Germany acting to increase hotel business

Just like many hoteliers across Europe Germany’s have struggled over the past year and a bit due to the economic downturn. Occupancy rates have been some of the worst in Europe with less than 58 per cent for the first seven months of 2009. By contrast London had the highest occupancy rate in Europe managing almost 80 per cent, but the revenue per room available (revPAR) dropped by 7.6 per cent because of price reduction to try and encourage people back into the leisure market.

Germany aims to help out their flagging hotel industry by reducing VAT on hotel rooms by more than 50 per cent. It currently stands at 19 per cent but they plan to drop that to just seven per cent from the 1st January. The aim will be to encourage more travellers to Germany as well as hopefully making them stay longer. It has to go through a number of committees and offices before getting the go-ahead and could face some trouble as the Bundesrat, who are representatives of the 16 states, will have to make up the lost taxes.

If the tax reduction is given the all-clear by all those included in the decision it will come into affect on the same day that the UK raises their VAT on hotels to 17.5 from 15 per cent. It is uncertain what the change will bring for both the countries involved, but it can do no harm for Germany as they are sure to see a rise in occupancy as it become cheaper for accommodation.