Regional group Peel Hotels has reported the toughest year in the company’s history, with sales and profits down alongside rapidly rising energy costs.
For the financial year ending 5 February 2012, the company – which has nine hotels across the UK – has reported a dramatic 54% fall in profit before interest to £598,396, compared with £1,298,676 in 2011 and turnover down 4% to £14,647,126 (2011: £15,263,682).
Revenue per available room (revpar) decreased by 1.8%, with occupancy down 1.9% and average room rate up 0.1%.
The poor results, which mean the company is unable to pay out a dividend to shareholders for the year, highlight the realities currently being faced by provincial hotels in a tough economic climate.
In his annual statement, Robert Peel, chairman of Peel Hotels, said that the company had not been able to claw back the additional 2.5% VAT levied last year. “This together with severe discounting in the provinces, cut-backs in Government spending, increased energy costs and the disproportionate costs in relation to a rent review at the Crown and Mitre hotel in Carlisle, have resulted in reporting a pre-tax loss of £227,802,” he explained.
“In view of the very high operational gearing of hotels a comparatively modest decline in turnover translates into a substantial decline in profitability. This was compounded in the year through our inability to achieve the normal margins of profit on our food and liquor sales, in simple terms we were unable to pass on the substantial increases in the cost of food and liquor products.”
However, Peel Hotels was able to reduce its net debt to £600,163, resulting in the company decreasing its overall debt over the past two years by £1,916,010.
While capital expenditure for the year was limited to £568,441, Peel said it had not been cut to a point which would jeopardise the hotels’ AA ratings.
Peel said that the first quarter of the new financial year has been encouraging, with sales growth of 5.1%. “We believe there is a degree of optimism, that in provincial terms, the ‘bottom of the cycle’ has been reached. However, we need to contain our costs against inflationary pressures in order to improve our profits in the current year and thereby gradually getting into a position that will enable us to return to paying dividends to our shareholders.
“The fact that we have maintained the quality of our product and not been tempted to slash staff costs throughout the recession, we believe, will stand us in good stead going forward to increase market share and drive our sales growth.”