hotel_user

Just been announced that there is a temporary VAT cut of 15% for hospitality.

DO you think this should be passed on to the customer ? or used to rebuild the profit at the hotel ? and what about existing bookings ?

My personal 2c is that it should be "kept" for the hotel to rebuild the small operating profits at the hotel.

If anyone better than me at IT could do a poll ?

Often1

Pricing is based on supply and demand. This, not a matter of whether the savings are passed on to the consumer.

The reality is that consumers factor in the total cost of a room and are less sensitive to how it breaks down.

Thus, given a demand at a given rate, whatever the VAT, demand should not be affected and thus the net impact will be that the VAT "holiday" will not be reflected.

ameryki

Not quiet sure how it could be passed on to the customer? I am assuming instead of 20% VAT the customer will now only be charged 5% VAT the idea being more and more consumers indulge and spend money to help hospitality businesses spring back up!

Often1

"Passed on" is a bit imprecise. It is simply that if a room once cost GBP 100 + 20% VAT, that amounts to a GBP 120 total.

If the VAT were dropped to 5%, the question is whether the property adjusts its room rental rate such that the total amount comes to GBP 120, e.g., the rate increases and the VAT decreases.

chrism20

I will be surprised if the guest sees the benefit of it as it will be hidden by the dynamic pricing models that hotels use, however VAT is a consumer tax and not a business one and many guests will be expecting to see the cost reduce whilst I think the government idea is to stimulate demand and additional spending and therefore preserve profit/job in this way rather than just a straight profit grab by keeping the money that would have went to the exchequer.

SouthWesterner

I doubt the VAT cut will be passed on. Rates are quoted inclusive of VAT, so I expect the hotels to keep the difference as (much needed) margin and I'm OK with that, personally.

strayersong

My thoughts too. The initiative is to encourage consumers to spend, otherwise they should cut other taxes instead.

chrism20

I think cutting other taxes would have been a better way forward TBH. Personally instead of the £1000 employment incentive and the drop in VAT I would have preferred to have seen the employers contributions slashed with a promise of keeping them at a reduced rate throughout next year for every employee they keep on the payroll.

Cutting VAT is a method of stimulating consumer spending but if prices aren't cut it won't stimulate spending and as the amount its being cut by is significant it's noticeable in the final cost.

This has the potential to backfire if the consumer doesn't feel like they are benefitting and no doubt the blame will be placed on these beleaguered operators if it does. It's also worth remembering that whilst the business have been hit hard so have some consumers. It's a two way street.

cwl

Both London Airport Sofitels to date have gone with the profit grab option.

Rates unchanged pre and post change in the tax rate although the rate pricing conditions have been amended to reflect 5% tax instead of 20%

rangerss75

This ought to mean that we get more points, since less of the total price will be tax, something I raised in a similar thread on the IHG forum. We'll need to check our statements