Hotels are likely to be hard hit by the Government’s £80bn spending cuts announced yesterday, according to a hospitality expert at PricewaterhouseCoopers (PwC), who predicts that tightened economies will have a knock-on effect on business travel.
In addition, the cuts to public spending could result in the loss of 25,000 jobs in the hotel and catering sector, says PwC.
As government departments and businesses shift to accommodate the cuts, they will likely take a new – and more centralized – approach to travel and hospitality, said Robert Milburn, UK leader for Hospitality & Leisure at PwC.
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“Just as we saw in the private sector 18 months ago, travel buyers will face push backs and should expect to be challenged on the need for every trip. Departments will be looking for the best possible deal to be squeezed out of suppliers, with the ultimate goal being central procurement of travel and hotel rooms,” he said.
“There will also be a knock-on effect from private sector companies supplying goods and services to Government, who will no doubt look to curtail business travel and conferences in order to prop up profitability.”
Public cuts impact private profit and jobs
Milburn said that provincial hotels are particularly vulnerable as they are more reliant on domestic business travel than London hotels.
“The cuts will inevitably mean reduced public sector travel budgets and less demand for accommodation, causing further headaches to the industry,” he said.
In a report issued last week, PwC predicted that public sector cuts could result in almost half a million job losses in the private sector, and reduce private sector gross output by £46bn per year by 2014/15.
The distribution, hotel and catering sector could face £1.1bn in gross output loss, which is equivalent to around 0.4 per cent of its overall output. Job losses in the sector directly as a result of the cuts could reach 25,000 predicts the PwC report, Sectoral and regional impact of the fiscal squeeze.