News Article

Sector Analysis

Baker Tilly predicts tougher 2010 for the UK hotel industry

By CreditMan Tuesday, August 18, 2009

Restructuring and Recovery experts from Baker Tilly have warned that 2010 is set to be even tougher for the already struggling UK hotel industry with the luxury end of the market bracing itself to bear the brunt of the challenging times.

In the first edition of Full House?, a briefing for the leisure and hospitality industry, Baker Tilly comment on what the hoteliers need to do to help navigate their business through these difficult times.

Bob Bailey, a partner at Baker Tilly said: Forty percent of European hotel executives predict that more than five hotel chains will go into insolvency in the coming year and it is easy to see why. The Office of National Statistics shows the number of visitors to the UK has fallen from 33 million to 31 million during the 12 months ending in April 2009, and many companies are reducing employee travel to cut costs which is having an adverse effect on hotels that rely on corporate business.

We have been working with banks, owners and management teams to come up with new solutions and give practical advice to help buck these trends. We have been focussing on beating industry benchmarks for cost management, treating no cost as fixed, ensuring that every opportunity is maximised and working with staff and management teams to make the most of human, property and brand assets.

The June UK Chain Hotels Market Review shows that RevPAR was down 11.5%and profits fell nearly 17% for the first six months of this year. The Full House? sector briefing offers some practical suggestions to hotels to increase their share of the reduced recession market and aid recovery :

* If a hotel is not part of a group or chain, it could benefit from creating a purchasing group with other local businesses to negotiate volume discounts.

* By putting together packages, hoteliers can add value by analysing previous trends to get promotions in place early.

* If there is already a good database of existing customers, hoteliers can build loyalty by making sure these customers are the first to hear about special offers and promotions.

* Hoteliers should talk to their suppliers about joint marketing and promotion.

* If a hotel provides live-in accommodation for staff, is the rent proportionate to salary? Baker Tilly recently implemented a review, moving rent from a flat rate to 13% of wages, leading to those earning above the minimum wage paying a fairer rate in relative terms.