By Scott Wright

A SCOTTISH hotel company has taken the decision to close one of its properties during winter for the first time as the cost crisis facing the hospitality sector deepens.

Alex McKie, founder of the Stirling-based Fusion Group, has revealed he will put the Old Churches House in Dunblane into cold storage next week. It will be the first time the hotel will be shut down since it was opened by Fusion a decade ago, outwith closures enforced by government because of Covid.

The move comes as growing numbers of tourism and hospitality operators decide to close venues for winter or reduce opening hours to conserve cash as the cost of doing business spirals. Industry figures say the inflation crisis is proving to be a bigger challenge than the pandemic, when financial support was provided by government to ease the blow of lockdowns.

The Fusion Group, which was founded by Mr McKie in 2006, owns seven hotels around Scotland, and holds interests in three more under joint ventures. It also works with a further 29 as a service partner. Most of the hotels are based in tourism destinations.

Mr McKie said the forthcoming off-season is going to be a “huge challenge” for the company.

“The pandemic forced us to close legally – we are now being forced to close because of the “perfect storm” of all costs,” he told The Herald. “Cost of living, consumer confidence, utilities, employment… it is the most challenging time for employment I have ever come across.”

Mr McKie, who said he is “not alone” within the industry in taking such decisions, will be able to redeploy employees affected to other parts of the business.

He added: “Ironically, Old Churches House is a regional finalist for small hotel of the year [in the forthcoming Scottish Thistle Awards] and that is the one I have got to close for five months because of the climate in which we are in. I will lose less by closing.”

Asked if government should be doing more to help the tourism and hospitality sector, Mr McKie said the “bold” decision should be taken to reduce value-added tax temporarily for the sector, following a similar move earlier in the pandemic. He said reducing the rate of VAT from 20 per cent to 10% or 12% would provide “breathing space”.

And he argued that relief for business rates in Scotland should have been put in place for the whole of the current financial year, instead of just the first three months. In England, business rates relief is in place for 12 months, with eligible firms able to get 50% off bills for the 2022/2023 tax year up to a total of £110,000 per business. “They (Scottish ministers) could pull that lever if they wanted.”

Mr McKie added: “The pandemic was a rough ride, but this is rougher. Fiscally, the pandemic was supported, and a lot of businesses survived because of intervention. Intervention in this particular storm has not been as strong as it should be. The sector is going to shrink.”

Marc Crothall, chief executive of the Scottish Tourism Alliance, agreed the challenges facing the sector are more acute now than when Covid struck, and stated that the absence of support from government was a “concern for many”.

Bookings for the coming weeks are falling sharply, he said, with no business guaranteed even for key seasonal events.

“The whole booking indicators of the domestic tourism short-break, Christmas party [seasons] have pretty much fallen off a cliff in the last couple of weeks,” Mr Crothall told The Herald.

“A lot of the hotel operators are not even going to venture into doing Christmas party nights or put on a Christmas offering, because at the price point they would have to pitch it, they recognise it is probably going to be too rich for the average household to make it worthwhile, and they can’t service it.”

Mr Crothall emphasised that it was important for businesses to have the capacity to invest in their properties not just in repairs and maintenance, but to ensure they are attractive and competitive in the international tourism market.