(Image: Loch Melfort Hotel)
The co-owner of a luxury hotel in Argyll has questioned what the hospitality industry gets in return from business rates after seeing the property's tax bill ramp up again.
Calum Ross, who owns the four-star Loch Melfort Hotel near Oban with wife Rachel, saw the rateable value of the property increase by nearly 40%, from £88,500 to £122,000, following the most recent revaluation. That followed a comparable rise after the previous revaluation in 2023.
Mr Ross said the latest increase has added around £2,000 to the hotel's monthly rates bill, equivalent to about £20,000 a year as business rates are paid in 10 instalments.
Coming on top of a host of other cost increases, it means the business has less money available to reinvest in the property.
“The practical impact is significant,” he told The Herald. “The latest increase pushed us into the large-property category, meaning we now pay the higher supplement as well.
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“In simple terms, our rates bill has increased by around £2,000 a month. Across the year, that's around £20,000 straight off the bottom line [business rates are paid each year in 10 monthly instalments].
“In an environment where it's difficult to grow revenue and absorb rising costs, that's £20,000 [a year] less available to reinvest in the business, whether that's refurbishment, upgrades, innovation or net-zero projects.
“If I go back two revaluations, I was paying around £3,000 a month. The last revaluation added about £2,000 a month and this one has added another £2,000. Today I'm paying around £7,000 a month. The impact is huge.”
Calum and Rachel Ross of the Loch Melfort Hotel (Image: Loch Melfort Hotel)
The situation facing the Loch Melfort Hotel is emblematic of the challenges that the current business rates system is presenting to the Scottish hospitality industry. The Herald is calling for a fairer deal for hospitality and tourism accommodation businesses as part of our Reset The Rates campaign which launched this week.
Despite soaring business rates, Mr Ross has questioned what the hotel receives in return for the thousands of pounds it pays in property tax each month.
“And what do we get for it? In reality, very little,” he said. “In an urban environment, people may assume rates cover services such as waste collection, but we pay separately for commercial waste contracts.
“I think people often assume business rates provide a range of direct benefits. In practice, for many rural businesses, it's simply another tax that goes into the general pot supporting local authority and government spending.
“That's the reality of it.”
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Asked whether the hotel has had to reduce staffing levels because of the increased costs it is facing, Mr Ross replied: “No. Rightly or wrongly, perhaps even foolishly, we've continued to operate in the same way.
“We pride ourselves on delivering high standards. Everything in the restaurant is made from scratch. We haven't cut corners. The consequence is simply that we make less money than we used to. That's the point. There is no spare cash for new projects or expansion.
“To be frank, we're barely making any money at all these days. What keeps us going is that we've been here for 18 years. We love what we do. We love the role the business plays in the community.
“We employ around 40 people and are one of the largest employers in our area. There is a huge amount of personal and social reward in that.
“We were never in this to make a fortune. But if things don't change, I genuinely don't know how long we can continue operating in the same way without making fundamental changes to the business model to generate the cash needed for reinvestment.”
Mr Ross said the business has lodged an appeal against the latest revaluation, but there is no immediate prospect of a decision given the protracted nature of the process.
“The appeals process appears to take a very long time, and whether we'll be successful remains to be seen," he said. “Our agent believes there is a strong case, but we don't know whether it will ultimately be upheld.
“To be clear, we're not arguing there should be no increase at all. Our rateable value went from about £88,000 to £122,000. I believe the appeal argues it should be closer to £96,000 or £98,000, based on comparisons with similar properties.
“There might be some good news there, but we don't know when we'll find out.
“As for reliefs, many of the hospitality relief schemes introduced in recent years were capped and focused on smaller businesses. We were simply too large to qualify.
“There is supposed to be a transitional relief scheme that softens the impact of increases [in rates]. In theory, that should significantly reduce the additional costs we're facing.
“For some reason, however, the council has not yet implemented it, despite several months having passed. I've challenged that and have yet to receive a satisfactory response.”