Hospitality insolvencies up by one fifth in 2011

Published: 03 February, 2012

The hospitality industry was one of the hardest hit by insolvencies last year - they grew by 19% - and experts predict the situation will worsen in 2012.

The hospitality industry was one of the hardest hit by insolvencies last year - they grew by 19% - and experts predict the situation will worsen in 2012.

The overall number of businesses appointing administrators in the hotel and licensed leisure sectors increased by 29% from Q3 to Q4 of 2011, according to Baker Tilly's analysis.

The continuation of Q2's upward trend makes the sector has been one of last year's worst hit, with an overall increase of 19.3% in administrations in 2011. Hotels are primarily responsible for the increase, with the number of administration appointments increasing from 51 to 80 year on year (an increase of 57%).

Peter Cooper, partner at Baker Tilly Restructuring and Recovery, said: "At the end of Q3 2011, we predicted an increase in the number of hospitality and leisure industry insolvencies for Q4, based on uncertainty around the prospects for a full scale economic recovery, a decline in consumer confidence, a fall in spending power and restrictions in the availability of working capital.

"As the year came to a close, there is no doubt these factor combined to create very tough conditions for an increasing number of distressed businesses in the sector. Our view remains unchanged: there is no room for complacency or underperformance in the current climate. We expect the rise in insolvencies to continue into Q1 2012 as a lag response to defaults on December quarter rent payments."

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