The number of hotel companies going bust during 2009 soared by 61% compared to the previous year, according to accountancy firm Wilkins Kennedy.
Hotels which went into liquidation, receivership, administration and company voluntary arrangements rose to 122, up from 76 in 2008.
Despite the positive effects of the weak pound and the staycation, which increased domestic demand, the level of hotel insolvencies were very high due to the continued slump in business travel and the reluctance of banks to lend to the hotel sector.
Anthony Cork, director of Wilkins Kennedy, said that 2009 was marked by a strict tightening-up of corporate budgets which led to a massive curtailing of business trips, conferences and team building events.
"The net long term effect of the volcano ash crisis is difficult to call, but if it speeds the shift to video-conferencing and other new forms of communication rather than face-to-face meetings, this will have another negative impact on the corporate travel segment," he said.
Although Cork admits that occupancy levels and room rates are increasing, he believes there will be more casualties with hotels still finding it difficult to obtain bank loans backed by property, which are the hotels' main assets.
"Even if property values have now bottomed out and bank lending is generally creeping up, the availability of funds for hotel investments is expected to remain limited over the short to medium term," he added.
By Janet Harmer
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