For much of the past six years, the hospitality sector has operated within an environment shaped heavily by business rates support.
From emergency Covid relief rates through to extended retail, hospitality and leisure discounts, these measures provided vital breathing room for businesses navigating one of the most challenging trading periods that sector has ever faced.
Now, that landscape is beginning to change.
As the 2026 revaluation takes effect and relief structures continue to evolve, many hotel operators are entering a very different business rates environment, one where liabilities are increasing at the same time as wider operational pressures remain high.
Years of Support Helped Stabilise the Sector
Since 2020, hospitality businesses have benefitted from multiple forms of government support through the business rates system.
As Adam Brooke explains:
“Across the past 6 years, the retail, hospitality and leisure sector has been eligible for numerous reliefs. These began with 100% COVID relief in 2020/21 and continued up until the 2025/26 rate year where a 40% discount was available.”
These reliefs played an important role in supporting operators through periods of restricted trade, uncertainty and rising costs.
For many businesses, they also helped provide a degree of stability while the sector worked towards recovery.
Hospitality is Now Entering a Different Environment
The challenge now is that the structure of support is changing.
According to Brooke:
“The Government want to bring an end to the reliefs and so have created a multi-level set of multipliers to calculate liability.”
While some hotel operators may benefit from lower multipliers, the impact across the sector is far from uniform.
Brooke notes that some businesses may now pay reduced multiplier rates of “38.2p or 43.0p in the pound”, while others “won’t benefit from this fall and instead may be paying similar level as before; but on a significantly increased rateable value.
This creates a more complex and uneven landscape for operators already managing wider financial pressures.
The Full Impact May Still Be Ahead
One of the more difficult aspects of the 2026 revaluation is that some of the largest increases may not be fully felt immediately.
To help soften the short-term impact, traditional support measures have been introduced to phase liability increases over time.
However, while this may initially reduce the immediate pressures for some businesses, it also means liabilities can continue to rise further into the rating cycle.
As Brooke explains:
“The increases across the following years phase in at much higher levels, compounding on top of year one.”
For hotel operators trying to plan ahead, this creates a degree of uncertainty around future costs and long-term financial forecasting.
Business Rates Are Rising Alongside Wider Operational Costs
The challenge for hospitality businesses is not simply that business rates are changing.
Operators are also balancing:
- Staffing pressures
- National insurance increases
- Wage inflation
- Operational and energy costs
- Changing consumer behaviours
As Brooke warns:
“With staffing costs, National Insurance and operational expenses also on the rise, it leaves little room to manoeuvre if you are overpaying on your business rates.”
That combination of pressures is what many operators across the sector are now trying to navigate.
The Sector is Adjusting To a New Reality
The hospitality sector has shown significant resilience over recent years.
But as relief structures evolve and liabilities continue to increase, operators are now having to adjust to a new business rates environment, one where support is reducing at the same time as operational pressures remain high.
For some businesses, that transition may feel manageable.
For others, it may create much more difficult financial decisions over the coming years.
Looking Ahead
The 2026 revaluation represents more than just a change in rateable values.
It marks a shift in how hospitality businesses are expected to operate within the business rates system moving forward.
As support structures continue to evolve, understanding both current liabilities and how future increases may phase through will become increasingly important for hotel operators planning ahead.
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.
