Hotel insolvencies have increased by 19% in the last year, from 127 hotel companies in 2022/23 to 151 in 2023/24, says the national accountancy group UHY Hacker Young.
UHY Hacker Young says costs for hotels have continued to rise. This has been driven in part by the same challenges facing all sectors, including higher interest rates and inflation.
Hotel companies also face additional issues that are specific to the hospitality sector. Spiralling costs have driven up the price of importing food and drink, which, with so much competition in the sector, is hard to pass on to customers.
Staff costs have also continued to rise both from the National Living Wage (which increased by 9.8% this year) and from a post Brexit slump in staff coming from Europe. Businesses in the hospitality sector have also faced the highest rate of wage inflation out of all UK sectors, with workers’ pay having increased by 53% over the last decade.
The slowing economy has caused some businesses to cut back on conferences and ‘away days’. Corporate events such as these are a key revenue source for hotels – they are not only a source of income from venue hire, but also the rooms, food and drink that accompany them.
Room occupancy in February 2024 for the smallest hotels (1-25 rooms) continues to fall, from 69% in February 2023 to 64% in February 2024.
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By GlobalDataHotels are also affected by number of international tourists to the UK, which has still not reached pre-pandemic levels as of Q3 2023 at 10.9m, 8% less than Q3 2019.
Hotel businesses have also amassed significant levels of debt to weather the lack of tourism during the lockdown.
Commenting on this, UHY Hacker Young partner, Brian Johnson, said: “The hotel industry continues to go through a very rough patch.
“The hotel industry would like to see much more help from the Government in areas like visa rules, the return of tax-free shopping for tourists and more capacity at our airports.
“Now that Covid is over the UK has to compete hard with a lot of countries that are really determined to win more tourism spending.”
