Assured Hotels gives their impartial & independent views on the potential outcomes of Government support during the pandemic, and how particularly new levels of indebtedness could be addressed as support is removed.
Part 1. Debt & cash liquidity – The unintended Stakeholder
The reality is that the past 15 months of intermittent lockdowns and continuous trading restrictions are behind us, with the strength of our vaccine program and greater testing ability it looks highly unlikely further national restrictions will be needed. Finally, the whole economy can start to emerge from the lopsided on-line bias and hotels can look forward to the potential of trading towards pre-pandemic levels. Whilst a truly positive step for many this next phase will be significantly more challenging than forced closure, particularly as we wean ourselves from the comprehensive Government support.
Of course risks remain, particularly unknown customer demand in some locations driven by changes in behaviour and the reliance on domestic markets with restrictions on international travel – see this highlighted in our recent demand update. Therefore the biggest challenge centres around delivering meaningful forecasts to demonstrate credible plans to address liquidity challenges. Forecasts will need to cover new trading costs, service debt and legacy liabilities accrued over the past year – we are told Banks and other funders are well capitalised, but if a business can’t demonstrate how it will service current debt, then further facilities can’t be the only solution.
Recovery plans must therefore be based on serviceability of all costs and liabilities, and speed is of the essence as we expect Government measures will come to an end as currently planned, along with a general change in attitude from external stakeholders.
Aside from JRS, the protection created by the moratorium on rent foreclosure, and winding up, the additional risk not being discussed is the unintended stakeholder – Her Majesty’s Government. Loans with very favourable terms were rushed out as a stop gap solution, so we can’t be 100% confident that nothing will change structurally to those terms once businesses are back on their feet with “both ends working” – income driving profit margin and asset values improving the balance sheet.
Management support solutions as opportunities?
Some of the various solutions, or in a positive mindset the opportunities would include:
- Valuation towards disposal of certain assets particularly if in a group – as seen in this case study we have been involved in some recent transactions where value has held up, achieved by a consensual approach from all stakeholders.
- Operational product & business model review, where not only costs are in check to income, but challenge the need for salary heavy traditional pools of labour e.g. does the business need full-service housekeeping and traditional F&B outlets?
- Loans & legacy liabilities – have all options been explored with funders and other external stakeholders?
Working with the support of a third party may well give the confidence to all at the table to ensure a consensual approach is agreed for the best outcome. Whilst the overall situation is unprecedented and very unlike a pure economic recovery, the support as it ramps down is quantifiable and mapped out to known expiry dates, so presents a real opportunity to not only return stronger but blend in changes to traditional structures and processes that were perhaps overdue anyway.
Supporting Stakeholders – meet with us on a no obligation basis.
As we all now look forward to getting back to trading and brighter times ahead Assured Hotels will be offering no obligation meeting time to sector stakeholders to assess how we may be able to support.
We have made our significant experience and resources available without charge to cover all of the main disciplines of finance, procurement, sales and revenue management, plus funding and government support access. We will endeavour to answer any question raised, so please click here to book a meeting email email@example.com or call 0203 205 7239.