More hotels and restaurants failed last year than at any other time in the past five years, according to the latest figures from Companies House. The number of start-up hotels and restaurants also fell sharply in 2003.
Business failures climbed from 1,535 in 1999 to an all-time high last year of 1,877.
The number of start-ups also rose steadily from 1999 when there were 2,785 until reaching 3,859 in 2002. But last year the figure plummeted to an all-time low of 2,236.
Matthew Debbage, marketing head at ICC Credit, the credit reference agency that compiled the research, described the figures as "worrying".
But he added that action could be taken to reduce the risk of failure and advised new businesses to carry out credit checks on suppliers or corporate customers making large bookings before setting credit limits.
"Most hotels and restaurants fail because they have large debts. There is a distinct correlation between businesses that don't get paid and failure rates," said Debbage.
He said there were fewer new business launches because the industry was "mature and extremely competitive".