The Treasury's plans to change the stamp duty paid on hotel leases could increase the costs of a typical 35-year lease tenfold and sound the death knell for turnover-based and long leases across the industry, warns hotel consultant Insignia Hotels.
"It's significant that the Government's examples relate to 10-year leases," said Insignia director Chris Rouse. "We are not sure the Treasury fully appreciates the importance of long leasehold structures in the hotel sector."
Leaseholds allow hotel operators to free up capital for development and offer more security than pure management contracts.
Unless the industry lobbies the Government now, stamp duty will be charged from the end of the year at a fixed rate of 1% based on the net present value of the lease rentals.
Rouse also predicts that the change in stamp duty will have serious repercussions for sale-and-leaseback deals.
The proposed changes in stamp duty could see such deals replaced by sale-and-manage contracts.
Source: Caterer & Hotelkeeper magazine, 15 - 21 May 2003