Hotel insolvencies hit five-year high

Hotel insolvencies have reached a five-year high in 2019, according to new research from accountancy firm UHY Hacker Young.

Insolvencies in the sector rose by 60% from the previous year, rising from 90 to 144 in the year ended 30 September 2019. 

The firm said that the rise was driven by a “slowing” UK economy. It believes that this has caused businesses to cut down on conferences and ‘away days’, a key source of revenue for many hotels. 

A fall in consumer demand has also damaged the sector over the past five years, with overseas tourists falling to 37.9m in 2018, down by 3% on 2017. 

The firm also blamed a “surge in alternatives” as a reason for the sectors decline, citing AirBnB as a main competitor to the market.

It said that the company has “reset consumer expectations”, and is now aiming to trying to “increase sales in the premium segment” of the industry, which could see many more hotels deemed as “outdated”.

Large referral fees from sites such as Booking.com have also hit the sector, with many hotels facing a reduced profit margin due to their participation in such sites. An increase in wages and business rates have also damaged profit margins over the five-year period.

Peter Kubik, partner at UHY Hacker Young, said: “The hospitality sector is facing a period of considerable upheaval. Those hotels that are unable to fund change face being left behind.

“On top of that, Airbnb is increasing its market share and not just amongst millennials. Hotels – many of which are lagging behind in their use of technology – are going to have to quickly bring themselves up to speed.”