Hotel and Leisure Sector 2011-2012

Written by Graham Timmins Monday, 03 October 2011 13:22

"A cloudy outlook" is forecast by Graham Timmins in our Business Transfer Department. He says "factors such as diminishing or static visitor numbers, heightened consumer expectation and difficult lending conditions make for challenging times ahead".

The 2011 figures from the South West Tourism Alliance show numbers of visitors to the region is roughly up 2% on the previous year, but it should be borne in mind that those figures were down 10% on 2009's figures.

Tourists are trying to save money where they can and as such they are looking for discounted deals on hotel and guest house bookings. This is something the larger national chains can cater for, but for owners of small and middle sized businesses, it is forcing them to squeeze their margins at a time when costs are going up.

Graham TimminsGenerally speaking, clients have had a couple of bad years and their businesses are valued on their profit and loss books. The Banks' lending policy is still drastically affecting sales with their loan-to-value rates remaining low at around 50%, together with the fact that they are loath to lend to 1st time entrants into the hospitality industry. Accordingly, what we are seeing is less applicants who are in a position to proceed. There are still plenty of people wanting to make a lifestyle change and buy a business in the South West, but they are unable to do so.

Artist's ImpressionOur clients, meanwhile, have a choice. Wait to sell and try to keep their business ticking over until the market improves, or sell now and drop the price by 20% to 25%. In some cases owners have opted to change the nature of the business to make it saleable. An example of this is the Bartrip Hotel in Newquay. The economic downturn, together with an increase in Regulations and increased competition, made it uneconomic to sell the business as a hotel. The owner successfully gained Permission for a Change of Use. It is now being marketed with Planning Permission for 24 mixed use apartments at a guide price of £850,000.

There are still deals being done in the region but they are being done by the big operators. We are aware of several large hotels and Holiday Parks in the South West being acquired by other national companies rather the private buyers.

A general tightening of the consumer purse is also affecting secondary spend. Pre-recession a family on holiday may have eaten out several times, now they'll save their money for one trip out at a restaurant like Rick Stein's Seafood Restaurant in Padstow or Jamie Oliver's Fifteen at Watergate Bay. These 'signature' restaurants and destinations are doing well whereas the smaller going concerns are still suffering.

It looks as though the uncertainty of the UK's economic situation will continue. Therefore I would predict next year's summer season could well be even tougher for those in the tourist industry. The wise hotelier will target North European visitors who want to take advantage of the exchange rate. In the main though, proprietors will be forced to offer a better product at the same price. It is definitely a case of "survival of the fittest".

For further information on acquiring or selling your business, contact Graham Timmins on 01872 247019

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