Third party management increasing as hospitality failures rise

The credit crunch has led to a marked increase in the number of third parties being parachuted in to manage hospitality operators that have gone into administration, experts have revealed.

Third party management organisations, which offer specialist assistance to turn a business around on a solvent trading basis, provide an ongoing temporary day-to-day management service to administrators in the event that existing management of the failed company are either unwilling or unable to continue to manage the business.

Stephen Broome, director of hospitality and leisure at PricewaterhouseCoopers, said he had noticed a large increase in companies offering these services.

"Whereas a year ago I could have counted the number of approaches I receive in a week on one hand, I now struggle to cope with the flood of e-mails from both companies and individual consultants offering their services," he said. "As trading continues to worsen in 2009 I anticipate that these management companies services will be in great demand,"

Jason Briggs, director at accountancy firm BDO Stoy Hayward, attributed this rise to the lack of available credit, meaning the sell-off of assets - which usually happens following an administration - was not financially viable.

"Due to the lack of credit, any fire sale of assets will have a significant and detrimental impact on both the number of buyers and sale prices," he said. "Faced with taking a significant writedown on loans, a more credible option is to look to introduce experienced asset managers to assist (with ongoing trading) where possible, thus preserving value."

Hotel consortium Best Western is one of the companies that has capitalised on the climate by forming a "rapid reaction" management service, InnFutures.

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By Gemma Sharkey

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