The firm found that hotels in both regions continue to struggle with unsustainable debts, losses and staffing problems, and Matthew Richards, partner in Azets’ restructuring London office, said that it is “entirely possible that 10% of hotels in London could be forced to shut permanently by 2023”.
It comes as UKHospitality recently reported that the sector has £2.5bn in rent arrears alone due to the pandemic, “further compounding the millions of pounds borrowed through various Covid loan schemes made available last year”.
Azets warned that many hotel businesses are seasonal, but have already been “unable to capitalise” on a Spring upturn in bookings.
It added that the collapse in business travel and rise of working from home, as well as the cancellation of weddings, parties, conferences and tourism has led to reduced occupancy, whilst hotels are also struggling to meet routine costs such as staffing, insurance, heating and marketing.
In light of this, Richards is urging hotel operators and owners to “move swiftly” to cut costs, preserve cash, communicate with lenders and consider a restructuring of their business.
He said: “While many people are planning to staycation due to the difficulties of overseas travel during the pandemic rather than go abroad, unfortunately, the sector is now facing an unprecedented set of problems that is almost certainly set to cause long term strategic damage to the hotel and hospitality sector in the South and South East of England.
“It would be entirely reasonable if several hotel operators, owners and entrepreneurs decide that the problems are insurmountable and close their businesses. If 10% of hotels close, it will have a serious impact on local urban and rural economies given the importance of the sector in terms of employment, investment and the cohesive role hotels play in local communities.”
He added: “The hotel sector in the South of England is tackling an unprecedented number of problems, and there will inevitably be winners and losers. The winners are likely to be those businesses that invest in taking the right advice in order that they may better manage their cash and key stakeholders so that they can come through and maximise their chances of capitalising on the recovery.”