Hospitality administrations drop to lowest level in five years

By Luke Nicholls

- Last updated on GMT

Related tags: Hotel, Uk

The number of businesses appointing Administrators in the hotel and licensed sector fell significantly, by 35 per cent year-on-year in 2012
The number of businesses appointing Administrators in the hotel and licensed sector fell significantly, by 35 per cent year-on-year in 2012
The number of UK hotels, restaurants and bars falling into administration has dropped to the lowest amount in five years, indicating 'recovery in the hospitality sector and resilience to the wider economic woes'.

According to official statistics published today by The Insolvency Service, hospitality administrations in 2012 fell by 35 per cent year-on-year. This Follows on from research earlier this week by Colliers International Hotels​which showed that only a quarter of hotel sales were 'distressed transactions' emanating from administration or receivership. 

The figures also fly in the face of administration figures this time last year which showed that the number of hospitality businesses falling into administration had increased by 19.3 per cent in 2011.

Tony Wright a partner at Baker Tilly Restructuring and Recovery, said: "While we experienced the usual seasonal increase in Administrations in Q4 2012 compared to Q3 2012, the decrease in administration numbers over the course of the full year indicates a recovery in the sector and resilience to the wider economic woes, with appointments at five-year lows.

Sustainable recovery?

"These figures show that last year the leisure sector as a whole responded well to the continued low interest rates and the fall in inflation, in turn having eased the pressure on consumer spending in the period. With unemployment rates falling in the quarter to November 2012, and particularly poor weather last year, people have returned to the comfort of bars and restaurants amid the tough climate. 

"Hotels and restaurants experienced the most substantial falls in the sector - levels of appointments of administrators down 36 and 41 per cent in the past 12 months respectively - with the influx of tourists to the country for the Queen’s Diamond Jubilee and the London Olympics last year undoubtedly providing additional income for the sector. The question for the industry going forwards is will this recovery be sustainable in the absence of these exceptional events in 2013?

"Although the sector appears to have rebounded, there is still caution in the air with worries surrounding the limited prospects for a full scale economic recovery and the Eurozone woes leaving many operators concerned for the next twelve months, especially given the number of well-known high-street names entering Administration over the winter period."

Sales & profits

The recent research by Colliers International Hotels showed that the vast majority of hotel deals in 2012 involved new entrants to the market (34 per cent of deals) or expansions by existing hoteliers, giving further indication that the financial stress may be beginning to ease for UK hotels. 

Meanwhile, today's report of TRI Hospitality’s annual HotStats survey​discovered that an Olympic-led 90 per cent increase in profits in August proved to be a major factor in the year-on-year increase in RevPAR of 4.9 per cent for hotels in London; while properties in the regions slumped to regions slumped to a fifth consecutive year of profit decline.

The hotel sector was a major player in the UK economy last year; generating £115bn as the sixth largest employer in the country. 

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