Hotels and Restaurants

The hospitality sector remains subdued with turnover in accommodation services and food & beverage serving services in decline. Indeed, expenditure on hotels and restaurants, in real inflation adjusted terms, peaked in the UK in 2004, suggesting that households have been curtailing this element of discretionary consumption for a considerable time.

The sector has faced a number of challenges in recent years in addition to the consumer income squeeze in the UK – primarily around government policy. The alcohol duty escalator, which increases alcohol duty rates at a rate above retail price index (RPI) inflation every year, in addition to policy measures such as the smoking ban, have reduced the desirability of drinking outside of the home for many. With restaurant meals and alcoholic beverages subject to VAT, the increase in VAT from 17.5% to 20.0% in 2011 has also increased the cost of eating out relative to eating at home – a further blow to the hospitality sector.

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