• Costs loom over sector

Five of the south-west-based Richardson Hotels have gone into administration, owing money to HMRC.

The collapse came as the sector recorded one of the largest deals of the year as the Waldorf Astoria Edinburgh – The Caledonian was sold, indicating that investors were keeping faith despite concerns over rising costs.

At Richardson Hotels, the company was unable to agreement a payment plan with HMRC, resulting in winding-up petitions against it. A recent period of capital expenditure is thought to have exacerbated cashflow problems.

The administration comprised The Grand Hotel in Torquay, The Royal Beacon Hotel in Exmouth, The Falmouth Hotel in Falmouth, The Fowey Hotel in Fowey and The Metropole in Padstow will remain open. The Grosvenor Hotel in Torquay, due to relaunch next month as the John Burton-Race Restaurant with Rooms, was not included.

Joint administrator Mark Boughey of RSM Restructuring Advisory, said: “All the hotels offer enviable locations, architecture and facilities, so their rooms are in high demand from both existing and new customers. Whilst things are at an early stage, we are therefore hopeful that a long-term future for of all the hotels can be secured.”

The administrators confirmed wide interest for the group from potential buyers.

The sector remains of interest to investors, with the largest hotel sale in Scotland since 2015 and the largest single asset trade in the regional UK market in the last 12 months as the Waldorf Astoria Edinburgh – The Caledonian was sold to Abu Dhabi-based Twenty14 Holdings for GBP85m.

Kerr Young, director, JLL’s hotels & hospitality group, said: “Edinburgh continues to be one of the best performing and most sought after European hotel markets by both domestic and overseas buyers. The sale of The Caley follows the recent sales during 2017 of The Scotsman and The Bonham as well a number of other hotels in the Scottish Capital. This sale marks the largest hotel transaction in Scotland since the sale of Gleneagles in 2015.”

Rising costs, driven in particular by the narrowing labour market and rise in NLW, continued to cause concerns in the sector. Central to this was the role of EU nationals from outside the UK, in the light of wider figures showing a fall in net migration, as the falling pound makes the UK a less attractive source of earnings.

The impact on the hospitality sector has not been entirely as expected. A study by Professor Andrew Lockwood and Professor Chris Cowls, of the University of Surrey, regarding the impact of Brexit on 85 UK hotels, found that the percentage of hours worked by staff who came from other EU countries actually went up year on year by 3.6% to 31% against those from the rest of world and the UK following the EU Referendum.

Cowls, also CEO at Eproductive, told us: “Depending on the eventual Brexit terms that are agreed this percentage could fall substantially as nationals from EU countries find it harder to work in the UK in future. And if staff from EU countries are not easily replaced, supply and demand will dictate that an additional upwards pressure will be exerted on hospitality wage bills.”

The study looked at staffing data from June 2015, a year before the referendum in June 2016 to a year after the referendum, June 2017. It found that, since June 2015 the total number of staff employed by the four hotel chains had gone down, with the decrease has been mainly in UK employees.

Over the two years the total number of hours worked had gone down but the number of hours worked by EU employees has gone up. Over the two years hotel revenue had gone up but the number of hours has decreased so productivity has improved.

The beginning of 2018 saw the Association of Licensed Multiple Retailers reiterate its calls for a constructive future immigration policy, following a report citing hospitality as an area of labour shortage concern.

The Preparing for Brexit report by Cambridge Econometrics, for the Greater London Authority, identified hospitality as a vulnerable sector with 32% of hospitality jobs in the capital being carried out by non-UK EU workers.

ALMR CEO Kate Nicholls said: “The report highlights the important contribution being made by EU nationals to the capitals hospitality sector and the difficulties businesses would face should they be unable to access labour from the EU.

“The government has already made a commitment to EU nationals living in the UK, but it is crucial that any future immigration policy reflects the ned for hospitality businesses to employ non-UK workers.”

 

HA Perspective [by Katherine Doggrell]: The collapse of Richardson Hotels is, at the moment, an aberration, with Carine Bonnejean, head of consultancy for hotels, Christie & Co, telling us that, as far as the wider health of the sector looks: “The only thing we can be sure of is that costs are rising and this will create pressure.”

Demand is strong for those hotels and the new owner or owners are likely to remember not to put their daughter on the stage, as ‘twere, after the local press in Devon laid the blame for the administration on the recent extensive refurbishment of The Grand in Torquay, which featured in Channel 4 TV show The Hotel prior to Richardson buying it. Exorcising ghosts of public shaming past costs. Trump Hotels is certainly feeling the pressure as the result of its reality TV president.

But away from the ego of hotel owners, should that be possible and the issue of rising labour costs will not leave the sector alone, with all HR departments focusing on just one thing this year – staff retention.

Our attention was drawn to the Yummy Pubs Co, which recently made all its Yummy Academy staff workbooks free to download on its website. Sharing best practice will become key to helping the sector face what promises to be its greatest Brexit challenge.

Share →