Wind-up hotel petitions set to increase due to coronavirus

Eloise Hanson Eloise Hanson Uploaded 12 May 2020

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UK: The number of petitions to wind-up hotels has almost doubled in a year, and is expected to increase dramatically once the moratorium ends on June 30.

According to accountant and business advisors Moore, 13 petitions to wind-up hotels have been made by courts in 2020 to date, compared to just seven in the same period last year.

At the moment, hotels are protected by a moratorium on winding up petitions, though once this ends on June 30, the number of petitions is expected to rise sharply.

These petitions are normally filed by hotel lenders or suppliers that have lost hope in the ability of the hotel company to repay debt. 

With social distancing measures expected to remain in place, Moore expects a long-term financial impact on the sector.

A hotel may need to reduce the capacity at which its restaurant, breakfast and conference facilities function, with tables being limited to ensure safe distancing.

The move towards video calls and webinars could also reduce travelling for conferences and meetings.

Moreover, the economic impact of the coronavirus could also see customers with significantly less disposable income to spend on tourism. Lower levels of international tourism will mean that UK hotels are unable to capitalise on higher spending US and Gulf-based customers.

Chris Tate, business advisory director at Moore, said: “The hotel industry was already struggling as a result of Brexit-related uncertainty and coronavirus could be the final straw for many hotels.”

“There has been little indication on when hotels will be able to re-open. That needs to come soon. Those that are seasonally geared for a busy period in summer will be amongst the worst affected. If hotels miss out on key custom during July and August, this could have a disastrous impact on their finances.”

“We’d expect to see a rise in insolvencies once Government protections to mitigate the impact of the outbreak are lifted, unless tenants and their creditors successfully negotiate payment plans. Landlords will want to work with tenants to come to a viable solution, however, many will be reluctant to grant reductions in rent, which could negatively impact the value of their portfolio and lending provenance criteria.”

Moore has with 31 locations of member firms across the UK. Its member firms are also part of Moor Global Limited, which has its headquarters in London.

The network comprises more than 260 independent firms in over 110 countries.

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