Hotel insolvencies doubled in 2008

The number of hotels going bust has doubled in a year and the trend is set to continue through 2009, the industry was warned today.

Quarterly insolvency statistics from PricewaterhouseCoopers (PwC) show that 36 hotel companies entered an insolvency process during the fourth quarter of 2008, double the number of the previous quarter. In all, the number of insolvencies in the sector in 2008 rose 98 per cent on the previous year.

Stephen Broome, hospitality and leisure director at PwC said the hotel industry is historically hit later than other companies in an economic downturn, hence the sharp rise in insolvencies at the end of last year.

“This is due in part to extended lead in times for hotel bookings and means that the impact tends to fall six to 12 months later than some other sectors. However, as was experienced in the last recession, the negative impact on hotel performance is likely to accelerate sharply at the start of the technical recession, suggesting these early casualties are just the beginning,” He said.

Broome advised hotel groups to avoid putting development plans on hold and making ‘defensive piecemeal actions’ such as putting a freeze on advertising, recruitment and loyalty programmes for customers and staff over the next few months.

He said: “Hotel businesses that understand the need to develop and implement new strategies can navigate the downturn in a way that makes the most of the opportunities arising. Those who don’t know enough about themselves or the external market will be inclined to take the path of least resistance, leading to defensive and piecemeal actions which can result in reduced service levels and disgruntled clients. Most damaging of all, these businesses risk losing out to their competitors.”

Hotel outlook for 2009 worsens