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More than five hotel chains forecast to face administration this year

10 March 2009 by
More than five hotel chains forecast to face administration this year

More than five hotel chains will go into administration over the next 12 months, according to four in ten European hotel executives.

In the survey of 261 hotel executives, by law firm DLA Piper, 79% predicted hotel chain bankruptcies in the coming year, with 40% expecting more than five to collapse.

The 2009 Europe Hospitality Outlook Report, launched at the International Hotel Investment Forum in Berlin, revealed that European hotel executives are less optimistic about the health of their industry than their US counterparts.

Only 39% expect the industry to recover in 2010, compared to 59% of their US counterparts, while more than half of the European executives (52%) do not expect a recovery until 2011.

However, the executives believe that, for well-capitalised investors, there are opportunities in the current market. Eight out of ten respondents recognised the "good" buying opportunities, with the budget hotel sector representing the most attractive investment opportunity.

The majority of respondents (71%) also regard investment in sustainable hotel development as a long-term trend.

Karen Friebe, global co-chair of DLA Piper's hospitality and leisure practice, said it was no surprise that the majority of European hotel executives are pessimistic about the health of industry but she added that the sector was "alive to the changes" in the economy.

"There will always be winners and losers," Friebe said. "The winners are taking advantage by asking us to help with renegotiating contracts, even leases and recession proofing their businesses. They are reviewing their corporate structures to make them leaner and fitter. The losers are doing nothing."

The research also revealed that

  • 81% expect the value of hotel assets to go down in the next 12 months.
  • 26% believe the potential removal of an EU country's right to opt-out from the Working Time Directive - which caps an employee's working week to 48 hours - will have a negative impact on the hospitality industry.
  • 70% are witnessing a significant reduction in business travel.

Hotel insolvencies double; worse to come >>

A grim outlook for hospitality as insolvencies rise by 95% in two years >>
Hotel revpar forecast to plummet by 19% in 2009 >>

Hotel revpar forecast to plummet by 19% in 2009 >>

Wake-up call: Pre-pack administration >>

By Daniel Thomas

E-mail your comments to Daniel Thomas here.

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