South: Critical period lies ahead for hotels

This autumn will be a critical period for many hotel companies, predicts KPMG, as the sector faces the drop-off in summer leisure spend and looks for a much needed return of corporate and events business.

But with commercial tensions between owners and the brand and management companies as great as they have ever been, flexibility and co-operation will be key to keeping the wolf from the door.

Richard Hathaway, KPMG's head of Travel, Leisure and Tourism comments:  "Given the rough ride the hotel sector has endured in the last 12 months, the summer will have provided a life line for many  struggling businesses, but as leisure spend drops off through the autumn, the next three months could be make or break.

"Savvy operators will have optimised their summer trading and the rise of the 'staycation', to offset some of their lost business custom in recent months, but a continued tight rein on costs and cash will be
critical in the coming quarter.

"Many will find that the their traditionally strong  autumn and Christmas revenues from business travel, conferences and events does not return this year and as a result their businesses will remain under severe
pressure for the foreseeable future. Indeed recent research indicates that the sector is not expecting an increase in conference and meeting bookings in the coming year.

"We are expecting to see a surge in business insolvencies generally in the autumn, and in this context, the hotel sector is unlikely to be an exception. The festive period should provide a leisure trading boost, which will be particularly important this year, as traditionally weak trading in January and February may call time for some."

"Tensions between individual hotel owners and the big brands have never been so pronounced, as the pressure on cash and funding heightens their
differing priorities. Capital expenditure is a particular pressure point, with a need to find a balance between the long term need to maintain standards and on the short term need to keep servicing debt. This will require considerable flexibility and co-operation or the
consequences could be severe for both sections of the industry."