British staycation trend sees hotel insolvencies surge

The last three months of 2009 saw a drop in company insolvencies in every UK sector except that of hospitality and leisure, the latest figures show.

PricewaterhouseCoopers (PwC) says the industry witnessed a 12 per cent rise in business failures, an increase driven by a 68 per cent hike in hotel insolvency levels between the third and fourth quarters of 2009 and a 31 per cent year-on-year increase.

A total of 155 hotel firms went bust during 2009, compared to 87 insolvencies the previous year, according to PwC's data. 2009's casualties included the Purple Hotels chain.

Experts at the advisory firm point out that advanced bookings mean the hotel and travel market tends to lag behind pubs and restaurants in a recession, hence the high level of hotel insolvencies since winter 2008.

Furthermore, more hotels are expected to go bust in the first few months of 2010 since the beginning of the year is a notoriously quiet trading period.

PwC partner David Chubb says an absence of corporate travellers and Brits' growing fondness for "staycations" has taken its toll on the hospitality sector: "With the advent of glamping and up-market campsites such as Feather Down Farms, the British countryside was becoming more cosmopolitan.

"This trend, aided by an unexpectedly warm Spring, the squeeze on consumer spend, a widespread lack of job security and the euro/pound parity, drove a cyclical and short-term shift to self-catering, camping and caravanning."

Few hotel owners have experience of operating in the current harsh climate, he adds, suggesting that they "must identify realistic options, diagnose problems and implement a survival strategy".

"The options could include financial or operational restructuring, strategic partnering or joint ventures, cost reductions or simply tighter cash flow management," he concludes.

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