UK: Global hotel tech provider Avvio has predicted a downturn in the UK hotel industry due to a number of factors.
The company has predicted that the combination of a general downturn of tourist visitation to the UK, business rate re-evaluations, with the added competition of Airbnb and similar short-term rental options, had led to the projection
Avvio CFO Seamus Holmes said of the projection: “Hotel businesses have become fair game in a market which is evolving very quickly, but we are in danger of seeing more hospitality businesses fail if they carry on being subjected to so many negative commercial pressures.”
The number of overseas visitors saw a 3 per cent decline last year, in spite of a low pound, with a 60 per cent increase in hotel insolvencies following that. The issue of Brexit is also looming large over the industry, as the conference and event spending rate has dropped following the continued political turmoil, removing a significant revenue segment from most hotels.
The average hotel makes approximately 65 per cent of its revenue from non-stay-based services, including food and beverage, spas and events, which incur labour costs even when not in use, making this downturn in spending hit even harder. Pressure to list on sites like booking.com, which charge significant referral fees (up to 30 per cent), as well as increase in wages, make it tough for the hotel business to compete with their up and coming rivals.
The rise of short-term rentals for personal and business travel has brought significant competition for the hotel business, as they have no need for additional expenses, such as food and leisure, and have any major commission built into their online prices. With 80,000 Airbnb listings in London, about half the number of hotel rooms, and with Airbnb listings in Edinburgh almost even with the available rooms in the Scottish capital, hotels are losing their market dominance and are finding it harder and harder to make money.
PWC predicts a modest rise in hotel stays in London, assuaging dears in the capital, but predicts massive falls in the rest of the country, with these results backed by BDO findings in Q1 of 2019. The need for technological solutions is cited as a major driving factor for improvement in the new year, with increased use of digital platforms and cyber security cited as a big factor.
This follows findings last year that hotel chains are prioritizing investment in technological solutions for the future. With 76 per cent of travellers thinking hotels could be greener, improved sustainability is another way UK hotels could both reduce long term costs as well as make themselves unique in a more competitive global market.
Holmes predicts that a more classic approach may solve problems, saying: “Hotel owners need to take back control of their own destiny – this can be done by improving guest experience, offering added value personalised services which in turn generate more revenue, increase return visits and improve guest advocacy.”