A decade of hotel expansion across the South and South East of England is set to be reversed as many hotel businesses struggling with unsustainable debts, losses and staffing problems decide to close permanently, a leading restructuring expert is warning.
Citing industry reports indicating the scale of the financial and resourcing problems affecting the sector, Duncan Swift, Partner, Restructuring and Insolvency across Azets’ Solent offices, said that it is entirely possible that 10% of hotels in the Solent area could be forced to shut permanently by 2023.
Duncan said: “UKHospitality recently reported that the sector has £2.5bn in rent arrears alone due to the pandemic, further compounding the millions of pounds borrowed through the various Covid loan schemes made available last year. In addition, the latest survey from Market Recovery Monitor has disclosed that nearly 10% of UK restaurants have closed since the pandemic. The hotel sector is probably going to be just as severely affected during the next 18 months.
“Many hotel businesses are seasonal yet have already been unable to capitalise on the normal Spring upturn in bookings. The collapse in business travel together with the cancellation of major events, weddings, parties, conferences and tourism has led to a severe haemorrhaging of income. Furthermore, hotels are also usually heavily geared with sizeable loans whilst still having to meet routine costs such as staffing, insurance, heating and marketing.
“While many people are planning to staycation due to the difficulties of overseas travel during the pandemic rather than go abroad, unfortunately, the sector is now facing an unprecedented set of problems that is almost certainly set to cause long term strategic damage to the hotel and hospitality sector in the South and South East of England. It would be entirely reasonable if several hotel operators, owners and entrepreneurs decide that the problems are insurmountable and close their businesses. If 10% of hotels close, it will have a serious impact on local urban and rural economies given the importance of the sector in terms of employment, investment and the cohesive role hotels play in local communities.”
Hotel turnaround specialist, Tim Wedgwood who also owns and operates the South Lawn Hotel near Lymington said: “The last 14 months has been a challenge for the hotel sector but there are hoteliers that have managed to adapt to survive and find themselves in no worse financial position than before the pandemic. Some hotels have traded very well by taking advantage of the adverse opportunities the pandemic has presented and embracing government support. These businesses are in a very strong position to move forward.
On the flip side those hotels that couldn’t or didn’t adapt now find themselves on the back foot with increased debt and a lack of ongoing investment. The months ahead will not be straight forward and being able to react to the ever-changing circumstances will continue to be key. It’s not simply a matter of being a competent hotelier anymore and many hoteliers will need mentoring through the recovery period.”
Duncan Swift urged hotel operators and owners concerned about the scale of the problem affecting the sector to move swiftly to cut cost, preserve cash, communicate with their banks and consider restructuring the business.
“The hotel sector in the South of England is tackling an unprecedented number of problems, and there will be casualties. These are difficult times, but we would urge business owners to confront these problems sooner rather than later, and maximise their chances of capitalising on a recovery, as and when that happens.”