March 5, 2021

Defaults and bankruptcies threaten the hospitality industry, which already suffers 36% more bankruptcies




The evolution of bankruptcy processes clearly describes the pulse that small businesses are throwing into the pandemic and how the Covid has ended up beating many entrepreneurs, who have ended up throwing in the towel and finally lowering the blind. The hospitality is once again indicated by statistics as the economic activity most damaged by the management of the pandemic. The restrictions and confinements have put the productive fabric on the ropes, which continues to demand direct aid as have all the other countries in Europe. This week Ana Botín gave a speaker to Spanish companies and in the presentation of Banco Santander’s results, she called for SMEs and the self-employed support must go “beyond credit”. Appeal that becomes more relevant after the ECB warned this week that Spain is the country in the euro area that has spent the least in relation to GDP to face the crisis.

In the year of the pandemic, bankruptcy proceedings soared 35.6% in the hospitality industry, according to data from the INE. A blow for a sector that has accused in the last year the loss of 20% of its employment, according to ABC. In twelve months this activity, which contributes more than 6% to GDP, has lost 237,000 jobs, almost 20% of employment. The sector is in free fall, only cushioned by the ERTE, a safety net that is preventing a much greater collapse in occupation. Today one out of every three employed persons receiving these files are from the hospitality industry. If you add destroyed jobs and workers in ERTE, the figure goes to 600,000.

Last year 438 companies filed for bankruptcy, compared to 323 a year earlier. This sector accumulated 10.6% of bankruptcies during the past year, and together with commerce (20.5%) they represented almost a third of the suspension of payments in Spain. On the opposite side was the industry, where bankruptcies fell 23%. The drop was greater in the energy sector, 45%.

The statistics reflect that it was the small hospitality businesses that suffered the most from the coronavirus. Of the total of processes presented, 40% were from companies with up to four workers and that most of the layoffs were focused on Catalonia, one of the regions where restrictions in the hotel industry have been greatest. It is also the autonomous community with the most competitions registered last year.

The moratorium on bankruptcy approved by the Executive, extended until March 14, prevented a wave of bankruptcies during the past year. The average number of registered processes fell by 14.4% compared to the previous year and was reduced to 4,097 companies. A decrease that contrasts with the increases of the two previous years, of 10.5% in 2019 and 1.7% in 2018, and which followed the decrease of 0.8% in 2017.

As ABC has already reported, some voices already describe this mechanism as a “trap”, because although in 2020 it avoided a business drama, its persistence over time would be preventing viable companies from entering the market, which, perhaps, can’t fight for their survival in a few months. The moratorium was articulated by means of a decree that the Executive approved almost a year ago. At the time, all forecasts indicated that the crisis was going to be short-lived, so the Government designed a mechanism so that companies were not obliged to resort to the contest due to a “bad run.” Also, in this way a collapse in the courts was avoided mercantile, at a time marked by overwork. The rule suspends the obligation of companies to request the bankruptcy in the two months after knowledge of the insolvency. In addition, the judges are obliged not to process applications submitted by creditors for breaches of agreements or refinancing agreements by debtors.

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