Hotel insolvencies up, but business travel could provide a boost

A new report has revealed a significant increase in UK hotel insolvencies over the past year, as operators continue to struggle with a slew of adverse conditions. However, a potential recovery in business travel during 2024 suggests there could be light at the end of the tunnel for an industry that has suffered significantly in the wake of Brexit and COVID-19.

According to a report from national accountancy group UHY Hacker Young, hotel company insolvencies increased from 127 in 2022-23 to 151 in 2023-24, a rise of 19 per cent. Several factors have contributed to this increase, particularly rising costs amid higher interest rates and inflation.

The report stated that, with hotels facing increased costs for staff, food and drinks, they have been unable to pass on these additional expenses on to customers, resulting in reduced spending and an increase in closures.

UHY noted in particular that rising workforce costs have burdened hotels, with increases in the national living wage and a slump in staff coming into the UK from Europe in the wake of Brexit. The sector is said to have seen the “highest rate of wage inflation out of all UK sectors” – 53 per cent over the past decade.

Hotels have also been heavily impacted by the decline in business travel post-COVID-19, with businesses cutting back on corporate away days and conferences, events which are key sources of revenue for many hotels.

The ongoing effect of COVID-19 for hotels is also reflected in the fact that the number of international tourists visiting the UK continues to languish below pre-pandemic levels. Around 10.9 million international tourists visited the UK as of Q3 2023, 8 per cent less than the corresponding quarter in 2019.

Brian Johnson, partner at UHY Hacker Young, commented: "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."

Johnson added: “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.”

However, there are signs that the sector could begin to see some relief. The UK has seen some tentative economic improvement over recent months and, perhaps more importantly, there have been forecasts that business travel could make a concerted recovery during 2024.

According to the Global Business Travel Association’s (GBTA) recent Business Travel Outlook Poll, 67 per cent of business travel buyers anticipate that they will increase their business travel spending this year compared to 2023 and 59 per cent expect to make more business trips this year.

GBTA CEO Suzanne Neufang said: “As companies and travellers continue to embrace the vital role of in-person connection for business, there are strong indicators for continued growth in travel volume and spending in 2024.”

While it is too early to say that the hotel industry is poised for a full recovery, these early hints of better trading conditions, combined with the rising number of insolvencies in the sector, point to the opportunity for existing hotel operators and market entrants to capitalise on distressed acquisition opportunities that could later deliver significant value.


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