Hotels, guesthouses and self-catering units have seen some of the largest increases in rateable values nationally, placing renewed focus on how hotel business rates assessments are actually calculated.
But for many operators, the real conversation is no longer just about the size of the increase.
It is about whether the methodology behind those valuations fully reflects the realities of operating a hotel business in today’s market.
Hotels Are Valued Differently To Many Commercial Properties
Unlike offices, industrial units or retail premises, hotels are not assessed purely on location or rental evidence.
Instead, hotel valuations are heavily influenced by trading performance through a methodology known as Fair Maintainable Trade (FMT).
According to Adam Brooke:
“The methodology used by the Valuation Office has not changed between the 2023 and 2026 Rating List.”
This approach allows the Valuation Office Agency to assess large volumes of hospitality properties across the country in a relatively consistent and efficient manner.
As Brooke explains:
“This shortened method of valuing properties is useful when needing to value a large number of assessments within a short period of time.”
However, while consistency is important, hotels themselves are rarely consistent businesses.
No Two Hotels Operate In Exactly The Same Way
One of the challenges within hotel valuation is the sheer variation between properties.
Two hotels of similar size in similar locations may still operate completely differently:
- different occupancy patterns
- different customer demographics
- different operational costs
- different food and beverage revenue
- different staffing models
- different profitability levels
As Brooke notes:
“Every valuation is individual to that property and as such; there can be wide discrepancies between hotels even in similar locations.”
This is where valuation methodology becomes increasingly important.
Because while turnover may appear similar on the surface, the financial realities behind that performance can differ substantially from one operator to another.
Revenue Alone Does Not Always Tell The Full Story
One of the key drivers behind higher hotel valuations following the 2026 revaluation has been improved trading performance across the sector.
However, stronger turnover figures do not necessarily mean operators are under less financial pressure.
Many hotels are now balancing:
- rising staffing costs
- National Insurance increases
- operational and energy pressures
- financing costs
- changing consumer demand
This creates a disconnect that some operators are now beginning to question.
If two hotels generate similar revenue but operate under very different cost pressures, should they necessarily produce the same valuation outcome?
A More Detailed Approach To Valuation
According to Brooke, there are alternative methods of valuation that can provide a far deeper understanding of an individual hotel’s position.
“There are alternate methods of valuation that provide a much deeper analysis of a hotel’s performance on a more individual basis, a method that when employed can often be at odds with the values currently applied.”
A full Receipts and Expenditure valuation considers not only the revenue generated by a hotel, but also the operational costs specific to that individual property.
In some cases, this can result in materially different outcomes compared to more standardised valuation approaches, particularly where profitability and operating pressures vary significantly between operators.
This is a highly specialist area of valuation that requires detailed analysis of how a hotel business actually performs in practice, rather than relying solely on broader assumptions around trade.
Why Operators Are Taking A Closer Look
As liabilities increase across the hospitality sector, more operators are beginning to scrutinise how their assessments have been calculated and whether the methodology applied genuinely reflects the realities of their business.
Not because every valuation is incorrect.
But because in a higher-cost operating environment, the detail behind the methodology matters more than ever.
Looking Ahead
The hospitality sector has always been operationally complex, highly individual and heavily influenced by changing market conditions.
As the 2026 revaluation reshapes the business rates landscape, the focus for many operators is beginning to shift beyond simply what they are paying, towards how those valuations have been reached in the first place.
And in a sector where no two hotels operate in exactly the same way, valuation methodology is becoming an increasingly important part of the conversation.
If you would like to discuss how the 2026 revaluation may impact your hotel portfolio, please get in touch with Dunlop Heywood’s Retail, Hospitality and Leisure team.
