Scotland’s hospitality businesses have faced significant obstacles in the past few years. Having survived the unprecedented challenges brought about by the Covid-19 pandemic, they have had little respite in the years which followed with the cost-of-living crisis putting a significant strain on the country’s hotel owners and operators.
The challenging economic climate brings with it rising interest rates, while inflation is seeing food and drink prices and utility costs affecting the bottom-line profitability of Scotland’s hotels. Meanwhile, changes in legislation are further adding to an already-pressured environment.
Additionally, the impact of Brexit has reduced the number of individuals entering the sector, while unaffordable housing and the cost of living crisis has made attracting skilled hospitality workers more difficult as they look towards other careers.
As a result, many Scottish hospitality business owners are hanging up their keys due to the financial burden. For those who remain, more than half state they are in "survival mode" in an ominous warning from a sector which is looking to weather the current financial storm.
Regardless of the hurdles, Scotland’s tourism sector remains a huge contributor to the nation’s overall economy. It attracts 14 million visitors annually, with tourist spending accounting for around 5 percent of the country’s GDP. Additionally, the sector delivers around seven per cent of employment across Scotland. Meanwhile, the Gross Value Added (GVA) is poised for growth in the coming years, with 2022 generating around £5.1bn in GVA, a figure predicted to surpass £6bn by 2032.
Despite the current economic climate, opportunities are available for those within the sector who are looking to expand their business and thrive moving forward. With some owners considering selling their properties amid the economic challenges, this presents an opportunity for those committed to staying in the industry as they can make acquisitions at more favourable prices and offer substantial growth potential.
However, the premise of growth should be approached with caution. In light of the significant issues the hospitality industry is facing, expansion plans require careful consideration. Business owners should adopt a pragmatic approach to expansion, as not every deal yields a positive outcome. Failures often result from inadequate due diligence or a lack of engagement with appropriate advisors early in the process.
Collaborating with specialist advisors, such as accountants, solicitors, and realtors, can make a significant difference. These professionals provide expert guidance to navigate potential pitfalls and structure deals effectively. Meanwhile, utilising the expertise of building societies which use a relationship-managed approach adds another layer of support as their relationship managers will look in-depth at the business and the people behind an application, not just the financial figures.
While there is little doubt that Scotland’s hospitality sector is facing adversity, there is room for optimism and hospitality operators should not be disheartened from exploring how they can grow their business. It may seem daunting, but those who pull in the expertise of those working within the industry to create a strategic expansion plan moving forward will find the opportunity for growth is there to be seized.
Alasdair Swan is Senior Commercial Manager at The Cumberland building society, https://www.cumberland.co.uk.
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