The Glenburn Hotel in Rothesay, Isle of Bute has filed for administration, caused by significant operating costs, coupled with the fall in revenue due to the pandemic, leading to unsustainable cash flow problems.
All remaining staff will be made redundant with immediate effect and joint administrators Stuart Robb and Chad Griffin from FRP Advisory will now commence liaising with employees, the Redundancy Payments Office and other agencies to minimise the impact on staff and to ensure their claims for redundancy are processed as quickly as possible.
Originally built in 1843 on a hilltop location overlooking Rothesay, Scotland’s first ‘hydropathic’ hotel opened in 1892 was extensively refurbished in 2016 and features around 121 guest rooms, a ballroom, restaurants, bars, a terrace, conference facilities and terraced gardens. There are also three cottages located within the grounds of the hotel.
Joint Administrator Stuart Robb, partner with FRP Advisory said. “The Glenburn Hotel is a landmark hotel with a long history stretching back to its opening as a grand seaside hotel in 1892. Unfortunately, having explored all its options, the Hotel was unable to survive the significant fall in revenue caused by the COVID 19 pandemic whilst still having to meet significant maintenance and running costs.
“We will now focus our efforts on assisting employees, many of whom have worked at the hotel for many years, to submit their claims for redundancy and other sums due to them whilst preparing to market and sell the hotel.”
The hotel had traded briefly since the start of the first lockdown in early 2020, but has been closed since November 2020 with staff initially being placed on furlough.
Ahead of the reopening of pubs and restaurants on Wednesday 15th July as lockdown measures are eased, Chartered Accountants Wylie & Bisset is advising those hospitality sector operators facing financial difficulties because of the coronavirus to consider applying to the Redundancy Payments Service (RPS) for financial assistance.
With estimates that around 100,000 of the 280,000 people employed in Scotland’s hospitality sector could lose their jobs – 55% of workers in Scotland’s licensed trade have been furloughed due to Covid-19 and 29% have been made redundant – many businesses having struggled to access financial support throughout the lockdown, and larger businesses have been denied grant support altogether.
Operators that cannot afford to pay their employees redundancy pay can apply to the RPS for assistance. If approved, the RPS will make statutory redundancy payments directly to the redundant employees on the employer’s behalf.
Any employer who is not subject to formal insolvency proceedings can apply. This includes businesses that: are still trading; have stopped trading but have not gone formally insolvent and those that will soon stop trading but are not going formally insolvent.
Donald McKinnon, managing partner at Wylie & Bisset, said, “With many hospitality businesses having been hit hard by the lockdown, with many teetering on the edge and struggling to survive, the RPS may act as a lifeline for those worrying about having to make redundancies but unable to afford the redundancy payments, which, in turn, may force the business into a route of formal insolvency.
“Having the government help pay for some redundancies may save the business going forward.”
RPS payments are subject to statutory limits. These include a maximum of 20 years redundancy that can be paid and a cap on a weekly rate of pay. The RPS cannot make any other types of payments, such as arrears of pay, holiday pay, or notice pay unless the employer enters formal insolvency proceedings.
If the RPS makes statutory redundancy payments on behalf of a solvent employer, it will then look to recover the cost of the payments from the employer. If the employer fails to repay debt, enforcement action may be taken.
“As an employer in financial difficulty it is your responsibility to consider whether it remains appropriate to continue trading, and to seek professional advice if you are unsure,” said McKinnon.
Employers must make statutory redundancy payments to redundant employees who meet the qualifying criteria for redundancy under the Employment Rights Act 1996. In most cases this will be employees who have worked continuously for their employer for two or more years.
Employers are required by law to consult with their employees about any potential redundancies. They must also notify the Insolvency Service in advance of any proposal to dismiss 20 or more employees as redundant at an establishment
Some G1 staff have received a letter from the company’s CEO to say that they have been made redundant for a second time during the coronavirus crisis. G1 let thousands of staff go in March, before doing a U-turn when the UK Government announced the furlough scheme days later.
In the letter, the firm, whose venues include Glasgow’s Corinthian (pictured), cited losses of over £25m in revenue since the start of the outbreak as justification for its decision, also claiming that it has had to fund over £1m in costs per month while making no income.
Scottish hoteliers have been warning since the start of March that Armageddon was approaching for the hotel industry if more support wasn’t received from Government and this week their predictions came to fruition with nearly 2,500 hotel employees now facing redundancy and more to follow in the weeks ahead.
Furlough wasn’t enough to save hotels from making tough decisions ahead of the 45-day August deadline which saw them liable for employee NI and pension contributions from the 1st of the month.
InterContinental Hotels Group (IHG) was first out of the block, announcing expected redundancies at five hotels including The Blythswood in Glasgow and The George in Edinburgh. Job losses are expected to be in the region of 200. Crieff Hydro was next to announce 241 possible job losses and Apex Hotels followed revealing they were taking the same route although they did not reveal the number of job losses from its 1,100 staff base, spread across its 10-strong portfolio. MacDonald Hotels too revealed up to 1,800 redundancies were expected.
Angela Vickers, CEO at Apex Hotels, said, “Throughout this period we have made use of the Government’s Job Retention Scheme with the aim of protecting jobs for as long as possible, but the impact coronavirus has had on our industry has been devastating. Our sector will be the last to reopen, and when we do it will be with many restrictions in place on how we can operate. Around 40% of our travellers come from overseas so international quarantine measures combined with strict 2m social distancing rules will all be a reality and severely impact our business. Without additional hospitality sector support, it is simply not feasible for us to open our doors and resume trading anywhere close to pre-COVID-19 levels.
“Our entire group has an average monthly occupancy of less than 10% from now until the end of the year. Normal occupancy levels at this time are over 90%. This dramatic downturn in business, coupled with the uncertain economic outlook ahead, has forced us to restructure our team and look at how we operate going forward and survive this crisis.
She added, “The Apex Hotels brand has been built on the strength of its people, so discussing potential redundancies is something we never wanted to consider. We will continue to do everything in our power to improve our position, but we know that it will take time for our business and the industry to bounce back. Our commitment to recovery and rebuild remains stronger than ever, and our sole focus will be on welcoming guests again and returning to usual staffing and business levels as quickly as we possibly can.”
Crieff Hydro boss Stephen Leckie, operates 11 properties, including Peebles Hydro and the King’s House at Glencoe, and has 950 staff he said of the decision, ‘When we closed our doors at the end of March, it was one of the darkest days in our 150-year history and this is another. The impact coronavirus has had on our industry and business has been immediate and drastic. As a family-run business built on the strength of our people, discussing potential redundancies is the toughest step we’ve ever had to consider. I am personally devastated for every one of our team who could lose their job.
“Throughout this process, we’ve done everything we can to look after our people. But despite all the measures we’ve taken so far to reduce costs, we anticipate that when we do open, bookings will be down by 30-50% for the best part of a year. This will amount to a revenue loss of at least £17m (50%) in the current financial year. For every month we’ve been closed with zero income, we’ve had to pay £500k just to keep our buildings safe and insured. This would have a profound effect on any business.
“To try to navigate our way through this crisis, we’ve made use of the Government’s Job Retention Scheme as well as securing an additional £5m in loans from our bank to give us the best chance of survival when we are eventually allowed to reopen. This comes with a heavy financial burden but is the only way forward to rebuild the business and protect the remaining jobs.
“We know that we have many loyal customers who visit us year after year, so we hope the recovery is quick and we can welcome families back to our own family of hotels in the coming months. The effects of this pandemic can’t last forever and our long term vision is to rebuild the team in the future when business returns.”
While MacDonald Hotel’s Deputy chairman Gordon Fraser said, “We had really hoped to avoid this very unwelcome step, but with no realistic prospects of a return to anything like normal trading for the foreseeable future, we were simply left with no choice.
“Potentially, we are looking at around 1,800 roles at risk, in all areas and at all levels of the business.”
The news came the same week Tourism Minister Fergus Ewing announced a tentative opening date of 15th July for hospitality.