Unlocking the potential of the hotel sector

In June 2020, shortly after the outbreak of the COVID pandemic, HVS – together with our friends from Bird & Bird (lawyers), AlixPartners (restructuring specialists) and EP Business in Hospitality (publishers) – launched the first in a series of webinars. Little did we know then how much our clients and friends would appreciate hearing from experienced guests and talented panelists who would add their expertise to each topic discussed.

So four years later, our 20th webinar returned to our original theme of unlocking the potential of the hospitality sector as we once again looked forward to what the future would bring. We organized this event as a hybrid event – approximately 40 guests from those who had spoken at our previous webinars joined our online audience of several hundred people. To watch a video of the event, click the link below.

Guest speaker Kate Nicholls OBE, renowned CEO of UK Hospitality, shared her views on the direction the country’s hospitality sector is heading. She noted that the “unlocking” process is ongoing, with hoteliers across the country noticing that turning revenues into profits has never been more difficult, with rising costs of debt, energy, wages and pressure on the supply chain. particular concerns, despite significant revenue growth.

She noted that the upcoming general election both in the UK and elsewhere in the world will have a potential impact on the UK sector and cited three reasons for rejoicing: (1) global travel is recovering strongly (mentioning the European Football Championship in Paris Olympics and Taylor Swift as particular demand generators); (2) consumer confidence is growing, with dining out and holidays being a particular priority; and (3) inflation is falling and there is a sense that the economy is on the mend. Continues to press the UK Government (and its opposition) to support the sector in easing planning restrictions, reducing the tax burden, in particular recognizing the impact of business rates and VAT, and encouraging more employment, with currently the number of job vacancies remains at 8%, which means that some operators are forced to shorten opening hours or limit the availability of their facilities.

Five eminent personalities from the industry then briefly shared their views.

• STR’s Tom Emanuel commented on the increase in demand in most countries around the world, with the current exception of China and the US. Europe continues to grow, with the UK and Ireland returning to pre-2019 levels. Room prices in luxury hotels in London are now showing signs of decline, having increased significantly in recent years. The economic sector is also developing well. STR forecasts UK RevPAR growth of 3.5% next year.
• Ian Livingstone of London & Regional Properties confirmed that his company’s luxury and budget hotels are performing very well, with business back to roughly 2019 levels. Mid-market hotel growth is slower, but business groups are now accelerating. He sees the proliferation of brands by major groups as resulting in greater difficulties in differentiation and mentioned that Area of ​​Protection (AOP) restrictions in many agreements could create increasing difficulties in the future. Sustainability is now becoming an increasing problem – expensive to implement and difficult to avoid. The sector also needs to do more to encourage young people to take advantage of career opportunities.

• Coley Brenan of KSL Capital Partners also emphasized the need to devote more resources to recruiting, training and retaining staff. Investors and owners need to drill down into what the data and trends show – understand their customers’ requirements, focus on delivering superior performance, and then manage the flow of funds to profits.
• Jan Hazelton from Kerzner International confirmed that the luxury space is a great place for consumers and investors. Many luxury products are emerging around the world, and quality service and providing exceptional experiences are key success factors. Growth is more difficult these days, takes a lot of time and, in her company’s case, may require using its balance sheet to make projects happen.
• David Kellett from Invesco Real Estate commented that for some institutional investors, hotels are like Marmite – love it or hate it! Consumer trends currently look positive and the focus should be on their requirements. Expresses concerns about inflation and its sequestration, especially regarding the costs of implementing sustainability requirements and the sector providing workers with satisfactory jobs. He encouraged hotel groups to focus more on revitalizing their core brands, finding value in “unloved” spaces and repurposing redundant buildings as hotels.

Finally, there was a lively panel discussion moderated by Bird & Bird’s James Fowler, raising some key questions. This time we thought we’d turn the tables and include the hosts on our panel…

• Graeme Smith, managing director of AlixPartners, stressed the need to address work-related issues, both in terms of overall costs, but also to make the sector more attractive to young people, including those who may be overseas, and provide meaningful and valuable careers. He also referred to the growing importance of the holiday sector for institutional investors, but warned against strong opposition in some areas to reducing their dependence on tourism. He believes hotels are a resilient asset class in their own right, becoming key assets attracting a greater share of available capital, especially from new investors.

• Karen Friebe, director of hotels, hospitality and leisure at Bird & Bird, noted the importance of sustainability, but there is still a lot of talk and not enough action – for example, how hotel management contracts should be improved to ensure they are properly care. She believed that China had untapped potential and saw this as an opportunity, as well as converting unused office space into hotels. Time will tell whether it will be possible to attract new investors to conclude lease or management agreements. She reminded us of the need to maintain quality in the standards of providing hotel services. She also challenged the industry to shorten management contracts and noted that there had been a number of conversions from leases to management contracts and from management contracts to franchises in recent years.
• Russell Kett, chairman of HVS, noted how well the sector has benefited from domestic tourism in recent years and that now that international travel has picked up again, the UK hotel sector should do more to retain domestic travelers for short breaks etc. He also reminded hotel operators of the need not only to generate business and revenue for their hotels, but also to ensure profits for their owners and investors, perhaps by repurposing underutilized hotel spaces, after monitoring their profits per square meter, and even adapting the use of artificial intelligence , to help you run your businesses more effectively. He remains hopeful that interest rates will fall by the third quarter of this year and that more deals will be announced by the fourth quarter.