Hotel Insolvencies Rocket

Hotel insolvencies increased by 61 per cent in 2009, the highest of any corporate sector, according to a recent report.

The report, published by accountancy firm Wilkins Kennedy, reveals that the hotel industry experienced 122 insolvencies in 2009, up from 76 the previous year. This is in contrast with the total number of corporate insolvencies across all sectors, which decreased by 11 per cent to 10,832 in 2009, down from 12,112 in 2008.

 Wilkins Kennedy has blamed the increase in insolvencies to a slump in business travel, and continued difficulty in obtaining bank loans using property as security, which particularly affects hotels as property is their main asset. The increase comes despite the positive effects of the ‘weak pound’ and higher domestic demand from consumers trying to save money by holidaying in the UK.

 Anthony Cork, director of Wilkins Kennedy, said: “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.”

 The firm also claims that the combination of bad weather in January and the turmoil caused by the recent volcanic ash crisis make the outlook uncertain for the industry in 2010.

 Cork added, “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.”

 Recent hotel insolvency cases include the Real Hotel Group, which has 40 sites, and Folio Hotels, which has 36 regional sites nationwide. One five-star hotel in London was declared insolvent before development had finished and before it had been given an official name.

 Cork also said, “Until confidence takes a firmer hold and business travellers come back in greater numbers, things are likely to remain tough for the hotel sector. Our feeling is that, inevitably, there will be more casualties.”

Posted at 04:05PM May 04, 2010 by Marc Stenton in Insolvency  |  Comments[0]