Across the country, hotels that were shuttered at the start of the coronavirus pandemic have become eerie, empty shells. Front desks are devoid of receptionists ready to check-in guests, rooms are collecting dust. And with the summer season on the horizon, life for UK hoteliers is about to get much harder.
“It couldn’t have come at a worse time,” says Sheena Kennedy, owner and manager of the Lindeth Fell Country House, a 14-room bed and breakfast in the Lake District owned by her family for 35 years. “We usually hope for a very good Easter, May, and the summer, of course, to keep us going over the quieter winters.” As soon as lockdown started, Kennedy cancelled all of her bookings and returned all customer deposits up to June. “I’m now very worried about the bookings that I have in place for July, August and September,” she says. “We’re waiting to hear on Sunday if there’s any news on that, but I wouldn’t be at all surprised if I’m doing the exact same and refunding those remaining deposits.”
The majority of Britons who had planned a domestic holiday in the UK this year believe that it is unlikely to go ahead, according to domestic tourism research from VisitBritain. “Those domestic summer holidays lost are not likely to be replaced with only a minority who have cancelled holidays looking to replace them,” says Patricia Yates, chief executive of VisitBritain.
If lockdown doesn’t lift by this summer, it would be a huge financial blow to many of the 13,000 hotels and over 35,000 B&Bs and guest houses in the UK, which make around 30 per cent of their annual revenue during the summer months. Chris Tate, partner at audit, tax and consulting firm RSM, says hotels that host corporate events skew the market’s revenue figures because they are busiest from October through November — hiding just how dire the summer drop-off can be for the rest of the market.
The average revenue that independent hotels outside London make between June, July and August — the period when they are more likely to be booked solid — averages £87 per room. This drops down to £64 per room after the season is over, a report from global hospitality market analytics firm STR shows.
In the Lake District, a popular destination for walkers, tourists and older holiday goers, Lindeth Fell is busiest from April to October, but it has already lost important income since it closed on March 22. “I don’t think overseas trade will be back for quite a few years. We have quite a strong market segment from Asia,” says Kennedy. “We hope that the UK market will pick up the slack, but are older people going to be isolating for much longer? I think they are, unless a vaccine appears.”
The summer period is just as important for the larger hotel chains. Accor, which operates hotel chains like Ibis, Novotel and Sofitel, reported that 77.5 per cent of its rooms were occupied in Europe during the months of July, August and September 2019, up from the reported 63.2 per cent occupancy rate in the previous three months. The InterContinental Group reported similar figures for 2019 for its hotel brands, like Holiday Inn.
“We have seen a significant drop off following the spread of Covid-19 and the significant impact on the industry as governments around the world restrict travel,” says an InterContinental Hotels Group spokesperson. “As is to be expected, given the circumstances, we’ve seen hotel closures, cancellations and changes to existing reservations in impacted markets.”
While the major players in the hotel industry might rely on the summer months just as much as the smaller bed and breakfasts across the country, it’s the B&Bs who are most likely going to struggle to survive a desolate summer. Krasimir Dinev, hotel industry analyst at IBISWorld, says that even if some industries are allowed to resume their usual operations soon, it’s unlikely that the hospitality sector will be one of them. “International brands have operations elsewhere, and as these operations start to improve, they can then support their UK segment to avoid collapse,” he explains. “Smaller operators are at a higher risk of collapsing than larger, branded hotels, due to their lower cash reserves.”
Family-run hotels, like the 10-bedroom Canberra Hotel in Blackpool, which Geoff Moore and his partner have owned for six years, could struggle. “At this stage, it’s hitting me hard. We’ve got absolutely nothing coming in,” he says. “The thing that’s crippling business is that the longer this is going on, the more people are deciding they don’t want to come, and the more deposits we are having to return. So it’s very, very hard at the moment.”
Moore says that he received the £10,000 retail, hospitality and leisure grant from the government, but believes that it will run out this month. The £10,000 cash grant is offered to businesses in the sector with a rateable value of under £15,000, and was introduced in addition to interest-free bounce back loans, which will let businesses borrow £2,000 and £50,000 interest-free for the first 12 months. “I will be looking to take advantage of that interest free loan,” Moore says. “I hope it’s a great deal easier to obtain than trying to get a loan.”
Along with the retail, hospitality and leisure grant, the government also introduced hospitality and leisure business rate holidays, which will apply to the upcoming tax year. “[These] will definitely help the industry and ease the impact, but it is likely to not be enough for all operators and some would inevitably have to close, especially if the current travel restrictions and lockdown measures persist,” explains Dinev.
As it was the beginning of the holiday season, Kennedy only had nine permanent staff, and was able to furlough all of them. If we’re not allowed to open, the scheme will have to be extended, or there will be huge redundancies across the whole sector, including us,” she says. “Depending on how long it carries on for, we will almost certainly be looking at the bounce back loan.”
Many of the hotel chains did not address how many of its staff had been furloughed or made redundant when approached, nor address whether their cleaning, maintenance or security staff were still coming in to work. The Marriott chain of hotels announced back in March that it would be furloughing 1,500 casual workers at its 60 UK hotels. And on Monday, it was reported that SoftBank-backed hotel startup OYO would be laying off 150 to 200 of its roughly 300 UK workers.
Budget hotel firm Travelodge famously appointed Deloitte and Moelis to negotiate rent breaks and deferrals with its landlords. Secure Income REIT, a real estate investment trust, which owns 123 of Travelodge’s 580 hotels, is currently in the midst of a high-profile dispute over the hotel chain’s overdue rent payments, accounting for six per cent of Secure Income’s annual rental income. On Monday, The Financial Times reported that Travelodge was expecting to lose £350 million in sales this year, and that it would take the hotel chain “several years” to return to 2019 levels, when its revenues reached £727.9m.
Premier Inn owner Whitbread is in a safer position as it owns its hotels, rather than leasing them. The company currently has £400m in cash and £900m in existing credit, though Hargreaves Lansdown analyst Emilie Stevens notes that its rent is still substantial.
And for those that do open, social distancing measures will have to be enforced, and they could cause chaos in the hotels. A spokesperson for Travelodge says that it has already begun installing Perspex glass on the front desks and placed two-metre tape markings in the reception area in the 50 Travelodge hotels that are still open. Accor has also begun putting up signage and placing down markings, making hand sanitisation available and adapting its food and beverage offerings.
For B&Bs, which tend to offer more cozy arrangements, social distancing could be harder. Moore has begun thinking about moving tables into the four corners of the dining room, and setting breakfast hours for each individual guest. Kennedy says she feels slightly luckier because she has a fairly large dining room. “I’m worried about how we reassure guests,” she says. “I hope that we will get a very clear plan on social distancing and guest management.”
Still, Moore is optimistic that his city will return to its usual popularity pre-pandemic, but as for his hotel? That might be a different story. “I think Blackpool will bounce back and the other seaside places in England will be busy in the summer,” he says. “They’ll come down for the day, but I’m not so sure they will stay.”
Alex Lee is a writer for WIRED. He tweets from @1AlexL
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