Youtravel’s attempts to reduce its debts risk undermining the entire accommodation-only sector.
The warning from one supplier came as a rival cancelled bookings and terminated supply of rooms.
As Travel Weekly reported last week, Youtravel is asking hotels to accept payment of as little as 70% of what it owes as it nears a deal to sell 85% of the company to German giant FTI Touristik.
Youtravel denied the deal is dependent on it reducing its debt and claimed many suppliers had accepted the reduced payments.
However, hoteliers are now expected to avoid giving firms such as Youtravel as much scope to build up debt.
Club La Costa director Laurence Hicks said an offer from Youtravel was under consideration and had to be weighed up against the potential legal costs of recovering the remainder owed.
But he said the Youtravel situation had been a “wake-up call” for suppliers who are now tightening credit controls on bed banks.
“We work with some high-volume bed banks. You have to look at how competitive they are. They are making very small margins and going for volume. If they cannot meet their commitments they are selling at the wrong price and the economics do not work.”
On Holiday Group said it was not prepared to accept the Youtravel request.
An OHG spokesman said: “Unlike hotels, we are unwilling to allow Youtravel to build up a large historic debt and then offer to pay only 70%. Hotels may be stupid, but we are not.”
The decision to cancel bookings affected only 150 Youtravel customers. Youtravel confirmed it was no longer working with OHG on a business-to-consumer basis but that this only affected city hotels, which account for 1% of its business.
The FTI deal is expected to complete any day. Youtravel founder John Kent declined to comment.