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.
Figure 1 – The Total Payroll PAR for the UK has increased in April compared to the previous 3 months in 2025.
There’s a Smarter Way to Navigate This Shift
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.
Figure 2- Viewing the Total Payroll PAR year-on-year change by regions shows that London experienced the lowest increase in the UK.
The Old Way: One-Size-Fits-All Doesn’t Work Anymore
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.
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.
Benchmarking Reveals the Real Impact
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.
What Top Performers Did Differently
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.
Your Next Move: Use Profit-Focused Benchmarking
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.
Matthew Redfern is Senior Data Analyst at HotStats. Connect with Matthew on LinkedIn.
HotStats, a Duetto company, is a global data benchmarking firm, providing performance analysis and a tool to assess financial and operational hotel data globally. Offering insights to owners, operators, and investors, it aids in evaluating property financial performance and competition, crucial for informed decisions and investment evaluations.
For more information, visit www.hotstats.com.
