I've recently been working on some holiday flats and had a 'disagreement' with the owner about and alteration he made. The building consists of four separately let bedrooms on the second floor, a kitchen, bathroom and dining room on the first floor, and a commercial property on the ground floor. There is only one escape route from the upper floors, a single internal staircase.

The owner decided to remove the wall between the stairs and dining room, to make it "feel more open". My understanding was that it needs to have a fire wall, as it should be a protected staircase. His justification was that a dining room doesn't count as a living area, and therefore doesn't need to be seperated from the stairs. Have I got the wrong end of the stick here?

You are right a dining room is a habitable room and create a possible fire risk  consequently the staircase has to be protected from it.

 

I forgot to add that the dining area also contains the consumer unit for the building. The problem is he's the one doing the fire risk assessment.

Who should I contact to get this sorted? It's multiple holiday lets, does it fall under HMO?

It is unlikely to be a HMO but subject to The Regulatory Reform (Fire Safety) Order 2005 especially as a FRA is involved and the enforcing authority is the local fire and rescue service, contact them.