Page last updated at 23:05 GMT, Sunday, 2 May 2010 00:05 UK

Hotels closing down despite rise in UK "staycations"

Hotel room
Hotels are suffering from a lack of business travellers

UK hotel insolvencies have soared despite the rise of the "staycation" in place of foreign travel, a report says.

The number of hotel firms that failed last year rose 61% compared with 2008, accountancy firm Wilkins Kennedy says.

People holidaying at home boosted room demand but a slump in business travel and problems getting bank loans is said to have affected companies.

Disruption caused by the volcanic ash could lead to further negative impact on the hotel sector, the study says.

The Cavendish, McKeever and Folio groups were just some of the chains to have folded last year in the midst of Britain's worst recession since World War II.

Customers cut back on their length of stay and extras, such as spas and room service
Anthony Cork

Recent figures from the Office for National Statistics suggest that visitor numbers into Britain were down only 6% last year.

The report said that despite the weak pound and many people holidaying at home, the hospitality sector remained weak.

"Unfortunately, this hasn't translated into the increased spending that hotel owners had hoped for because customers cut back on their length of stay and extras, such as spas and room service," said Wilkins Kennedy director Anthony Cork.

'Remaining tough'

Overall corporate insolvencies in all sectors fell by 11% in 2009.

But 122 hotel companies were declared insolvent compared with 76 in the previous year, Wilkins Kennedy said.

Mr Cork said the year saw a "strict tightening-up of corporate budgets", which led to a curtailing of business trips, conferences and team-building events.

"The net long-term effect of the volcano ash crisis is difficult to call, but if it speeds the shift to video-conferencing and other new forms of communication rather than face-to-face meetings, this will have another negative impact on the corporate travel segment," he added.

Looking ahead, Mr Cork said despite "some daylight with improved occupancy and higher daily rates", there will be more casualties.

"Until confidence takes a firmer hold and business travellers come back in greater numbers, things are likely to remain tough."

The British Hospitality Association said the firms which had gone bust had mostly been affected by excessive borrowing rather than weak overall trading conditions.

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