Peel Hotels has warned that a recovery in the provincial economy is a long way off, as it slipped into a pre-tax loss for 2009/10.
The firm managed to boost its revenue fort the year to 7 February 2010 to £14.1m, up from £12.7m, thanks to its acquisition of the Norfolk Royale hotel in May last year for £8.25m.
But earnings dipped from a pre-tax profit of £664,429 last year to a pre-tax loss of £74,106 in 2009/10.
And despite predictions in the first half of last year that the company would see its revpar (accommodation revenue per available room) improve, revpar actually dropped 6.9% in the year, with occupancy down 3.2% and average room rate down 3.8%.
In a statement, chairman Robert Peel said that the results were "very disappointing" and warned that there was "no real sign of recovery in the economy from a provincial point of view".
And he also sounded a note of caution over the increased level of competition among provincial hotels.
"The lack of commercial activity in terms of cut backs in overnight stays, conferences and training courses has continued throughout the year whilst the supply side has grown in terms of new hotel openings that had been financed when credit was relatively easily," he said.
The company is also carrying a greater debt burden, due in large part to its acquisition of the Norfolk Royale. Net debt at 7 February 2010 stood at £14.8m, a £10.9m increase on the previous year.
But there was small consolation in the company's food sales, which increased 3.5%, and a 5% rise in liquor sales on a like-for-like basis.
Peel spent almost £2.4m improving its hotels over the course of the year, including £931,000 on public areas and a new restaurant and bar at the Cosmopolitan hotel in Leeds, and almost £680,000 on refurbishing 15 bedrooms at the Caledonian in Newcastle.
Commenting on the future, Peel said: "Unfortunately our optimism at the half year of achieving overall revpar growth was not to be, in spite of room occupancy growth in the eighth, ninth, and tenth periods of the year. However revpar did improve from a cumulative shortfall of 8.8% at the hald year to 6.9% at the year end.
"The provincial market has yet to recover in terms of commercial activity while the relative cheapness of the pound in relation to the majority of the world's currency augurs well for improvement in the domestic discretionary market and incoming tourism."
By Neil Gerrard
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