A decade of hotel expansion across London and the South of England is set to be reversed as one in ten (10%) of hotel businesses struggling with unsustainable debts, losses and staffing problems could decide to close permanently according to new analysis by Azets.

Citing industry reports indicating the scale of the financial and resourcing problems affecting the sector, Matthew Richards, Partner, Restructuring, in Azets’ London office, said that it is entirely possible that 10% of hotels in London could be forced to shut permanently by 2023.

Richards 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 and the prevalence of working from home together with the cancellation of major events, weddings, parties, conferences and tourism has led to reduced occupancy and 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.”

Richards 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 lenders and consider restructuring the business.  “The hotel sector in the South of England is tackling an unprecedented number of problems, and there will inevitably be winners and losers.  The winners are likely to be those businesses that invest in taking the right advice in order that they may better manage their cash and key stakeholders so that they can come through and maximise their chances of capitalising on the recovery.”