Rescue, Recovery, and Closure Options for Hotels

Rising operational expenses and escalating staff wages pose a significant threat to an already struggling industry. If your hotel faces financial strain or you’re concerned about the future, it’s crucial to seek expert guidance urgently and fully comprehend all available options.

How liquidation can help you in closing your hotel? 

Depending on your hotel’s financial standing and the potential for improvement, you might be thinking of liquidating your hotel. Liquidation marks the end for insolvent companies. In case you think your hotel has hit a dead end, this could be the optimal choice for your business, your employees, and your creditors.

The liquidation of an insolvent hotel is conducted via a formal insolvency procedure called a Creditors’ Voluntary Liquidation – or CVL. This process requires the involvement of a licensed insolvency practitioner. 

Their responsibility is to identify and sell company assets, handle creditors’ matters, and oversee the orderly closure of your hotel.

Facing the prospect of liquidating your hotel is undoubtedly daunting. However, this course of action enables eligible staff to seek redundancy benefits, shields current creditors from additional losses, and ensures that as a director, you fulfil your legal obligations during this period.

An insolvency practitioner can guide you through the entire liquidation process and assess whether it’s suitable for your hotel. 

If liquidation is deemed necessary, we’ll manage the entire procedure upon appointment. However, if there’s a possibility to rescue your hotel from closure, we’ll examine various recovery options to revitalise your business.

A guide to rescue my hotel

Despite your hotel facing financial challenges, closing it down and resorting to liquidation may not be the sole solution. Especially if your hotel started experiencing cash flow issues only after the pandemic outbreak, there are several business rescue and recovery options available that could offer assistance.

While voluntary liquidation for an insolvent company involves a CVL, rescuing a financially viable but struggling business takes various forms. 

Vanguard Insolvency’s team of licensed insolvency practitioners can promptly assess the feasibility of rescuing your hotel. If viable, they will explore the available options to achieve this goal.

If your hotel’s financial difficulties arise from the income lost during enforced closure months, but trade has now resumed to satisfactory levels, initiating negotiations with your creditors could lower your monthly expenses while your cash reserves recover.

You can achieve this through informal negotiations or a legally binding repayment plan called a Company Voluntary Arrangement (CVA)

CVAs usually span 3-5 years and involve an indebted company and its creditors, supervised by a licensed insolvency practitioner who serves as nominee and supervisor throughout.

CVAs enable a financially distressed company to repay its outstanding debts over an agreed period and at an agreed monthly rate. Typically, some debt is forgiven during the process.

A CVA operates on the premise of a company using future earnings to settle existing debts. Before implementation, at least 75% (by value) of the company’s creditors must approve the proposal. Thus, only companies demonstrating long-term viability are likely to secure creditor approval for a CVA.

Smaller hotels might opt for an accelerated version of this process, known as a Fast-Track CVA, which achieves the same outcome in a shorter duration.

Some hotels may require administration while an insolvency practitioner charts a path forward. This affords more time to devise a long-term plan without the pressure of legal action or winding-up petitions from creditors.

At times, hotels may only need an infusion of cash to bolster cash flow and resume operations. 

Our specialised in-house commercial finance team can scour the market to find the most suitable funding option for your hotel, securing the best possible rate.