As COVID-19 continues to throw unprecedented challenges at the hospitality sector, we reached out for some words of support from INAA board member and international tax advisor, Jörg Bornhausen.
The abrupt introduction of lockdown measures and global travel restrictions means the hotel industry has all-but ground to a halt. Specifically, the cancellation of international business events and conferences poses a serious threat to the professional hospitality sector.
Luckily, accountants, like Jörg, are working around the clock to provide dedicated support. Whether it’s helping clients redeem government grants or striking agreements with landlords, accountants can offer a vital lifeline in these testing times.
Join us as we explore how the accountancy sector can support the hospitality industry and help struggling hotels achieve financial stability.
Introducing Jörg Bornhausen
Before we dive into Jörg’s expert insights, let’s rewind the clock and understand his professional background.
Just five years after joining the team of German auditors & tax consultants at Bornhausen Consulting, Jörg enrolled as a partner in 2016. As a certified tax advisor and a qualified chartered accountant in Germany, Jörg has years of experience as an international tax advisor, specialising in accounting and finance for the international hospitality industry, international accountability standards, and audit.
While his services span from IT companies to large property investors, recent events present a new set of challenges in the hospitality sector. As an INAA board member, we’re delighted to share Jörg’s expertise and empower our global association as a collaborative force for good.
What's the Link between Accountancy & Hospitality?
Many of Jörg’s clients rent real estate to hotel chains that serve business travellers across Germany and major European cities. While these clients aren’t directly impacted by the drop in hotel guests, it’s in their interest to support the leaseholder and take action to avoid the hotel chains from falling into insolvency.
Jörg explains how the long-term nature of most hotel lease agreements means it will be incredibly difficult to find a new renter if the existing hotel goes under. Both parties share a mutual interest to maintain financial stability and secure a healthy working relationship.
Accountants play a vital role in managing these relationships and negotiating financial obstacles presented by COVID-19. Specifically, they must conduct audits to assess the financial position of the hotels, assemble financial reports to support grant requests and provide certified advice to improve accessibility to short-term government loans.
How Are Accountants Helping During COVID-19?
After asking Jörg about what steps he and his associates are taking to support clients in this time of need, he identifies three focal points:
Claiming Government Support
In the absence of paying guests, Jörg and his team support hospitality clients to claim state funding and generate vital cash flow. While some businesses can scaledown their upfront costs and sit dormant while they wait for the storm to blow over, the overheads of renting a property mean the hotel sector can’t afford extended periods of zero income.
Accountants, therefore, play a pivotal role in analysing the financial position of these businesses and staying up-to-date with the latest government legislation to access relief funding.
While financial provisions are unique to each country, Jörg identifies a pressing need for the German government to establish funding options that are targetted specifically to the hospitality sector. All industries have a unique set of needs which can’t be satisfied if the government fails to recognise the nuances of individual businesses.
That said, the German government has recently implemented a VAT reduction from 19% to 7% for restaurant sales. Despite only accounting for a small proportion of hotel revenue, Jörg explains how small savings could be the difference between success and failure in the current climate.
In Germany, there are two immediate financial support options since the outbreak of COVID-19:
- Financial grants. Jörg has been impressed by the efficiency of the application process, with some clients receiving funds in a matter of days.
- State loans. Jörg emphasises the need to enrol the support of a qualified accountant to secure the right loan for your business. State loan applications can be extremely longwinded and often require detailed financial reports to validate your claim.
- In an attempt to accelerate the process, the German government are using private banks to administer the loans who will then request a repayment of 80-100% from the country’s state-owned development bank, KfW.
Managing Financial Relationships
As previously mentioned, managing professional relations between hotel owners and landlords is critical. Jörg explains how the government has implemented a new law which says property owners cannot cancel a rental agreement or enforce eviction at present.
The legislation has sparked private agreements which allow leaseholders to delay rent payments in a bid to maintain liquidity and support long-term rent agreements. Jörg emphasises the pressing need for accountants to conduct financial audits to ensure transparency between both parties and validate the need for an agreement.
In an attempt to minimise overheads, Jörg describes payroll as a “make or break” factor for hoteliers.
As soon as the state imposed mandatory hotel closure laws in March 2020, it was important to switch employees onto short-term contracts. This way, hotel staff still receive between 60-70% of their wage and the employer receives full compensation from the German government.
Jörg and his team are proud to report that none of their clients in the hotel sector have had to lay-off staff members as a result of the pandemic.
What Areas of Accounting Will Be Important for the Hotel Industry Over the Next 12 Months?
When we asked Jörg about the future of hotel accounting and the so-called ‘new normal’, he explains how managing hotels in multiple geographies will require unprecedented levels of collaboration and knowledge-sharing.
For example, Jörg has reached out to his fellow INAA members to seek local advice from partners in Austria and Switzerland to support German clients who have expanded into major European cities. He explains the value of having direct contact with a “trusted network of professionals” to discuss local legislation about government funding and stay compliant with regional tax laws.
As COVID-19 continues to present the hospitality sector with new challenges and travel barriers, the ability to join forces and share advice is more important than ever.
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