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The current economic situation and how it will affect the hotel industry

The UK’s economy is a huge focus at the moment, having been thrown into uncertainty in recent weeks following the Government’s new ‘mini-budget‘ and appointment of Rishi Sunak as prime minister, after Liz Truss’ resignation. 

It’s believed that the economic situation is the worst that it has been for many years, but is there a silver lining for the hotel industry? In this blog, we will take an in-depth look at the current economic climate and its potential benefits for the UK’s hotel industry.


Are we heading for a recession?

After weeks of financial turmoil, the UK is expected to slide into a deeper recession than previously forecast according to Goldman Sachs.




The appointment of the new Prime Minister, Rishi Sunak, has eased tensions in the bond market, stabilising the US-GBP currency pair, however, the country still faces “profound economic challenges”. A four-quarter cumulative decline in GDP of 1.6% is now expected, which will possibly create a recession next year, with the labour market still tight.


What about costs?

A low-valued Pound brings many economic challenges, one of which being how it affects importing and exporting. Due to currency exchange rates, UK exports become more competitive with a plummeting Pound – good news for those exporting goods. However, a low valued Pound has the reverse effect on importing, something that many UK hotels use for their goods.

Often, UK hotels import things such as gas, fuel, food, and technology, and these imported goods play crucial roles in their daily operations. For these hotels, their Pounds will not stretch as far when buying these crucial resources due to the currency exchange rates, meaning they will effectively be spending more money on the same goods. It is neither simple nor quick to find alternative sources for these goods, and so the situation will undoubtedly be concerning for many hotels within the UK.

"However, with hotel rooms now appearing cheap to overseas travellers (read below), it may be that an increase in occupancy rates, especially off-season, can compensate for these extra expenses. "



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