The timing of the virus, at this time of year has further compounded cash flow for hotels. In March, hotels are typically coming out of their low season and heading into the start of positive cash flow. Instead, with no or limited cash inflows, debts are now going to accumulate. Any debtors should be contacted to look for payment.
After you have spoken to your creditors and suppliers, and reduced, where possible your outgoings, we would recommend that you complete a cash flow analysis for the next one to three months. Current supports from Government such as the non-penalty for the delay in submitting payment with the VAT return will help with cash flow. Applying for support from your bank or the SBCI, for example, may take longer.
Communicating with your bank or financial institution will be very important. Understand what it is that you will need over the next few months – working capital, overdraft or a moratorium on your debt (either principal or interest). The reality is that hotels may be closed for longer than 2-3 months, or if open will have limited business for several months after. Therefore, in looking at your cashflow needs, a six-month cashflow statement may be necessary to prepare. Understand from the bank if any of this will impact your facility or covenants.
Without a doubt this will have a lasting impact for the sector. However, the expectation is that this is temporary and Ireland and the world will start to travel again and hotels will gain business. The domestic market will be very important to the sector in helping it get back on its feet.
Mairea Doyle Balfe is part of our specialist hotel, tourism and leisure team. We are here to help hospitality businesses that need expert support during this crisis. Contact a member of our team.
Mairea has also recently recorded a series of webcasts for Fáilte Ireland that cover a range of liquidity topics: