Event review: Annual Hotel Conference

Chris Eddlestone (head of hospitality and leisure at Squire Patton Boggs) opened the conference, thanking all sponsors, speakers and media partners. As a founder of the Annual Hotel Conference, he set the scene for the speakers to come and welcomed moderator Jonathan Langston (senior director CBRE Hotels) to the podium.

Speed Read:
UK regional market is very buoyant with KPIs up in all sectors
Too many “deluded hoteliers” in the industry says Alex Polizzi
Interest rates will rise but not over 2%
Manchester bedroom growth “phenomenal” to >16k rooms by 2017
Branded hotels overtaking independents
Airport security 100ml limit under review
Banks are lending again (albeit at higher LTV’s)
Hoteliers are happy again (for now at least)
But VAT rates continue to rankle

Deluded Hoteliers
Next up as keynote speaker was Alex Polizzi, who comes from a long line of hoteliers – her mother is the hotel designer Olga Polizzi; Sir Rocco Forte is her uncle and Lord Charles Forte, of Trusthouse Forte and Savoy fame, was her grandfather. As the Channel 5 Hotel Inspector Alex posed the question that since digital technology is changing very fast, can we cope with this?

Noting that there is no replacement for human interaction in the service environment Polizzi stated that “holding a tablet is not same as holding a customer’s gaze…. and that servers need charm when order taking”. When challenged by a question from the floor “How do you feel qualified to advise businesses outside hospitality?” she respond with ease “because the hospitality business sets you up for almost any business; people are the same and customer is king no matter what your business”.

She continued “the real challenge is to continue to invest in staff as tech has not made us as humans obsolete just yet!” When asked by Michael Hurst (CBRE consultant) what is the worst thing you have seen Polizzi quipped “Lots of deluded hoteliers – think they can stroll into the business because they can entertain a few guests at home.”

The Dismal Science (with apologies to economists)
The ubiquitous economic overview was delivered by Sebastian Burnside (a senior economist within RBS Economics). Apologising for being the bearer of a “barrel full of bad news” over the last five years, he added today most of the bad new is behind us (Eurozone crisis, near USA default etc).

The UK economy is now 2.7% larger than it was in 2009 and households are now spending 6% more than in depths of recession while annual growth of ±3% is sustainable. Positing the question “so how long should interests rates stay at record low 0.5%?” he answered the rhetorical question by explaining that we need to understand what is going on in Mark Carney’s head (Governor of BOE); Carney brought fresh perspective to the BOE and makes monetary policy understandable to all by introducing “forward guidance”. Unemployment has now has fallen to below 6% and +750K jobs were created in the last 12months (100k in hospitality) but consequently there is a 25% rise in labour market vacancies which the industry is painfully aware of.

The BOE will increase interest rates but not more that 2% Burnside forecasted and he warned that while companies have reduced debt by >£200bn since 2008, households have not and it now stands at £1.4bn;  so if interest rates rise by 1% it could remove £8bn out of UK Economy and impact growth.

Further depressing news was that there is a polarisation of labour market in UK; only the top 10% of the labour market have benefitted from wage rises and this sector is most important as they account for 25% of restaurant spend and 30% of all hotel spend in UK;  but they would actually benefit by a 1% increase in interest rates to the tune of about £4bn in increased interest on their savings! Interest rates will probably be below 2% in 2016 so no major shocks are in store.

From the floor, Clive Hillier (CEO Vision Asset Management) asked is the ECB powerless due to France’s perilous position and Germany’s decrease in spending? Burnside responded that it takes a Eurocrisis to deal with a crisis so EU recovery will be slow and late but it should be remember that the existential threat to the Euro was only two years ago which has now all but disappeared.

Manchester’s Phenomenal Growth
David Bailey (senior director at CBRE Hotels & Consultancy Services) delivered a highly comprehensive market overview stating that we still have a very volatile industry and economy. Focusing on Hotel Market Performance, Profitability, Supply Landscape a case study on Manchester and the Investment Landscape David treated delegates to an excellent graphic on RevPAR growth and decline since 2006.

Some notable facts included that London has the highest room occupancy of all major EU cities and Aberdeen is second highest RevPAR growth after London.  Hotel openings/closures: branded hotels dominate the supply pipeline but 12% independent hotels are still opening; closures are dominated by independents and  closures peaked in 2012/3 with 216 hotels closed or 4 per week but 128 opened at 2.4 per week. In 2014, there are 21 fewer hotels but 1004 more rooms so smaller hotels are closing but supply outlook is benign.

Regionally, Manchester has largest supply ±15,000 rooms and high pipeline supply. In terms of evolution since 1990, Manchester has grown from 6,135 rooms to 14,818 in 2014 and by 2017 will be 16,061 rooms which is phenomenal growth. Overall in the UK market over £3.2 bn has been invested into UK hotel market so far this year  with Starwood, Goldman Sachs, Marathon and others leading the charge. David concluded noting that we are in a completely different economic phase and that the key risks are now Geopolitical: Russia/North Korean instability, ISIS, Ebola and so on. The UK industry is on the mend as noted in the PwC UK Hotels forecast (4.3% increase in rate for regions).

Top Dogs
Headed up by Michael Hirst OBE (consultant at CBRE) the opening plenary panel entitled “From survival to revival” featured a Q&A with the “top dogs” (CEOs to you and me) of the UK hotel industry. Hirst asked the panel what are the market conditions and forecasts for 2015 which drew a largely positive response from the CEO’s but some caution about eurozone recovery.

Michael Wale, president, Europe, Africa and Middle East, Starwood Hotels & Resorts Worldwide noted that while the UK is performing well, there is concern about southern Europe (and France & Germany).

Steven Daines, CEO, Hotel Services, North Europe and Russia, who started his career with Accor in 1994 would not comment on whether Accor is buying Louvre Hotels in France for €1.3bn.  He added that Accor’s position in the UK, NL & Ger is looking well but the UK is best performing and that Accor (like everyone else) faces a recruitment problem and keeping employees.

Shane Harris  (chief executive of Jupiter Hotels which owns and operates 26 hotels under the Mercure brand and 32 multi brands across the UK) stated “the mid-market has life in it and is still a place to invest” but “MICE (meetings, incentive, corporate, exhibition) business is down as is average day delegate is down by 4%. Harris stated that he and his team know how to grow the business and satisfy investor ROI (return on investment) since they understand what investors and brands want.

Tony Spencer, managing director of Shire Hotels, was upbeat but noted that profitability is weak with rates not yet at previous peak levels.

The hoary issue of VAT was centre stage with research showing that a 5% reduction in VAT would lead to the creation of 100,000 jobs and increase GDP. Indeed one only has to look at policy success in the Republic of Ireland (which kept the 9% reduced VAT rate for hospitality, food & accommodation) where over 30,000 jobs have been created in the last two years in a much smaller economy.

Simon Calder – The man who “pays his own way”
Day 2 featured a sluggish start after a hugely success drinks reception hosted by JLL the evening before followed by countless dinner meetings across the city. However Simon Calder (Britain’s leading travel commentator and known as “the man who pays his way”) was on hand with a highly amusing but thought provoking presentation on the current “travel landscape” delving in topics like “what does the UK tourist industry do well and not do well? (the later of which there are many).

Noting that Istanbul is set to become the London of south-east Europe, Calder bemoaned the lack of “pluggage” (the need to plug in all your devices into non existent sockets) and especially asked hoteliers not to treat clients as “potential criminals” that may have robbed the minibar! His 10 things to watch out for included
APD has been cut for longest flights from April e.g. NZ and Chinese market
Rugby world cup will distort the travel market
Eurostar is expanding
Germany will be on track by 2016 with direct trains to the UK
Scotland trains are turning “luxury”
Easier airport security is on the way (IATA working on easing liquid ban)
Rio Olympics 5-21 August, 2016 could affect UK clients to stay home and watch
21 Aug 2017 will see greatest solar eclipse
Epidemic (probably flu) or pandemic is inevitable
Vesuvius goes Pop! (or will do soon)
Its all about perseverance !

Further excellent sessions (too detailed to include in this article) on “Loosening the (bank) Purse Strings” and Asset Managemet “Ready, Steady, Sell” featured industry experts discussing the banking landscape and how to prepare a property for sale. Further information is available via the contact details below which I would be happy to share.

Publicly available presentations from the AHC can be found here.

Weldon Mather is an independent hotel asset manager and tourism consultant in the hotel, restaurant and pub sector. He works with clients in throughout the UK and Ireland including banks, owners and managers, receivers/administrators, liquidators and investors. Contact: www.wmconsultancy.eu  Tel: +44 77845 46066 or +35386 8684441

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