Rise in ‘staycations’ fails to save UK hotel biz

Monday, 3rd May 2010

From 2008 to 2009, the number of hotels hit by insolvency was up 61 per cent, say accountants Wilkins Kennedy. Over the same period, the overall number of corporate insolvencies fell by 11 per cent. The dizzying rise in hotel failure rates came even as British holidaymakers increasingly choose to vacation in the UK.

The rise of the ‘staycation’ failed to make up for a collapse in business travel and a reticence by banks to lend to hotels. The number of visitors to the UK fell only six per cent but people are spending less time at hotels and have curtailed spending on important extras like room service and spas.

The recession, the worst in the UK since World War II, has seen entire hotel groups fold. The Elizabeth Hotels and Cavendish Hotels group, Brentwood Hotels and the Folio group are just a few of the dozens of hospitality and conferencing companies to be declared insolvent last year.

Things are unlikely to improve any time soon. The full effect of last month’s air-travel chaos is unlikely to be known for a while. Tightening of corporate budgets during the economic slump had already seen a rise in the use of alternative conferencing technologies, like video conferencing. The ash-cloud disaster is likely to drive companies to focus on cheaper, more reliable substitutes for business travel.

The British Hospitality Association, however, says most of the companies that went under had borrowed too much and that trading conditions, in the main, were not to blame. Anthony Cork, director of accountancy firm Wilkins Kennedy, says business in the hotel sector is likely to remain challenging until business travel recovers.

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