UK hotel insolvencies hit their highest levels in five years in 2019, rising 60 per cent year on year to hit 144.
According to accountants UHY Hacker Young, the slowing UK economy is to blame for the rise, as businesses have been forced to cut back on conferences and corporate away days, a key source of revenue for most hotels.
The challenge is compounded by consumer demand, which remains weak despite the growing UK trend for “stay-cations”.
Overseas tourists numbers are falling, with 37.9m visitors in 2018, down three per cent on the previous year.
The rise of alternative options such as Airbnb, which is increasingly targeting the sales in the premium segment, has also led to more competition in the market.
Room prices have also fallen due to additional competition, with 15,500 rooms added to the market last year and a further 19,300 set to be added.
Peter Kubik, partner at UHY Hacker Young, says: “The hospitality sector is facing a period of considerable upheaval. Those hotels that are unable to fund change face being left behind.
“On top of that, Airbnb is increasing its market share and not just amongst millennials. Hotels – many of which are lagging behind in their use of technology – are going to have to quickly bring themselves up to speed.”
Hotels are also facing a squeeze to their margins due to increases in the minimum wage, import costs and business rates.
The National Living Wage has increased four times in just over three years, most recently by 5 per cent in April this year reaching £8.21.
The ongoing weakness in the pound has driven up the cost of importing food and drink, which, with so much competition in the sector, is hard to pass on to customers.