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'No room for complacency' as hospitality administrations soar

By Luke Nicholls, 03-Feb-2012

Related topics: Business, Venues, Trends & Reports, Hotels, Pubs & Bars

The number of hospitality businesses falling into administration increased by 19.3 per cent in 2011, indicating that the sector was one of the worst hit by the economic crisis.

According to analysis by insolvency experts Baker Tilly, administrations in the hotel and licensed trade sector rose by 29.2 per cent between quarters three and four of last year.

Peter Cooper, partner at Baker Tilly, said: “At the end of quarter three 2011, we predicted an increase in the number of hospitality and leisure industry insolvencies for quarter four, based on uncertainty around the prospects for a full scale economic recovery, a decline in consumer confidence, a fall in spending power and restrictions in the availability of working capital.

“As the year came to a close, there is no doubt these factor combined to create very tough conditions for an increasing number of distressed businesses in the sector.

“Our view remains unchanged: there is no room for complacency or underperformance in the current climate. We expect the rise in insolvencies to continue into quarter 1 of 2012, as a lag response to defaults on December quarter rent payments.”

Christie & Co's view:

Chris Day, managing director of Christie & Co, put the year in perspective at a Business Outlook seminar held last month . Day said: "We unsurprisingly saw an increasing distress across the sectors as many businesses struggled to cope with the on-going economic challenges.

“There were disparities in the hotel sector. In London, prices held up very well, but in the provinces there were some significantly greater falls in value. There was also a great deal of uncertainty, caution and distress – particularly in the final quarter of 2011.

“But there were plenty of international bidders in the market over the past year, and we can expect to see more oversees investment in the hotel market in 2012.”

BigHospitality’s 2011 timeline of administrations: