By Paul Smith, Managing Director, Restructuring Advisory at Duff & Phelps 

Hotel sector hit hard as occupancy levels collapse

With hotel occupancy levels dropping in the midst of the current coronavirus (COVID-19) crisis, independents and chains alike are urgently reviewing their contingency plans related to people and human resources (HR); HM Revenue & Customs (HMRC) and tax liabilities; funding and cashflow; and how best to deal with suppliers and other creditors to ensure the smoothest business journey possible through the challenging months ahead. This is according to Duff & Phelps, the global advisor that protects, restores and maximises value for clients.

Duff & Phelps has a trained team of experts to support both independents and hotel chains through the current crisis. Duff & Phelps can help businesses establish best practices across the entire value chain, including assistance with a range of transformational HR initiatives, accessing emergency funding, maximising cashflow management, Time-to-Pay arrangements in the context of HMRC tax commitments and proactively ensuring all suppliers and creditors are properly managed.

The current COVID-19 crisis is resulting in hotels trading at low occupancy levels of 20% or less. Added to this, both the larger hotel chain groups and the independent sector in the UK are already struggling with a range of current challenges around Brexit trade deal uncertainty, assessing appropriate financing investing in new technologies and managing skill shortages.

Paul Smith, Managing Director, Restructuring Advisory at Duff & Phelps, stated: “It is clear that the hotel and catering sector is set to face a very tough few months, with income and revenue severely hit by the widespread travel restrictions in place, both across the UK and worldwide. Our team of experts are on hand to assist hoteliers with the most pressing HR, tax, funding and cashflow issues to help mitigate disruption during these uncertain times.”

“When it comes to their people and HR issues, almost all operators will be looking to review their current resource in the short-term and will need to know what options are available to them. They will need to ensure the safety of the workforce and manage downsizing efficiently and with the utmost care in order to avoid damaging tribunals down the line. Duff & Phelps can provide clear guidance and reassuring support here, not only in terms of process but also with regard to helping businesses access the redundancy payment service loan facility.”

“In addition to prioritising the safety, hygiene and well-being of their employees, hotels will need to maintain a clear focus on business continuity throughout this time. We are already helping our hotel clients to initiate flexible work arrangements that allow their people to work safely, as well as helping them to review resource allocations, ensuring their teams are engaged and fully aware of their strategy.”

Smith added: “Additionally, our team across the UK have helped to clearly define the best processes hotel chains and independents can use to navigate HMRC commitments, funding or cashflow issues and supplier and creditor management.”

“Those hotel businesses with a healthy bank balance will of course see this quiet period ahead as the perfect opportunity to undertake any particularly disruptive renovation work,” Smith explains.

“Those hotels lucky enough to be in this position will be able to undertake restructuring work with a real purpose and can also mitigate any unnecessary costs over the coming months due to the lack of income from spring and summer visitors.”

Smith adds: “When it comes to those more pressing and thorny issues of tax liabilities, funding and supplier management, we have extensive experience assisting businesses in these areas, helping them to develop the most effective and innovative solutions to navigate the oncoming months of financial hardship.”