Running a Hotel Business: A Guide for Family Offices
There is no getting away from the fact that running a hotel business is challenging. This is especially true in the current climate where ever-increasing regulatory pressures are pushing up compliance costs, whilst recent increases to National Insurance Contributions and the National Minimum Wage have resulted in a significant uptick in operational costs. This article looks at the current and upcoming challenges and opportunities the UK hotel industry is facing.
Diversifying Hotel Operations to Match Evolving Consumer Trends
Consumer trends continue to change, with a rise in mixed purpose travel and travellers focusing on sustainable tourism. The UK hotel industry is responding through strategic investment and diversification.
Sustainable travel
Sustainable travel or eco-tourism aims to reduce the detrimental impact of travel on the environment and local communities through, amongst other things, travellers taking in-country holidays and booking accommodation with strong sustainability practices. In its November 2024 report, travel marketing company, SEO Travel, found that 76% of travellers surveyed said they wanted to travel more sustainably over the following 12 months and 78% said they intended to stay in an eco-friendly or green accommodation in the same period.
Hotels are responding to this growing trend in a myriad of ways, including the adoption of eco-friendly practices – such as waste reduction, sourcing local / sustainable products and promoting ethical tourism – and establishing local community outreach programmes. The trend is also influencing the way in which hotels are investing in expansion. For example, the Chancery Rosewood, formerly the US embassy in Mayfair, London, and which is expected to open for guests this year, will feature extensive green roofs with the aim of improving the site's biodiversity and minimising water consumption.
Blended Travel: Adapting Hotel Spaces for Work and Leisure
The concept of combining business and leisure trips is nothing new but has been boosted by the post-pandemic prevalence of remote working. Gone are the days when you may have tagged-on a couple of leisure days to the end of a business trip, now you can bring the whole family along for a truly blended-travel experience. Hotels are responding to the needs of mixed purpose travellers by diversifying their offering to include additional amenities and services and integrating well-appointed workspaces with first-rate leisure facilities. This approach not only aligns with consumer preferences but also expands their revenue streams and enhances their appeal to investors and buyers.
Food Safety Compliance in Hotel Restaurants and Bars
With diversification comes additional regulation and risk. For hotels with restaurant facilities or looking to expand their food and beverage offering, food safety is a key concern. Following a series of allergy related deaths there is real pressure to ensure that products are sufficiently and correctly labelled and appropriate steps taken, in restaurants and elsewhere, including informing consumers if they have used any of 14 listed allergens as an ingredient in their food. Such food allergen information must be accurate, available to, and easily accessible by the consumer, and this applies to all food supplied by the businesses, including complimentarily food.
Compliance with evolving food safety regulation is likely to require hotels to expend additional resources, in particular in ensuring adequate staff training programmes and mitigation strategies to reduce the risk of cross-contamination are in place. However, compliance is essential to ensure customer safety and to avoid fines and reputational damage resulting from non-compliance.
Hotel Security and Compliance with Martyn’s Law
Hotels also need to get to grips with new obligations in the Terrorism (Protection of Premises) Act 2025, which became law in April 2025 but is not yet in force and will be implemented over the next 24 months. Also known as Martyn’s Law, in tribute to Martyn Hett who was killed alongside 21 others in the 2017 Manchester Arena attack, the Act’s scope is wide ranging and imposes a UK wide “protect duty” on those responsible for certain public premises and events, requiring them to take appropriate action to strengthen public safety, with requirements reflecting the size of the venue and the activity taking place.
For hotels, where 200 or more individuals may be present at one time, the Responsible Person (person with control of the premises, which could include the landlord and tenant of premises), must take appropriate and reasonably practicable public protection measures if any act of terrorism was to occur at the premises or in the immediate vicinity. This is known as the standard tier regime. The aim of these requirements is to improve staff responses, for example, training staff to lock doors, close shutters and identify a safe route to evacuate.
For larger hotels where 800 or more individuals may be present at one time and for qualifying events (which have a capacity of 800 or more) the Responsible Person owes enhanced duties. Events which are governed by tickets, a membership scheme or other condition of entry, including those which are wholly or partly outdoors, will qualify. Examples of appropriate public protection measures include monitoring the premises or event (e.g. CCTV), taking measures to control the movement of individuals in and out of the premises or event, measures in relation to physical safety and security and in relation to the security of information. The steps to be taken will vary depending on the particular venue or event. The enhanced duty also involves:
- notifying the new regulator the Security Industry Authority (SIA) of their premises; and
- producing a document recording compliance for the SIA.
The SIA has a wide range of enforcement powers and can impose potentially significant civil sanctions. There are also criminal offences for non-compliance. For more information, see Martyn’s Law receives Royal Assent – what do property owners and occupiers need to do now?
Artificial Intelligence in Hotel Operations
Artificial Intelligence Opportunities
As use cases for Artificial Intelligence (AI) continue to expand and evolve, AI offers the potential to revolutionise various aspects of hotel management, including the creation of customised guest experiences through data-driven insights. By analysing large data sets, hotels can anticipate guest preferences, optimise pricing strategies, and streamline operations. This capability not only enhances customer satisfaction but also provides a competitive edge in a crowded market. Furthermore, AI-driven tools can assist in managing proprietary data models, enabling hotels to refine their offerings continually and driving efficiency.
The Legal and Regulatory Risks
The rise of AI and technology in hotels also brings some complex legal issues to the forefront, particularly in the area of data protection and cybersecurity but also across many other areas such as consumer protection and employment legislation. These complexities mean that robust AI governance measures need to be put in place. The Information Commissioner's Office (ICO) has emphasised the importance of AI compliance with data protection regulations regarding both the use of personal data, be that of customers or staff, and protection of that data against cyber threats. As hotels implement AI technologies, they must ensure that they have a lawful basis for using personal data, are providing transparency information and are mitigating security risks. The ICO's recent consultation series on Generative AI looked at a number of these complex areas and serves as a reminder for businesses to address data protection risks associated with AI usage. The Competition and Markets Authority (CMA) is another regulator keeping a close watch on the use of AI, in the CMA’s case in relation to the effect on consumers. Hotels must remain vigilant in their AI implementations, balancing innovation with legal and regulatory compliance. To assist clients on their AI journey, we have published an AI for Business Guide detailing some of the complex legal issues associated with AI.
Business Rates Reform
Another pressure on costs comes from the anticipated revaluation of business rates due to take place from 1 April 2026. This is set to impact hotels considerably, given their substantial property footprints and prime locations. In its Autumn 2024 Budget, the Government announced the initial steps it planned to take to reform the business rates system, which included:
- the introduction of a permanently lower multipliers for retail, hospitality and leisure properties with a rateable value (RV) under £500,000 from April 2026/27 to level the playing field for the high street;
- the introduction of a higher multiplier on properties with a RV of £500,000 and above from April 2026/27, this includes large retailers, hospitality businesses, warehouses and the bigger supermarkets;
- the provision of support for retail, hospitality and leisure properties in the interim period leading up to the new permanent multiplier by providing 40% relief (down from 75%) to businesses on their rates bill in 2025/26, up to a cash cap of £110,000 per business; and
- protecting the smallest properties by freezing the small business multiplier in 2025/26 and protecting over a million properties from inflationary bill increases.
The above steps are intended to be the starting point in a complete overhaul of the business rates with the Government clearly prioritising areas of reform to protect the high street. The resultant increase in costs for hotels falling within the higher multiplier, could result in a disincentive for businesses to invest and expand their property portfolios.
Environmental, Social & Governance (ESG) Compliance and Human Rights Risk in Hotel Supply Chains
In Country Value Requirements in Hotel ESG Strategies
ESG considerations are becoming increasingly critical for the UK hotels sector, a focus that is driven by increased regulation (whether directly or indirectly applicable), the expectations of a more environmentally conscious consumer base, as well as the long-term value and risk mitigation benefits that sustainable practices offer. One way the UK hotels sector is responding to the ‘Social’ aspect of ESG is by the increasing prevalence of 'In Country Value' (ICV) provisions in hotel agreements. ICV provisions require hotel owners and operators to procure a certain percentage of supplies and services locally, thereby boosting local economies and supporting SMEs, whilst also contributing to the reduction of the overall carbon footprint of hotel operations.
Human trafficking and modern slavery in the Hotel Sector
Another key area on the “Social” side of ESG is human trafficking and modern slavery. The hotels industry is high risk from this perspective due to a combination of the transient nature of hotel guests, large workforces and complex supply chains, all of which can be exploited by traffickers. The EU and European nations, such as France and Germany, are developing mandatory human rights due diligence regimes, which require businesses to identify, disclose and take steps to mitigate risks to people in their direct operations and supply chains, including risks of human trafficking and modern slavery. In the UK as well, the UK government recently released new guidance to businesses that produce an annual modern slavery statement under s54 of the Modern Slavery Act 2015, aiming to encourage companies to move away from viewing it as a compliance exercise and instead embed anti-slavery activity within their operations and supply chains. For more see our detailed analysis of new Government guidance for businesses on Modern Slavery Act section 54 statements.
Therefore, whilst mandatory human rights due diligence legislation is not yet foreseen in the UK, hotel businesses with operations in both the UK and the EU, will need to tackle the regulatory complexity of diverging regimes, which creates governance and operational challenges, where a single global approach may not be possible, and an increasing cost of compliance. Where a hotel business’s footprint is entirely UK-based, it is still recommended that they are proactive in conducting appropriate and risk-based due diligence to prevent or minimise the risk of human trafficking or modern slavery occurring.
Evolving employment rights and employee-related challenges for UK Hotels
Employment Rights Bill
In October 2024, the Government published the Employment Rights Bill as part of its “Plan to Make Work Pay”. Whilst the majority of the proposed reforms will not take effect until 2026, the Employment Rights Bill is set to bring in significant changes impacting the UK hotels sector, which is known for its high staff turnover and flexible employment arrangements. The Bill is currently making its way through the House of Lords and separate consultations are taking place throughout 2025. There are steps those in the hotel sector can take now to prepare for implementation of the reforms and mitigate or spread the associated compliance costs, which our employment lawyers can advise on.
The Employment Rights Bill is aimed at enhancing worker protections and will impose new operational challenges and costs on hotels. For example, increased statutory entitlements to leave and pay could significantly increase operational costs for hotels. In addition, measures aimed at strengthening the rights of those with atypical working patterns - by increasing the regulatory burden on employers relying on zero-hours contracts and widening the current flexible working regulations - will necessitate a complete review of employment practices and contracts, potentially leading to a reduction in the flexibility that forms a key component of the hotel’s business model.
Another aspect of the Employment Rights Bill that impacts the UK hotels sector is the enhancement of protections against unfair dismissal and the extension of redundancy rights. Businesses will need to ensure they have robust human resources infrastructure to navigate the complexities of the enhanced procedural requirements to avoid the increased risk of litigation.
Prevention of sexual harassment
The Worker Protection (Amendment of Equality Act 2010) Act 2023 created a new duty to prevent sexual harassment which came into force in October 2024. Employers in the UK hotels sector are therefore under renewed pressure to foster a safe and respectful environment for employees - taking special care of its younger workforce - and observe the Equality and Human Rights Commission’s (EHRC) guidance.
Employers are now under a mandatory legal duty to take proactive steps to prevent sexual harassment, including implementation of preventative measures and creating an environment where employees feel empowered to report any issues without fear of retaliation. Preventative measures may include regular training, clear policies, and effective reporting and response systems, further impacting on a hotel business’s regulatory compliance costs. However, this should be weighed against the costs of non-compliance which include potentially significant reputational harm and costly compensation awards in employment tribunals.
Third-party harassment - for example, harassment by guests - is not explicitly outlawed by the Worker Protection (Amendment of Equality Act 2010) Act 2023, however, employers may still incur liability if complaints are not addressed. The Employment Rights Bill is also seeking to make all third-party harassment unlawful in 2026, so it is prudent for UK hotel businesses to tackle this issue now, so that they are better placed when the Bill becomes law.
Supreme Court’s Biological Sex Ruling
In its judgment in the case of For Women Scotland v The Scottish Ministers, the Supreme Court has unanimously held that the words "sex", "woman" and "man" in the Equality Act 2010 (EqA 2010) refer to biological sex. A trans woman with a gender recognition certificate (GRC) who is biologically male, but legally female for the purposes of the Gender Recognition Act 2004, is not entitled to be treated as a woman under the EqA 2010.
The court held that its conclusions do not remove or diminish the important protections available to trans people with a GRC under the EqA 2010. They are still able to claim direct and indirect discrimination and harassment in relation to both sex and gender reassignment. The court's decision has wide-ranging implications for employers and particularly those in the hospitality sector.
Failure to prevent fraud
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) contains wide-ranging reforms to the way companies and limited partnerships in the UK are formed, managed and operated. One of the key impacts of ECCTA is the creation of a new criminal offence of failing to prevent fraud. The offence means that an organisation may commit a criminal offence where an “associated person” (such as an employee, agent, or subsidiary) commits a fraud intending to benefit the organisation and the organisation did not have reasonable procedures in place to prevent fraud. The benefit does not have to be financial and the people running the organisation do not need to have known about the fraud in order for an offence to have been committed. The offences applies to large organisations, being those that meet at least two of the following criteria: (a) more than 250 employees; (b) more than £36 million turnover; and (c) more than £18m in total assets. These criteria apply to the whole organisation (including subsidiaries) regardless of where they are based in the world. However, to fall within the offence, an element of the underlying offence must be connected to the UK.
Any hotel businesses that are captured under the remit of the new offence should, given their size, already have significant anti-fraud measures already in place. However, whilst they are likely to have mechanisms and procedures aimed at identifying and rooting out the risks of frauds being perpetrated against them, they may not have similar processes for identifying the risks of fraud being committed by their employees and agents which stand to benefit the organisation. Whatever the position, any hotel businesses falling within scope will need to take action to ensure appropriate measures are in place prior to the offence coming into force in September 2025.
How we can help support family offices running Hotel businesses
Whilst a fairly lengthy read, this article seeks to address only the most topical operational and regulatory challenges currently faced by the UK hotel sector. As hoteliers are exploring innovative operational and cost management strategies to tackle these challenges and exploit opportunities, the legal experts at Charles Russell Speechlys can help to guide you through the ever-growing regulatory complexities.
