Reservations mounting over hike in rates for luxury hotel

The five-star Prestonfield House Hotel is among the hotels hit hardest by a recent revaluation of business rates.

Its annual rates bill has surged by 69 per cent this year after assessors judged that the value of the hotel has doubled.

A survey of Edinburgh hotels found that 47 out of 48 leading Edinburgh hotels have seen their rateable value increased since the revaluation took place. News of the extent that the hotel sector has been hit by business rates rises has led to fears of rising costs for customers and hotels opting to open in other parts of the UK – where there have not been as big increases – rather than Scotland.

The new rates bills were enforced in April this year, with many hotels seeing tens of thousands of pounds added on to the amount that they have to pay.

Graham Birse, deputy chief executive of the Edinburgh Chamber of Commerce, said: "There is no question that an assessment that took place in April 2008 has proved disastrous for the hotel sector and for businesses generally. Since then, the market has changed and values have declined.

"One consequence is the costs of running a hotel in Scotland are larger than running a hotel in England. If those costs are passed on, Scotland will become a more expensive destination than England.

"Another is that large hotel groups will opt not to invest in Scotland but instead in an area where the non-domestic rates scheme is more benign." It is understood that James Thomson, owner of Prestonfield, is privately one of the most active opponents of the new rates charges. The hotel, in the shadow of Arthur's Seat, had its rateable value doubled by assessors this year, to 399,000. That meant that its annual rates bill increased by 66,193 – or 69 per cent – to 162,393.

With only 18 bedrooms, that means it now needs to pay 9,022 a year for every room.

The Evening News has already revealed that 1,022 businesses had formally appealed their new rates bill in April and May – the first two months that the new bills were in force. It is understood that six per cent of all non-domestic premises owners have now appealed. Business leaders expect that to rise to 40 per cent by the time the window for appeals closes in September.

Crunch talks took place earlier this week between business leaders, including Mr Birse, and John Swinney, the Scottish Government's finance secretary.

Businesses want the rates rises to be enforced gradually over three to five years, but Mr Swinney told them the scheme has to be self-financing so rises have to be implemented now.

The Scottish Government says 60 per cent of ratepayers pay less or the same under the rates revaluation and claim the average saving is 1,300.

A Scottish Government spokesman said: "Introducing a transitional relief scheme similar to England would have transferred almost 77 million this year from the private sector – including many businesses across Edinburgh and the Lothians – to cushion rates increases for the public sector and a relatively small number of large businesses. That would be impossible to justify in this climate."