• Immigrants keep UK hotel labour costs in check

Labour costs in the hotel and restaurant sector in the UK dropped by 2.4% during 2005, according to the Bank of England.

The freer labour markets in Britain – one of the few EU countries to allow open access to workers from the 10, mostly East European, accession countries – have helped mitigate the generally rising tide of costs facing hotel operators.

The BoE quotes, in its February 2006 Inflation Report, Government data that shows median pay for the 1.8 million people employed in the hotel and restaurant industry in the UK fell by 2.4%. Overtime pay fell by nearly 20%.

The main factor cited by the Bank for the drop is migrant labour flows, mostly from Eastern Europe, putting downward pressure on pay.

For investors in hotel property, the news is doubly beneficial in that not only does it boost operating profits at the hotel but it also has a macroeconomic impact in keeping wage inflation in check and thus encourages lower interest rates.

Meanwhile other costs have been surging, notably energy. UK gas wholesale prices quadrupled during November, well above the price increases experienced in Continental Europe. And of course the oil price remains high.

One comfort is that hotel and restaurant prices went up 3.4% in the past year compared to a 1.9% rise in general consumer prices.

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