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Analysis

The evolution of the VAT for Europe's hotel industry across 10 years

What changes has the VAT undergone in the hotel industry? With business results increasingly divergent from one country to the next in Europe and "Brexit" perhaps a harbinger to any hiding of European goals for fiscal convergence, it's time to review a decade of changes for the VAT applicable to the hotel industry.



During the last decade, the leading markets have posted different trends when it comes to the volution of the VAT applicable to the hotel industry:

  • Italy and Belgium have maintained stable VAT rates throughout the period, 10% for the Mediterranean land and 6% for the country on the North Sea.
  • The United Kingdom, which had a higher rate of 17.5% in 2006, posted a slight drop in 2009 (to 15%, applicable from December 2008), at a time when hotel performances in the country were at their lowest, prior to returning to the pre-crisis rate of 17.5% in 2010, when the market was bouncing back, and then 20% in 2011.
  • Spain kept a stable and more moderate rate of 7% during the crisis, until June 31, before gradually increasing it (+1 point on July 1, 2011, then +2 points on September 1, 2012), to reach 10%.
  • France, whose hotel industry did better during the early crisis years compared to other countries, posted an initial 1.5 point increase (from 5.5% to 7%) in 2012, then 3 points in 2014 (to 10%), which led to a drop in turnover excluding VAT, due to the week demand in recent years (occupancy rate inferior to that in most other European countries).
  • Germany followed an inverse trajectory, posting an increase in its VAT at the top of the cycle (from 16% to 19% on January 1, 2007), followed by a considerable drop on January 1, 2010, to 7%, which allowed properties to make up for the drop in revenues (VAT incl.) recorded the two previous years and to re-establish financial flexibility.


In terms of levels, among the leading European markets Germany is now the country with the lowest VAT (7%). Spain's rate is 10% which is comparable to France and Italy, but it benefits from a very favorable market dynamic. Finally, the United Kingdom posts a particularly high rate; however, expenses and taxes outside the VAT are very low and its money has depreciated significantly recently in particular due to "Brexit":

Graphical visualization of market data.

At the same time the changes in activity differ significantly from divergent one European country to the next for several months (July's figures are available in the Trends column). While Spain and Germany benefit from a strong economic and tourism context with a stable VAT, and the United Kingdom reported a drop for its currency, France did the opposite and increased its VAT and now shows a drop. It must also be observed that in Belgium, as in France, VAT rates appear low or standard however they have other operating costs that penalize income statements with respect to other European countries, as we show in detail in Hospitality ON (exclusive for subscribers) in 2014:

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