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Brexit increases pressure on UK hotels

Up to 1,800 UK hotel companies have at least a 30 percent chance of becoming insolvent by 2020, according to accountancy firm Moore Stephens.


Amber Ainsley   Pritchard

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Amber Ainsley   Pritchard
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The firm said this estimated decrease could be the result of Brexit as well as the introduction of the living wage.

 

It said the weaker pound post-Brexit could both encourage tourism in the UK and lead to more Britons having “staycations”.

 

However, Moore Stephens said this could result in a disadvantage to hotels because visitors are more likely to use sites such as Airbnb rather than stay in hotels because it can be cheaper.

 

Moore Stephens explained how companies like Airbnb do not need to charge VAT so can keep prices low, increasing the strain on hotels.

 

It said another strain on small hotels, in particular, could be the introduction of the living wage.

 

According to charity the Resolution Foundation, many hotel workers are over the age of 25, therefore the living wage could affect almost half of the hospitality workforce.

 

The accountancy firm said: “Food and beverage costs are also set to increase as unfavourable exchange rates push up import prices, adding to already-rising overheads tightening profit margins.”

 

It added: “The popularity of budget hotel chains such as Premier Inn may have also had a negative effect on smaller hotel chains.

 

“Tourists will often choose hotel chains due to low prices, and the familiarity and reliability of the facilities.”

 

Another issue which affects smaller hotels are internet comparison websites. The firm said these sites charge hotels to advertise online but not all hotels can afford to do this making competition harder.

 

Joanne Allen, head of hotels and leisure at Moore Stephens, said: “Staff shortages have the potential to get worse if immigration tightens after the implementation of Article 50.

 

“In addition to this, small hotels have tighter profit margins and are often more reliant on seasonal trade. This can make it difficult to budget for the whole year, whilst also putting cash aside for renovations and updates.”

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