The past year has been challenging for the textile rental industry. Although there are some positive factors and some individual companies may be more optimistic than others, the industry as a whole has had to cope with what TSA chief executive Murray Simpson calls the “toxic mix” of continually rising costs for diesel, energy and, in particular, cotton that have threatened both profitability and cash flow.

The central message to the customer has been that charges must rise although this is not always easy to implement.

David Stevens, the joint managing director of Paragon Laundries, takes a cautious view. The main reason for this has been the significant influence of cotton pricing.

Stevens feels that sector growth has not been dramatic, many projects have been slowed down and most hotel chains have found business slower than forecast. A knock-on effect of the cotton crisis is that linen is now becoming an attractive target for theft and he says there have been several instances of substantial stock being taken directly from hotel linen rooms.

However volumes have been more positive says Stevens and generally on a like-for-like portfolio there has been a 5% increase. He also believes that most laundries have improved profits over the last few years so the industry is moving into 2012 in a stronger position than it was going into 2009. Nevertheless he has strong concerns about the industry’s inability to secure the price increase mechanisms it needs. The TSA cost index stands at 8.44% and he feels that most laundries are failing to secure increases at this level. In the long term this could be bad news not only for textile rental companies but also for the hospitality sector as it will mean that hotels will be served by an under-invested industry, explains Stevens.

At Imperial Linen Services, managing director William Hill takes a similar view. Although business has been buoyant for the company in 2011, the previous year was quieter and he believes that with the threat of a double-dip recession the market could become tough again in 2012. ”There are still some nervous hotel groups out there,” he says.

Hill says that his company has faced the increasing prices in cotton, raw materials and fuel head-on. The rises have proved a challenge for all laundries that exceeds anything he has experienced in the past 30 years. His company has continued to make exceptional savings, not least in wages and personnel and the problems have undoubtedly meant that laundries have had to become leaner and fitter.

All customers are looking at price and most are sticking with their current suppliers, says Hill. He adds that some responsible launderers, like his own business, have raised their prices over this period and if all laundries, public and private, took this approach the industry would be better placed to survive the challenges. “We simply have to raise the bar in terms of pricing if the industry is going to become stronger over the coming years,” says Hill.

The view from Bourne Textile Services reinforces the general feeling about the industry.

Chairman Hedley Stroud agrees that 2011 has been challenging, but the company, which focusses on the hotel sector, did see a small increases in the number of pieces sent in. This was especially evident in July and August where some of the hotels that the company serves, seem to have successfully promoted the “staycation holiday”.

This increase helped to compensate for a “very flat” period in April that resulted from the combination of Easter and the Royal wedding.

Answering LCN’s questions in November, Stroud said that volumes appeared to be steady but unpredictable.

Everyone, he says, has been taking a closer look at the cost of textiles as a result of rising cotton prices. He notes that there has been an accompanying increase in problems with stock loss and organised theft – one of the customers had its linen room cleared out. The company now takes a closer look at internal security measures during service visits. Hedley Stroud also notes that TSA is being proactive on security with a poster and awareness campaign.

Murray Simpson says that this campaign, which will be launched in 2012 and also covers linen misuse, seals a process of co-operation between TSA, the UK Housekeepers Association and the Institute of Hospitality, that followed TSA’s emergency cotton summit in March this year. The aim will be to have these posters in every linen room in every hotel.

Simpson also says that TSA, in conjunction with Crime Stoppers Integrity, has launched a confidential Linen Crime line (0800 021 100) for reporting suspicious activity in the laundry or hotel.

Though the cotton crisis has tended to grab the headlines, Hedley Stroud stresses that there is still continued pressure from high increases in gas electricity and fuel, which are outside the industry’s control. Bourne Textile Services has continued to invest in energy-saving equipment, which has improved drying times in the tumblers and other finishing equipment. It has also invested in filtration equipment to improve water recovery and continued to look at areas where the company can become more efficient.

Continued re-investment has indeed been a key to the company’s continued success.

Chris Sander, managing director of Johnsons Textile Services, acknowledges a lowering of consumer confidence during 2010 – due to political turbulence in areas such as Libya and Afghanistan and, in the UK, government cuts, job losses and increases in petrol, cotton and fuel prices. These continued in 2011 and the year started with atrocious weather conditions.

The group naturally had to overcome these problems but Sander says that both Johnsons Apparelmaster and Johnsons Stalbridge Linen Services coped well and the company is on course for a very successful year. Sander attributes this success to the employees’ “enthusiasm, hard work and belief in the company”, the ability to control costs and work more efficiently and to Johnsons’ dedication to being the best service provider. It continues to invest time, money and resources in developing staff skills.

Sander also believes that despite difficult trading conditions there are still opportunities for quality textile rental services and direct sales, particularly of PPE, are growing.

The hotel and hospitality sector is one of the major customer groups in textile rental but healthcare is also important and the challenges it faces are slightly different.

TSA’s Simpson says the biggest disappointment here in 2011 was the Government’s failure to publish the long-awaited replacement guidelines for HSG (95) 18. These are now expected by Spring 2012 but Simpson still calls the delay “unforgiveable” and says it has led to uncertainty and indecision.

Increasingly commercial laundries serving the sector are seeking accreditation to RABC (Risk Assessment and Biocontamination Control) as represented by EN14065. This requires robust validation of disinfection processes and TSA led the move to develop an industry wide protocol.

Derek Isles is managing director of Synergy Health (UK) Linen Management Services the dedicated provider to the healthcare market.

He says that growth has been slow due to the delay in the publishing of the Buying Solutions Framework which led to trusts delaying issuing tenders until this had happened. The eventual publication did trigger a significant number of tenders and enquiries.

Although Isles’ comments refer solely to healthcare, this sector too has been faced with rising textile costs. Isles says that the higher cost has limited the volumes of linen that the company can purchase.

This sector also suffers stock losses and Synergy has introduced an awareness campaign at most hospital sites to highlight the losses that result from ambulances taking linen from A&E departments and also from patients being discharged in nightwear or being returned to nursing homes. The company has also visited many nursing homes to recover its linen.

Pricing is also a big problem. Contracts follow fixed pricing schedules based on either the Hospital Services Cost Index or the Retail Price Index. This means that there is little room to increase prices to reflect the provider’s increased costs, so margins are squeezed.

The healthcare sector remains price driven and trusts are under government pressure to cut their own costs so seek lower prices from suppliers. Recent trust mergers have increased volumes but the downside is that the merged trusts believe high volumes must equal lower prices and several trusts issuing new tenders are seeking to hold prices for the term of the contract – 2/3/5 years.

However on a positive note prices for new contracts from commercial operators have been more reflective of the cost of providing a service.

For the textile rental market in general, 2012 holds mixed prospects. For companies serving the hotel and hospitality sector, much has been made of the opportunities afforded by the Olympics.

Certainly Chris Sander at Johnsons Textile Services believes this will be very positive.

However, this prospective opportunity does have a downside. The TSA has pointed out the difficulties the event might cause for the logistics of delivery and supply. It aims to keep members informed both on its website and with e-mail bulletins.

Hedley Stroud at Bourne Textile Services says that the exact consequences of the Olympics’ effect are difficult to predict as there is no history to base judgements on. Hotel occupancies could well be very high in London and the home counties during July and August but many visitors will be long-stay so there could be a reduction in the pieces sent in for processing, because of bed-change policies. Beyond London, laundries will not be able to be sure of their operating levels until early summer.

Therefore the challenge will be meeting the demands of all customers, when the effect of the Olympics is so difficult to predict.

David Stevens is also not convinced that the Olympics will provide good business for the textile rental industry. Hotels will undoubtedly be busy but while this sector may be able to raise room rates to reflect extra costs, textile rental providers cannot increase their charges.

He points out that the logistics problems will increase the cost of servicing hotels in and around London and it is unlikely these can be recovered.

While hotels may do good Olympics business, their conference bookings may suffer and by implication so will the laundries.

As for prospects in the healthcare sector next year, Derek Isles says that a significant volume of healthcare contracts serviced by his company and others will come to the market in 2012.

If all parties offer realistic prices, providers will be able to invest in equipment to control or reduce costs. However, several NHS in-house laundries are lowering prices to secure volumes.

The challenge for commercial operators is to ensure that sensible prices reflecting the true costs of providing services are supported by quality offerings and a robust contingency plan is in place and is recognised by the Trusts.

So overall it seems that for th textile rental industry the mix of opportunities and challenges in 2012 may be similar to that it faced in 2011.

Pricing will continue to be one of the main concerns as will the ability to contain costs.

Despite the potential problems, the Olympics could bring extra business but sensible charging and planning ahead as far as possible will be essential.