Peel Hotels has suffered the toughest year in its history as it dropped into the red with a pre-tax loss of £227,802.
Chairman Robert Peel cited a drop in sales, pressure on profit margins and rising energy costs for the downturn. He also hit out at high VAT with the regional hotel chain being unable to claw back last year’s 2.5% rise.
“This together with severe discounting in the provinces, cutbacks in government spending, increased energy costs and the disproportionate costs in relation to a rent review at the Crown and Mitre Hotel in Carlisle, have resulted in reporting a pre-tax loss of £227,802,” he said.
He described 2011/2012 as “the toughest encountered in the company’s history”. However, the company was encouraged by 5.1% sales growth in the first quarter of the current financial year.
But Peel added that the company continued to struggle to contain costs against inflationary pressure.
Results for the year to February 5 showed hotel revenues falling by 4% to £14.6 million and like for like profits down by 24.5% to £2.2 million. Revenue per available room dropped by 1.8% with occupancy down by 1.9%
“In view of the very high operational gearing of hotels a comparatively modest decline in turnover translates into a substantial decline in profitability,” said Peel.
“This was compounded in the year through our inability to achieve the normal margins of profit on our food and liquor sales, in simple terms we were unable to pass on the substantial increases in the cost of food and liquor products.”
Looking forward, Peel said: “The first quarter of the new financial year has been encouraging with sales growth of 5.1% and we believe there is a degree of optimism, that in provincial terms, the ‘bottom of the cycle’ has been reached.
“However, we need to contain our costs against inflationary pressures in order to improve our profits in the current year and thereby gradually getting into a position that will enable us to return to paying dividends to our shareholders.
“The fact that we have maintained the quality of our product and not been tempted to slash staff costs throughout the recession, we believe, will stand us in good stead going forward to increase market share and drive our sales growth.”
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