Two councils run by Labour majorities, in Wirral and Tamworth, are also considering court action.
But the owner of the Bell Hotel has argued that the government contract to house asylum seekers was a financial rescue for the hotel, and it will take the case to the Court of Appeal.
With a key border policy at stake, the UK government is considering whether to join the appeal.
Prime Minister Sir Keir Starmer has blamed the previous governments for the problem, given that the Conservatives ruled from 2010 to 2024 and asylum seeker arrivals continued over that time.
“I am determined to smash the business model used by people smugglers, and I’m taking joint action with our allies to make it happen,” he said on social media following the court decision.
Starmer has heralded an agreement with French President Emmanuel Macron to return some of the asylum seekers to France, and a partnership with Iraq to deter people from starting out on the journey to Europe.
The asylum hotels are part of a broader “dispersal” policy for asylum seekers to spread them across the country. There were 38,000 asylum seekers in hotels at the end of last year, with another 65,000 in “dispersal” housing such as private flats or hostels run by companies for the government.
The UK does not use large-scale detention centres such as those funded by Australia on Nauru and Manus Island in Papua New Guinea over the past two decades.
Loading
Official figures from the Home Office data show that 50,271 people have claimed asylum over the past year after crossing the channel by boat – usually small inflatable craft launched on beaches near the French city of Calais.
This was 35 per cent higher than the arrivals in the year before Labour took office, but it was in line with some of the peaks in the arrivals when the Conservatives were in power.
The BBC reported that there were 53,587 arrivals by small boat between October 8, 2021 and November 14, 2022.
With Reuters