A Perfect Storm for the Hospitality Industry


Rocketing costs, and staff shortages, together with a drop in demand due to the cost-of-living crisis, are having a devastating effect on the hospitality sector.

Hotel, restaurant and public house owners are currently looking hard at their profit and loss accounts. In quiet times some hotels are seeking to temporarily close, with pubs and restaurants potentially just operating from Friday to Sunday. After all, there is no point in incurring costs if turnover levels are not there to make a profit. However, owners will try to maximise profits when opportunities arise. Pubs will no doubt be looking at how to attract customers during the World Cup in Qatar, and similarly for hotels, the run-up to Christmas and New Year can be a very busy time.

Ongoing trading can only be sustained with a positive cash flow. In these testing times, without adequate working capital, owners must look to their balance sheets for options that will allow them to trade. These may include:

  • Restructuring bank loans by extending maturities, renegotiating repayments or softening mandatory default triggers.
  • Revisiting payment terms with key suppliers or landlords.
  • Examining any investor loans. Perhaps these could be converted from loans to equity?
  • Exploring any non-core assets that could be sold in order to inject some cash into the business.

What should you do if you conclude you are unable to continue trading?

Sadly, for some, however, after carrying out this due diligence an owner may conclude that it is just not possible to continue trading and to be able to pay debts as they fall due.

This is the time to contact a Licensed Insolvency Practitioner to discuss your options, with a view to protecting your staff and maximising returns to your creditors.

It may be that a breathing space can be achieved to allow time to sell the business or its underlying assets. Here an Insolvency Practitioner will work closely with solicitors who will advise on all contracts, tenancies and leases. However, a vital part of this team will be a solicitor specialising in licences.

Retaining your premises licence

A premises licence can be held by a company or an individual. If the holder becomes insolvent the licence lapses immediately and no licensable activities can take place. You can imagine that without the matter of the licence being addressed any future sale of the business could be scuppered.

A specialist licencing solicitor will be able to advise on this key asset throughout the whole insolvency journey. They will know that a lapsed licence can be reinstated to an active company or individual as long as the transfer application is made within 28 days of the original insolvency. This is critical, because if the licence lapses irrevocably a new application must be made. Not only is this expensive and time-consuming it may be difficult, or in some circumstances just not possible, to get a licence with the same hours and activities as the previous one. This could materially affect the saleability of the business.

In conclusion, all hospitality business owners must be aware of the profitability or otherwise of their operation. When in doubt seek independent specialist advice at an early stage. Be aware of all your options and how to protect key assets such as your premises licence.

For help and support with the solvency of your hospitality business, please get in touch with Elaine Wilcox on 0808 144 5575or email

Contact Elaine