86 because I can reclaim the VAT now costs me £95. In these circumstances, there IS price elasticity at play and hotels may come down.
I'm fully aware of how hotel pricing works and from a quick look around at the availability of the properties that are open and aren't within five miles of the coast I'd question how many are actually managing to fill rooms on a consistent basis.
As
IAN-UK mentions above it's a rather odd initiative where it is effectively giving them the money for doing very little and not stimulating any demand.
It should have been a scheme to protect jobs along with stimulating demand and revenue after they had experienced months without, not a scheme to trouser some cash for doing nada.