A Review of Pub & Hotel Rating Valuations: An opportunity for meaningful reform?
The Government’s decision to launch an independent review of how pubs and hotels are valued for business rates is a significant development for the licensed and hospitality sectors. The review follows widespread concern over the outcomes of the 2026 revaluation and the significant increases in rateable values seen for many businesses in these sectors.
Connor Robinson explores whether the existing approach remains fit for purpose and considers meaningful reform could help rebuild confidence in the system.
What has been announced?
A review of the valuation methodologies used by the Valuation Office for pubs and hotels. It will consider whether the current approaches remain appropriate, transparent and reflective of true market conditions. It’s important to note that any changes would be aimed at the next revaluation due in 2029 and will not affect the current 2026 Rating List.
The review will not consider multipliers or relief schemes. Instead, it is focused specifically on valuation methodology and how rateable values are determined.
Why is the current approach being challenged?
Pubs and hotels are typically valued using a shortened Receipts & Expenditure method which analyses the Fair Maintainable Trade (FMT) of a business and derives a hypothetical rental value from its trading performance rather than directly from physical occupation or floor area. Many operators argue this no longer adequately reflects rising operating costs, changing consumer behaviour and post-pandemic trading conditions. Transparency around how assessments are derived also remains a longstanding concern. Since the Covid-19 pandemic, our clients in the hospitality sector have faced:
- Rising labour costs
- Increased energy costs
- Higher borrowing costs
- Changing consumer behaviour
- Reduced profit margins
As a result a turnover-based methodology can therefore create outcomes that feel disconnected from actual profitability.
Transparency around precisely how rateable values are derived, the assumptions used by the VO, and how those assumptions compare with actual market evidence also remains a longstanding concern.#
Is the current approach fit for purpose?
In my view, the answer is nuanced. The valuation methodology itself remains a recognised tool for certain property classes used where rental evidence is limited. For many pubs and hotels there simply is not enough open-market rental evidence to support a traditional comparative approach. The principle of assessing the property’s trading potential therefore remains sound. However, for any valuation methodology to be considered ‘fit for purpose’ it must also be transparent, understandable, consistent and capable of adapting to a ever evolving hospitality sector.
We manage client portfolios which cover a wide range of hybrid operating models with diversified income streams, which often bear little resemblance to the traditional trading models upon which the valuation methodology was actually designed for.
The existence of this review is itself recognition that legitimate questions exist regarding whether the current methodology continues to accurately reflect today’s hospitality sectors market conditions.
What could a new approach look like?
I wouldn’t expect a wholesale abandonment of the current shortened Receipts & Expenditure method. More likely are reforms focused on:
- Greater transparency of valuation assumptions surrounding FMT and percentages applied to the FMT to arrive the rateable value.
- Sector-specific valuation models – There may also be scope for more tailored approaches within the hospitality sector itself, recognising that a budget hotel, luxury hotel, wet-led pub and food-led destination venue operate fundamentally differently despite all currently sitting within broadly similar valuation frameworks.
- Improved recognition of increasing operating costs and lower profitability
What should the industry demand?
The focus should not simply be on reducing assessments. Instead, the industry should be calling for:
- Transparency
- Evidence based valuations
- Consistent approach
- Simplicity
The rating system is already complicated enough. Future reforms should make assessments easier to understand rather than creating additional layers of complexity. The real opportunity here is not to rewrite the rating system, but to rebuild confidence in how pubs and hotels are valued.
Reviewing your property strategy? Whether you’re relocating, refurbishing or reassessing your existing space, ForeView can help uncover potential business rates savings and provide clarity on total occupancy costs. Get in touch to discuss your plans with our expert team.
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