Hotel Insolvency Levels Jump to Five-Year High

Written by: Keith Tully

Published: 6th January 2020

Hotel receptionInsolvency rates among hotel businesses reached a five-year high during the year to September 2019, according to a new set of figures on the subject.

The accountancy group UHY Hacker Young has put together data that points to a 60 per cent jump in the number of hotel operators becoming bankrupt during the period.

According to the numbers, there were 90 hotel businesses that became insolvent in the year to September 2018, compared with 144 who found themselves in that same position in the subsequent 12-month period.

A generally sluggish UK economy has been cited as the underlying cause of the difficulties that hoteliers have been facing, with income from corporate events having seen a particularly sharp downturn of late.

Corporate events of various sorts account for a significant proportion of revenues at hotels right across the country but economic uncertainty last year left many companies keen to cut costs wherever they could.

Consumer demand more generally has also been weakened to an extent that hasn’t helped hoteliers, while the number of people visiting the UK from overseas has been falling in recent years.

Another issue for hoteliers has been the growth of competition from web-based businesses like Airbnb, which enables people to book private properties for short-term or lengthier stays in the UK and many other parts of the world.

According to UHY Hacker Young, the hospitality sector as a whole has been hit with cost pressures in recent years as a consequence largely of business rates issues, rising import costs and increases to the national minimum wage.

The number of hotel insolvencies increased slightly in each of the years to the Septembers of 2016, 2017 and 2018 but those rises were much smaller in percentage terms than what was recorded for the year 2017/18.

“The hospitality sector is facing a period of considerable upheaval. Those hotels that are unable to fund change face being left behind,” said Peter Kubik, who is a turnaround and recovery partner for UHY Hacker Young.

“On top of that, Airbnb is increasing its market share and not just amongst millennials,” Mr Kubik said.

“Hotels – many of which are lagging behind in their use of technology – are going to have to quickly bring themselves up to speed.”

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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