Restructuring in the hotel sector: what does the future hold?
Restructuring in the recruitment and interim sector
What is the current state of play in the hotel sector?
What issues are businesses in the sector facing?
Of all the sectors impacted by the COVID-19 pandemic, the hotel industry is certainly among the most affected. Numerous lockdowns, a decline in foreign tourists to the UK, a substantial reduction in business travel and corporate and personal events and the introduction of travel corridors – along with talks of a COVID vaccination passport – have resulted in a significant challenge for hotels of all sizes and in all locations. While a fraction of hotels have been fortunate enough to secure government contracts, including those for NHS staff and those acting as quarantine hubs for overseas travellers, the vast majority have remained closed or scarcely occupied.
The most pressing issue facing the industry is the challenge of reopening and operating cost-effectively until the new level of fair maintainable trade is attained. Hotel owners simply don’t know what’s on the horizon, which makes planning difficult. The challenges of reopening fall into three categories: Government, operational and financing.
Numerous lockdowns, a decline in foreign tourists to the UK and a substantial reduction in business travel and corporate events have resulted in a significant challenge for hotels of all sizes and in all locations. Ian Corfield Restructuring Advisory
Government support measures
The UK economy including the hospitality sector has been cushioned by government support measures and funding schemes. Hospitality investors and operators will sensibly have taken advantage of the Coronavirus Business Interruption Loan Scheme (CBILS), the furlough scheme, reduced VAT and rates relief, as well as business grants. Importantly, such funding support was also braced by the introduction of the moratoria on forfeiture and winding- up petitions, which effectively estopped enforcement action by suppliers and landlords. As a result, the prevalence of distress and failures in the hotel sector is currently muted, but the eventual and necessary phasing out of government support measures will create the greatest challenge yet for all stakeholders.
How has the COVID-19 pandemic impacted the sector?
An uneven picture has emerged across the hotel industry, and location continues to be a major factor in the fortunes of individual businesses. For example, coastal hotels enjoyed a busy summer season in 2020, as we embraced staycations following months of lockdown. Many of these businesses are already modelled for winter closure, so despite further lockdowns, have been largely insulated from the challenges that the wider hotel sector has faced. Conversely, city centre hotels have struggled due to the lack of both corporate and family events, with large-scale conferences and social activities cancelled, and inbound tourism and city breaks significantly reduced. Neither are likely to return in earnest until at least 2022. The hotel industry is hugely varied; operators might be small bespoke hoteliers or part of a worldwide chain. They could run a freehold or leasehold property, and their model could be managed or owned. These factors have all influenced the impact the pandemic has had on individual trading over the past year. More importantly, such factors will also determine what the future will hold.
An uneven picture has emerged across the hotel industry, and location continues to be a major factor in the fortunes of individual businesses. Phil Reynolds Restructuring Advisory
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