Small British hotels need help from the state
Despite the fact that the hotel segment is gradually beginning to recover after a difficult 2020, British hotels are still in a precarious position. According to the forecasts of consulting company HVS, in the next few months, a number of facilities may declare bankruptcy because of the long decline in profits, which is not able to cover all costs. The only way out for this area is the provision of state support.
If large hotels have already felt an increase in customer traffic and their profits have gone up, small provincial hotels are still unable to recover from the effects of the pandemic. Their operating profits are about 50% of 2019 and 30% of the results of hotels in London in the same 2019. These amounts are not enough for owners to bring the business to breakeven. However, despite this state of affairs, analysts predict an increase in revenues in the first half of 2022.
The crisis in the hotel sector first of all hit small hotels, where financial opportunities are much less than at large chains. Many had to close back in 2020, but bankruptcies continue even now, when the tourist sector is recovering quite actively. The situation is aggravated by the fact that banks consider cooperation with small hotels rather risky, which means that getting a loan in the current situation is quite difficult. Therefore, the growth of debts continues to increase, which leads to the reduction of hotel staff.
The wave of bankruptcies has been observed since the second quarter of 2021, when a number of small companies could not withstand the debt load and closed. Moreover, hotels in major cities have already felt the improvement due to the growth of tourism, while in the regions there is still a crisis. Therefore, experts urge the British government to introduce special programs to support the hotel industry. It should be taken into account that this area is an important source of jobs. In this case the jobs can be organized very quickly, which will benefit the economy. The state initiative is needed today, otherwise there is a risk of losing a large number of enterprises, and many people will be left without sources of financing. The HVS believes that such a support package should include a reduced rate of VAT, the abolition for a certain period of taxes for businesses, as well as special conditions for loans from banks.
According to analysts, if these measures are embodied in life, by the second quarter of next year we can see significant changes and development of the segment along with its collapse.