Hospitality and leisure firms under pressure

The number of hospitality and leisure businesses going into administration increased by more than 50% last year, according to new research.

Analysis of UK administration figures by consultancy Deloitte revealed that the hospitality and leisure sector was one of the worst hit industries.

This was due largely to an increase in costs, which saw hospitality businesses punished for their thin margins and leased-premises model, said Lee Manning, reorganisation services partner at Deloitte.

"Earnings appear to be becoming more volatile in competitive leisure businesses and relatively high gearing in a leased business gives less scope for error in achieving forecasts," he said.

"Often the smaller businesses lack access to capital to invest in their properties and customer offerings, compared with the bigger players who are able to tap into funds and keep their offerings fresh and interesting."

Martin Couchman, deputy chief executive of the British Hospitality Association, said that while the figures seemed to represent a rather large percentage increase, the results were not surprising.

"There are parts of the hospitality sector that have always been susceptible, particularly restaurants," he said. "But the fact is that most small businesses are under a lot of pressure from increasing costs such as wages and fuel prices."

Many hospitality businesses were under pressure to increase their turnover just to break even, Couchman added. "Many small businesses are having difficulties as they're vulnerable and find that cash-flow problems can drive them out of business," he said.

For more trends and data go here >>

By Kerstin Kühn