UK: IHM, in partnership with AHV Associates and H+G, hosted a hotels and hospitality Urban Living Insights event at the House of Lords yesterday.
The focus of the event, Sailing through the storm, involved six short presentations providing a state-of-the-market snapshot of debt finance, equity investor sentiment, valuations, operations, brand, and the distribution landscape.
Thank you to Louise Gillon, head of hotel finance at Leumi Bank (debt finance); Mathieu Pinson, partner at Zetland Capital (equity investor sentiment); Will Kirkpatrick, head of hotels and extended stay at Gerald Eve (valuations); Kerian Barnes, commercial and operations director at Starboard Hotels (operations); Brenda Collin, EVP of Europe at Preferred Travel Group (brand); and Tara Colpitts, senior director of market management at Expedia Group (distribution), for setting the scene in their respective areas.
IHM’s editor-in-chief, George Sell, then hosted a discussion about the future outlook for hotels and hospitality.
Some key take aways from the conversation include:
• There’s a strong focus on interest costs, reducing the amount of debt on assets, and analysis of cash flows (particularly utilities, staffing, and F&B). Combined, this means the senior lending market isn’t as competitive as it once was. It could also put pressure on valuations.
• With the new barometers of low LTVs (loan-to-value) and high interest rates, bid-ask spreads are widening. It’s a good time to get involved with value-add projects.
• Construction costs are crippling which is making development a huge challenge. Overall, business operations are very positive but when it comes to servicing debt interest at a minimum of eight or nine per cent, it’ll be difficult to make a return on the asset in the short term.
• There are a lot of owners who want to sell, but buyers perceive assets being brought to market now as requiring significant investment. In the last 20 years, there’s never been such a wide gap between a buyers’ and sellers’ expectations. It’s a stagnant market, and we need the market to move.
• Whilst revenues are up, costs are being squeezed. The F&B supply chain is very disruptive and is reducing what hotels can offer to customers. There remains a lack of staff and difficulties around recruitment and retention. Costs of implementing ESG initiatives involves a whole new set of skills when trying to improve carbon footprints.
• Luxury hotels have performed incredibly well, as have economy. Some airport hotels are still being offered government contracts to house refugees, which could result in high occupancy levels and guaranteed income.
• American inbound travellers to the UK have increased, and MICE business has been phenomenal. Most planners are refocusing efforts on Europe through to 2025. It’s all about speed to market and responding to RFPs as quickly as possible in order to convert.
• Projects which have been delayed have typically launched in phases, which has impacted on more negative guest reviews, driving down ADR. The consumer expects a better guest experience, and greater effort is required to monitor reviews and manage responses.
• Customer expectations are high when it comes to a seamless, connected and personalised booking experience. Consumer behaviour has changed so much that the marketplace has widened in order to cater to preferences such as cancellation policies, refunds, sustainability, payment methods and more.
Companies in attendance included HB Titan, Wyndham Hotels & Resorts, Cynergy Bank, Colliers, The Mandeville Hotel, Sir Richard Sutton Limited, Cairn Group, City Relay, Shiva Hotels, Christie & Co, Blue Orchid Hotels, Beaufort Capital, C1 Capital, 4C Hotels, and more.
IHM hosts regular Urban Living Insights events throughout the year, each one focussed on a different asset class within the hospitality and real estate industries. To check out the schedule, please click here. To learn more about the events we host, please email email@example.com.