Should You Hibernate Over Winter?

With the recent news that the government has authorised the use of a Covid-19 vaccine there seems, at last, to be light at the end of the pandemic tunnel. Unfortunately, it is also clear that the next few months will remain extremely challenging for all businesses, especially the independent hotel and leisure sector. Indeed, recent research shows that as many as 50,000 pubs and licensed premises could remain closed over the next few months.

As a result, many of Graham + Sibbald clients are asking how they should best survive until March 2021 – historically, the start of the tourism season in Scotland and the date by which it is hoped that some version normality may have returned.

The main question that independent hoteliers need to consider is whether to put their business into hibernation or whether they should carry on trading. In a normal year, Christmas and Hogmanay is a time for making a good profit and for setting up a business for the year ahead. However, the painful truth is that it is going to be very difficult for many businesses to make a significant profit over the next few months.

Putting a hotel or other leisure business into hibernation is going to cost money, however the up-side is that it is possible to know much these cost will be, as they will be primarily fixed costs such as light, heat and power.

If a business stays open and continues to trade then it will have to cover a wider range of costs, such as wages and raw materials, and there is little way of being sure what, if any, profits it will make.

The question is: What’s better – to know what your losses will be, or to take a gamble on potentially making a significant, and unquantifiable, loss?

Of course, there are a number of key issues to take into account. If you feel your location and business model will guarantee a good level of custom over the next few months, and if your cash reserves are in good stead, then it will make sense to stay open. If not, then it may be sensible to close up for a while.

If you decide to put your business into hibernation:

• Let your customers know what your plans are. Use this as an opportunity to market offers for Spring 2021. Take deposits for when you re-open.
• Look for ways to shift stock.
• Communicate with those staff who will be on furlough, letting them know how your plans will affect them. Then keep them abreast of developments.
• Inform your insurer and adhere to all relevant insurance criteria.
• Decide whether you are going to live on site, employ a caretaker, or make regular inspection visits of your property.
• Make your property winter-safe (eg. draw down and turn off water).
• Put in place any necessary security measures.
• Think about making your venue available for your local community to use, which may help to cover costs such as light and power.

If you decide to keep trading:

• Let your customers know and use it as an opportunity to market festive deals.
• Look into options to diversify your business.
• Re-purpose your kitchens to offer a take-away service.
• Offer ready-made meals (eg. Christmas dinners).
• Speak to the likes of Deliveroo and Let’s Eat to provide deliveries for you.
• Work with your local community – generate positive PR about the fact that you are soldiering on and celebrating Christmas.

Whichever decision you make, keep up to date with the latest support offered by the government and by banks (although, it is clear, many businesses have now reached a point where they don’t want to borrow anymore).

Also, make sure you view the next few months as an opportunity to review your business and prepare it for the ‘new normal’ ahead. This self-audit might involve reviewing your Property Management System (PMS), your check-in systems and procedures and your future procurement needs. Think about your strengths and weaknesses and assess how you can trade more effectively in the future.

Looking ahead, it is hoped that many businesses will find that trade really picks up as final restrictions are lifted (as was the case following the first lockdown in 2020). At Graham + Sibbald we are always on hand to help, and we look forward to moving forward with our clients into 2021.

To get in contact:

Peter Seymour
Head of Hotel + Leisure
t: 0141 567 5378 | m: 07967 551 569 | e: Peter.Seymour@g-s.co.uk