Cost of living: Restaurant and hotel prices set to rise as hospitality firms grapple with surge in costs

Prices for restaurant meals and hotel stays look set to rise sharply after the hospitality sector’s industry body said firms were being forced to pass on surging costs.

A survey by UK Hospitality found that prices across the sector were set to increase by an average 11% this year.

That will add to the strain on households already facing across the board cost of living increases from household bills to shop prices, as well as a national insurance rise and interest rate hike.

UK Hospitality said that on top of two years of severely-disrupted trading and a Christmas period spoiled by Omicron restrictions, it is facing steep increases in energy (41%), labour (19%), food (17%), drink (14%) and insurance (21%) costs.

Many of the businesses it represents are mired in debt and running out of cash, the organisation said.

It is calling for the government to ease the burden by making permanent its current reduced rate of VAT for the sector, of 12.5%, which is currently due to expire at the end of March and return to 20%.

UK Hospitality surveyed more than 340 businesses representing 8,200 venues employing 190,000 people about their plans to put up prices.

It found 47% said they would be forced to increase them by more than 10% this year, with 15% anticipating hikes of more than 20%.

More than four-fifths of operators also said they had seen moderate or severe levels of cancellations this year, which UK Hospitality suggested consumers were “already feeling the pinch”.

UK Hospitality chief executive Kate Nicholls said: “Omicron has infected the start of 2022 with lower-than-expected trading levels and higher than expected cancellations in hospitality venues.

“One in three businesses in our sector have no cash reserves left and are already carrying heavy debt burdens.

“Many of our community pubs, restaurants, hotels, and hospitality venues will therefore fail as the cost-of-living crisis bites, causing demand to falter.

“This can only cause the UK’s wider economic recovery to stutter.”

The prospect of price rises comes after Premier Inn’s owner said last month that it would put up room rates in response to surging costs.