Press Releases

30 April 2010

Insolvencies of hotels soar 61% over the last year

The number of hotel companies going bust (include compulsory liquidations, receiverships, administrations and company voluntary arrangements)  soared by 61% to 122 in the last 12 months (to December 31 2009), up from 76 in the previous year, says Top 25 accountancy firm Wilkins Kennedy.

Wilkins Kennedy says that although the overall UK economy returned to growth in Q4 2009, this hasn’t yet reflected in the insolvency figures. Nor did 2010 get off to a good start with the bad weather in January and the recent turmoil caused by the volcanic ash crisis.

In contrast to the experience of the hotel industry, the total number of corporate insolvencies across all sectors decreased by 11% to 10,832 in the last 12 months, down from 12,112 in the previous year.

Wilkins Kennedy says that despite the positive effects of the weak pound and “staycation”, which increased domestic demand, the level of insolvencies amongst hotel companies remained very high due to the continued slump in business travel and the particular reluctance of banks to lend to the hotel sector.

Anthony Cork, Director, of Wilkins Kennedy, comments: “2009 was marked by a strict tightening-up of corporate budgets, which led to a massive curtailing of business trips, conferences and team building events. That is only now being released.”

“The net long term effect of the volcano ash crisis is difficult to call, but if it speeds the shift to video-conferencing and other new forms of communication rather than face-to-face meetings, this will have another negative impact on the corporate travel segment.”

“Staycation and the weak pound might have helped increase the number of visitors during the holiday periods, but unfortunately, this hasn’t translated into the increased spending that hotel owners had hoped for because customers cut back on their length of stay and extras, such as spas and room-service.”

On the prospects for the hotel industry, Anthony Cork says: “Operationally, hotels might have started to see some daylight with improved occupancy and higher daily rates, but whether this will suffice to see them through to the end of the tunnel is another question. Our feeling is that, inevitably, there will be more casualties.”

“Until confidence takes a firmer hold and business travellers come back in greater numbers, things are likely to remain tough for the hotel sector.”
 
Wilkins Kennedy says that the difficulty to obtain bank loans backed by property - which are hotels’ main assets – continues to be a big issue for hoteliers.

Comments Anthony Cork: “Many banks are chock-a-block with bad loans to hotel groups, so, understandably, they have been more cautious about increasing their exposure to hotels.”

“Even if property values have now bottomed out and bank lending is generally creeping up, the availability of funds for hotel investments is expected to remain limited over the short to medium term.”

ENDS

Press enquiries:

Anthony Cork
Director
Wilkins Kennedy
Tel: 020 7403 1877
Mobile: 078 8060 1962

Nick Mattison or Fay Israsena
Mattison Public Relations
Tel: 020 7645 3636