Over 150 hotels went bust last year as pre-pandemic international visitor figures failed to recover, and food, wage and energy costs spiralled
The total number of hotel insolvencies increased from 127 in 2022/23 to 151 in 2023/24, up 19%, revealed analysis by UHY Hacker Young, not helped by an 8% decline in international visitor numbers.
Costs for hotels have continued to rise, driven in part by higher energy and food costs, and punitive interest rates and inflation, which affected all sectors.
Hotel companies also faced additional issues that were specific to the hospitality sector. Spiralling costs have driven up the price of importing food and drink, which, with so much competition in the sector, were hard to pass on to customers, warned UHY Hacker Young.
Staff costs have continued to rise both from the national living wage (which increased by 9.8% this year to £11.44 an hour) and from a post Brexit slump in staff coming from the EU.
Businesses in the hospitality sector have also faced the highest rate of wage inflation out of all UK sectors, with workers’ pay having increased by 53% over the last decade.
The slowing economy has caused some businesses to cut back on conferences and away days. Corporate events such as these are a key revenue source for hotels – they are not only a source of income from venue hire, but also the rooms, food and drink that accompany them.
Hotel businesses have also amassed significant levels of debt after the pandemic lockdowns.
Brian Johnson, partner at UHY Hacker Young, said: ‘The hotel industry continues to go through a very rough patch.
‘The hotel industry would like to see much more help from the government in areas like visa rules, the return of tax-free shopping for tourists and more capacity at our airports.
‘Now that Covid is over the UK has to compete hard with a lot of countries that are really determined to win more tourism spending.’
Room occupancy in February 2024 for the smallest hotels (1-25 rooms) continued to fall, from 69% in February 2023 to 64% in February 2024.
Hotels are also affected by number of international tourists to the UK, which has still not reached pre-pandemic levels as of Q3 2023 at 10.9m, 8% less than Q3 2019, according to Visit Britain figures.