Tenth of Scotland’s hotels could be gone by 2023, restructuring expert warns

A tenth of Scotland’s hotels could be forced to shut for good by 2023 as they buckle under debts, losses and staffing problems, a restructuring expert is warning.

The dire prediction has been made by Derek Forsyth head of restructuring with specialist local accountancy firm and business advisory group Azets, who believes a decade of expansion by the sector could slip into reverse.

Mr Forsyth said UKHospitality recently reported the industry it covers has £2.5 billion in rent arrears alone due to the pandemic.

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He said the Scottish Tourism Alliance had found that 89 per cent of hotels have up to ten staff vacancies, and he cited Market Recovery Monitor data showing nearly 10 per cent of UK restaurants have closed since the onset of the pandemic.

The Scottish hotel sector is now facing an 'unprecedented set of problems', according to restructuring expert Derek Forsyth. Picture: Christopher Furlong/Getty Images.

The restructuring expert said many hotel businesses were seasonal, but had already been unable to capitalise on the normal spring upturn in bookings.

“The collapse in business travel, together with the cancellation of major events, weddings, parties, conferences and tourism, has led to a severe haemorrhaging of income,” he said.

"Furthermore, hotels are also usually heavily geared with sizeable loans whilst still having to meet routine costs such as staffing, insurance, heating and marketing.

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“Unfortunately, the sector is now facing an unprecedented set of problems that is almost certainly set to cause long-term strategic damage to Scotland’s hotel and hospitality sector.

"It would be entirely reasonable if several hotel operators, owners and entrepreneurs decide that the problems are insurmountable and close their businesses.

"If 10 per cent of hotels close, it will have a serious impact on Scotland’s urban and rural economies, given the importance of the sector in terms of employment, investment and the cohesive role hotels play in local communities.”

Edinburgh Hotels Association spokesman Russell Imrie said looking at the Scottish capital alone, the hotel market faced major hurdles, with no international business currently, and the UK staycation market favouring large rural destinations.

Mr Imrie, managing director of Queensferry Hotels, said cities still lacked reasons for people to visit such as theatres and big events – for example, with this year’s Edinburgh Tattoo now cancelled.

“Because the normal demand is just not there, every hotel in [Edinburgh] is trading substantially below what should be expected,” he said.

It was recently revealed that almost half of accommodation businesses in Scotland are struggling to sell a fifth of their rooms over the summer.

Plan of action

As for what can be done to tackle the problem, Mr Forsyth is urging concerned hotel operators and owners to act fast to cut costs, preserve cash, communicate with their banks and consider restructuring the business.

“Scotland’s hotel sector is tackling an unprecedented number of problems and there will be casualties,” he said.

“These are difficult times, but we would urge business owners to confront these problems sooner rather than later, and maximise their chances of capitalising on a recovery, as and when that happens.”

Mr Imrie said he believed hotels were likely to be at the stage where little more cost-reduction could be done, while those that were well-capitalised and owned by large corporations or even overseas capital would be able to “ride the storm”, but smaller, independently owned hotels may not fare so well.

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