Hotel businesses can still profit in tough times

Colin Frame
Colin Frame

HOTELS and restaurants in the Scottish Borders and north Northumberland are seeing gross profit margins go up by reviewing their business to adapt to the downturn, according to a Berwick accountancy firm.

The weather has been miserable for most of spring and early summer, and the economic climate is not much better as the tourist season gets into full swing.

However, if hoteliers and restaurateurs are viewing the forthcoming months with concern there is little to be gained from being too pessimistic. Colin Frame of Berwick-based Greaves West and Ayre, who advises a number of hotels and restaurants in the Borders and Northumberland, says businesses can remain profitable by adopting the right strategy.

“There are a number of things hotels, restaurants and venues can do to keep the business side of their trade strong and able to withstand a difficult season,” he explained.

“Just because the forecasts are for a difficult tourist season it doesn’t mean that your profit margins need to suffer. A number of our clients in the hospitality trade have actually used the economic downturn to review their business.

“As a result they have benefited from these hard times as they have taken a much tighter approach to running their business and in fact have seen gross profit margins go up.”

One of the first things some businesses are trying, according to Mr Frame, is to be flexible over room and hire out rates.

Keeping occupancy rates high is all important and a room or function suite at a reduced rate is better than an empty room.

A number of hotels in the area are already being proactive offering special deals and mid week offers.

One of the key things is to keep fixed costs as low as possible” says Hazel Smith, also of Greaves West and Ayre.

“Staffing, for example, needs to be as flexible as possible and staff contracts should encourage total flexibility in terms of hours worked rotas and duties.”

Reviewing existing contracts is not impossible and historical wastage can be considerably reduced.

Mr Frame also advises his clients to review contracts with breweries and other suppliers in order to keep costs at a minimum. “Breweries, in particular, are keen to keep or get business and are offering good discounts and other negotiable deals,” he said.

“The secret is to make the time to speak to the reps on a regular basis to know all about the best terms on offer.

“However you shouldn’t buy stock for the sake of it as you don’t want to tie working capital up into unused stock.

“You also have to make sure stock is properly rotated so that wastage is minimised as there are many elements which can erase your gross profits.”