As a specialist lender to hospitality businesses, we have observed the huge challenges faced by the sector since the start of the pandemic and as such our focus remains on ensuring our commercial customers continue to receive the support and guidance they have come to rely on this past year.

With lockdown restrictions across the UK hopefully eased by the summer, there may be mixed times ahead for the tourism sector, a significant contributor to the economy and one that has also been impacted the most.

The dual retraction of both the international tourism and corporate travel markets has had a huge effect, with some estimating this may take up to five years to recover.

However, by 2025, UK tourism is estimated to be worth £260bn per annum, according to Visit Britain.

And the BBC reports that demand for short breaks has risen as some countries emerge from lockdowns. In the first three months of the year, US bookings beat pre-pandemic levels, while there was a “steady improvement” in business in the UK and France.

Long term effect of depleted international visitors

Although hotels, guesthouses, holiday lets and other tourism related businesses in the UK may have been noticing a ‘staycation’ boom in between lockdowns, the longer-term effect of depleted international visitors cannot be dismissed.

In addition, it may be more likely for businesses in more traditionally tourism-led locations, such as on the coast, within national parks or in rural locations to recover well. Traditional holiday areas such as the Scottish Highlands, the Lake District and Devon and Cornwall are all predicted to have a buoyant recovery.

However, as customers’ preferences change – for example, the trend towards long-term stays and more rural properties – I foresee stimulated competition between hospitality businesses. It could also be argued that those who do survive may need to significantly invest in staff recruitment and training in order to thrive in a more competitively driven market space.

The supply chain people issues caused by both Brexit and the pandemic are not to be underestimated, and these are causing very real challenges for businesses currently.

I’ve been moved and inspired by how businesses have shown such resilience and adaptability, with many having to pivot to keep up with an altered marketplace. In fact, many have changed significantly. For example, city centre hotels that once catered mainly to the international tourism and corporate travel markets innovated to take on NHS contracts or, in some cases, homeless people.

But now it is vital to understand how this sector of the market is adapting post-pandemic. That’s why we’ve commissioned specialist research to find out, amongst other things, the innovation that holiday accommodation owners have adopted to keep their enterprises resilient in an industry that has had to weather a particularly torrid storm.

And as we surmise that consumers show a growing preference for high levels of customer service, more space and properties away from city centres, it will also be compelling to find out exactly what consumers are prioritising when it comes to booking UK holiday accommodation. How the city centre hospitality sector recovers from what have been a series of deep impacts will be of additional interest.

Back to the future?

As we turn our attention to the likely shape of economic recovery, we mustn’t forget that the landscape has changed. For example, it’s worth noting the buildup of consumer cash that is affecting the market, because quite simply, many people have more money than ever before to spend on staycations rather than foreign holidays. In this respect, perhaps we’ll be going ‘back to the future’, by seeing a return to overseas travel being the exception rather than the rule?

For a number of years, there hasn’t been such a strong reserve of consumer assets and availability of debt funding available and so we are noticing that some customers are fueling the staycation recovery by purchasing a second and third property. This has also been assisted by the temporary reduced rates on SDLT (stamp duty land tax) which are due to be eased by October.

Can hospitality businesses that have innovated and invested for growth continue to flourish post-pandemic?

Most businesses have had government financial assistance, be it through furlough, grants and debt repayment holidays and CBIL, BBL and other forms of debt, as well as deferment of HMRC contributions assistance and these, as well as suppliers, will all need repayment and equity input for owners and others in some form or another.

I’m concerned about what I call the ‘wall of debt’, something which is certainly on the horizon.

An opportunity for strong businesses

What does this situation therefore create?  I see it creating a real opportunity for strong businesses that have minimal borrowing and strong cash positions and the ability to take on more funding to capitalise on a growing and innovating market.

I foresee a significant growth in the staycation market, particularly across holiday parks and holiday lets. I also think we will witness a strong recovery amongst suburban, rural and seaside hotels, but question how sustainable into the long term this will be.

There are bound to be challenges in reopening as businesses re-establish supply chains and renegotiate contracts, and the three biggest challenges of recruitment, repayment of debt and further disruption uncertainties.

However, there will be restructure and refinance opportunities available, which will be harnessed by many within the sector as a way to really advance their businesses.

It is vital that the UK staycation market builds sustainability in its own right and doesn’t rely solely on being fuelled by the post-pandemic recovery.

The Cumberland head of commercial Scott McKerracher