The UK government’s April 2025 increase in the National Living Wage—from £11.44 to £12.21 per hour—isn’t just a regulatory update. It’s a fundamental shift in the economics of hospitality. Labour costs are rising sharply, and profitability is under pressure. But the impact isn’t uniform. Some cities are struggling. Others are adapting. A few are even thriving.
UK Hotels Face a New Challenge: Rising Wages, Squeezed Margins
Figure 1 - The Total Payroll PAR for the UK has increased in April compared to the previous 3 months in 2025.
Here we reveal how wage increases are affecting UK hotels differently—and how operators using detailed benchmarking are finding their way forward. With accurate data, you can anticipate costs, protect margins, and outpace the competition.
 
UK Hotels Face a New Challenge: Rising Wages, Squeezed Margins
Figure 2- Viewing the Total Payroll PAR year-on-year change by regions shows that London experienced the lowest increase in the UK. |
Operators relying solely on standard wage forecasts or broad market assumptions are struggling. Labour costs in hospitality are up across the board, with an 8.5% increase in Payroll PAR compared to Q1 2025, outpacing the mandated 6.7% wage hike. For additional context, the increase for April 2024 compared to Jan-Mar 2024 was 7.7%, with an increase of 4.7% year on year from Apr-24 to Apr-25.
But the real story is in the regional data. For instance, London hotels—already paying above minimum wage—saw minimal disruption. In contrast, Northern Ireland, where wages were lower and part-time employment is higher, felt the squeeze much more.
 
UK Hotels Face a New Challenge: Rising Wages, Squeezed Margins
Figure 3 - This graph displays the relationship between the year-on-year increase from April- 24 to April-25 for Labor Costs as a % of Total Revenue (x-axis) and GOP as a % of Total Revenue (y-axis) for major cities in the UK. |
A year-on-year view shows a clear correlation: as labour costs rise, GOP margins tend to fall. In many English cities, the data illustrates this relationship starkly. Birmingham, for example, experienced a 4.9% increase in labour costs and an 8.7% drop in GOP. Belfast fared similarly, with a 7.2% rise in labour nearly mirrored by an 8.4% decline in profitability.
This trend repeats across much of England and Northern Ireland: higher labour expense as a percentage of total revenue, leading to diminished profit margins. But it’s not a uniform picture across the UK.
What stands out in the data is the difference in performance between cities in Wales and Scotland compared to their English and Northern Irish counterparts. Despite increases in labour costs, Cardiff and Edinburgh still managed to grow GOP margins. Even more impressively, Swansea and Glasgow saw both a decrease in labour percentage and a notable increase in GOP.
This suggests that, while their labour costs (PAR) did rise, their total revenues grew at an even faster pace—shrinking the relative weight of payroll expenses and expanding profit margins. It’s a powerful example of how revenue strategy can cushion the blow of mandated cost increases.
Swansea and Glasgow didn’t avoid labour increases—in fact, their Total Labour PAR rose by 7.3% and 12.0% year-on-year, respectively. But their outperformance came from the top line. Total revenue growth in these cities outpaced payroll growth, which caused labour as a percentage of revenue to shrink and GOP margins to rise.
In contrast, cities like Belfast and Birmingham struggled to achieve similar results. Even modest payroll increases in those markets translated directly into profit erosion, reflecting either stagnant revenues or limited pricing power.
The lesson is clear: in a wage inflation environment, topline performance becomes a defensive tool. With HotStats, hotel operators can go further, breaking down payroll impacts by department, drilling into specific comp sets, and identifying exactly where efficiency or investment is needed to maintain profitability.
Minimum wage hikes are here to stay. But not all hotels have to suffer. The operators who benchmark payroll performance by region, department, or comp set are the ones seeing better results. With HotStats, you can spot issues early, understand true cost impacts, and make smarter decisions that protect your margin.
Curious how your hotel compares? Use HotStats to uncover the full picture—labour costs, revenue flow-through, and profit performance.
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