In short
When a hospitality group takes on a venue, its energy usually moves onto deemed or out-of-contract rates until a new contract is agreed, and those rates are typically far higher. The fix is to act in the first weeks, keep every venue on one register and buy the estate together. Hotels should also know their rooms do not qualify for reduced VAT.
- Deemed rates apply when energy is used with no contract in place, for example after a change of owner or tenant.
- Hotel and inn rooms are not residential accommodation for VAT, so most hotels pay 20% VAT and the full levy.
- In England, workplaces with ten or more full-time equivalent employees must separate food waste and dry recycling (since 31 March 2025).
The problem
Kitchens, cellar cooling, hot water and heating make hospitality one of the heaviest users of gas and electricity for its size. For groups, the biggest avoidable cost is rarely the unit rate on the contracts they negotiated. It is the venues that are not on a negotiated contract at all.
The deemed rate trap
When a pub company, hotel group or restaurant group takes on a venue, the energy supply does not transfer to the group's terms. If there is no contract in your name, the supplier bills you on a deemed contract: rates set by the supplier, usually much higher than a negotiated price. The same happens when a contract ends and nobody renews it. A group that acquires several venues a year can have a handful on deemed or out-of-contract rates at any moment.
Hotels and the VAT misunderstanding
Many hotel operators assume that because guests sleep there, the building counts as residential and qualifies for 5% VAT on energy. It does not. HMRC treats hotel and inn rooms as outside residential accommodation, so most hotels pay 20% VAT and the full Climate Change Levy. Staff accommodation can be treated differently, so each supply should be checked.
Waste rules that changed
In England, Simpler Recycling has required workplaces with ten or more full-time equivalent employees to separate food waste and dry recycling since 31 March 2025, and smaller workplaces must follow from 31 March 2027. Wales and Scotland have their own rules. Groups often have a mix of old and new waste contracts across their venues, some of which no longer meet the rules.
The solution
1. Act in the first weeks of every acquisition
Get the meter numbers and first bills as soon as a venue is yours, and agree a contract straight away, even a short one that lines up with the group's renewal date.
2. Keep every venue on one register
Supplier, rates, end dates and notice periods for every site. The register shows at a glance which venues are out of contract.
3. Buy the estate together
Bring end dates together as contracts expire, then tender the whole estate on the same terms, compared on total yearly cost.
4. Check VAT on each supply
Make sure hotels are not expecting a relief they do not qualify for, and that staff accommodation is charged correctly.
5. Put waste on the same register
Collections that meet the rules in each nation, with bins and lifts matched to what each venue produces.
Where we help
Where Business Savings Guru helps
New venues off deemed rates fast
Send us the first bill or the meter numbers and we arrange a contract in the first weeks.
Every venue on one register
Supplier, rates, end dates and notice periods for every site, so nothing rolls over unnoticed.
One renewal for the estate
We bring end dates together and tender the group as one portfolio.
Waste that meets the rules
Food waste and recycling collections that meet the rules in England, Wales and Scotland, compared on price and service.
