rangerss75

I managed finally to book a couple of IHG properties in the UK. As I expected, the rates are the same as they were before the temporary reduction in United Kingdom VAT for service industries which is now applied until 12th January. They haven't passed on the reduction to customers. This is, perhaps, understandable, as there was no obligation to do so, though I understand Marriott have said they will. But, when you click on price details for a particular booking, IHG have now marked the prices as 'including taxes of 5%', instead of the former 20%.

So we shall need to check our statements and make sure our points have been awarded on all but 5% of our spend, rather than the normal all but 20%. The reduction applies to restaurants too,

IAN-UK

In places like UK, where rates are generally offered inclusive of tax, we probably shouldn't expect a change in price. Whatever calculation goes into marketing, it is focussed on the inclusive price.

A win for the hotel.

And you are right to note that our points should reflect a14% increase in the base rate

craigthemif

Nobody should be even remotely surprised that rates aren't going to drop by the amount of the VAT reduction.

Hotel rates are based on what the market will bear, not a markup on costs. Any taxation is simply a cost of doing business, the same as wages, rent, utilities, etc.

UKtravelbear

It depends on both the hotel and the market.

I've just done a regular sweep of my bookings to check if I can get them cheaper and found the following (based on average rate over a 3 night stay)

I compare like with like so same room and same cancellation policy. Existing booking still says 20% VAT in the blub but new ones 5%

1. Manchester Crown Plaza - September

Previous rate - 91.16. if you divide by 120 * 105 the new reduced rate should be = 79.77

Actual new rate = 76.33 so rate is even lower than that expected just to take into account the VAT reduction

2. Manchester Holiday Inn - October

Previous rate - 91.46. if you divide by 120 * 105 the new reduced rate should be = 80.02

Actual new rate = 82.69 - so could be seen to not reflect the VAT reduction but I've found the price of this hotel does vary a bit anyway depending what is happening in Manchester.


YMMV

Dave Noble

even more so since the reduction in VAT is "to support businesses severely affected by forced closures and social distancing measures" according to the guidance document at https://www.gov.uk/guidance/vat-redu...nd-attractions

chrism20

A few of us were chatting about this in the Accor threads a week or so back.

I wish they had reduced employers contributions or some other tax on businesses which would have directly helped businesses rather than pit the operator against the consumer.

By reducing the VAT which is a consumer tax it's not unreasonable for the customer to expect to see a reduction in their bill particularly given the amount it has been reduced to.

Obviously the dynamic nature of hotel pricing can hide it but the idea IMO was to reduce VAT and stimulate demand by putting heads in beds.

I'd have preferred something like a 10% reduction in employer contributions and a 10% reduction in F&B VAT which would have meant both parties win rather than reducing VAT from 20% to 5%.

Dave Noble

Your opinion seems to not be in line with the statement on the UK government guidance that stated above - with nothing to suggest that prices be lower to consumers

RAPC

Had a couple of stays in the past week. One at a Holiday Inn (points do seem to have posted correctly) and one at a Doubletree where points have posted as if 20% VAT was paid.

Thanks for the reminder on to check rangerss75 - like you, I understand the hotel operator keeping the VAT saving, but the points are a fair claim for the guest. Will keep an eye on this for upcoming stays as well.

chrism20

Oh I know and in his speech to Parliament the Chancellor clearly said it was up to the operator whether or not they pass it on to the consumer.

Personally though I think there were better ways of doing this than reducing a consumption tax. If it was simply designed to help the operator other taxes could have been reduced without involving the customer.

As a consumer I’d be more inclined to support the business/property that’s advertising that they are passing the reduction on at the moment if I were to be honest. The reduction is that much it’s noticeable when you are spending say £200-£300 or so on a weekend or mini break and whilst personally I’ve been lucky enough to have worked right through the lockdown and seen no change in income many haven’t been as fortunate so it’s not just the businesses that are struggling. It’s a two way street in my opinion particularly when it involves consumer taxes.

Merely my opinion of course.

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.

IAN-UK

It would be different if rates were headlined without VAT. that was something IHG used to do in the UK for "business" hotels, but I think it's they stopped that.

It's an odd intiative - effectively giving cash to hotels, but not doing much to boost demand/consumption. Unless of course tpunters are fooled into thinking VAT reduction= price reduction

craigthemif

It depends on the breakdown of personal vs. business travel for accommodation at the moment.

Companies and the self-employed will end up paying more VAT to the Exchequer because they'll have less VAT paid (on business travel) to offset.

chrism20

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.