BHN editor George Sell reports from the 2019 Deloitte European Hotel Investment Conference in London.
When reporting on this event in 2017, my review was headlined “Optimism abounds at Deloitte conference”, and although this year’s mood was more moderate, with several speakers opining that we are near or at the top of this particular performance cycle, there was still an element of positivity in evidence.
Held at a new venue for 2019 – the Biltmore Mayfair on Grosvenor Square – the conference was opened by Deloitte’s Andreas Scriven, who gave a snapshot of the company’s latest investment survey. It found that the top five most attractive European cities for hotel investment are Amsterdam, Paris, London, Lisbon and Madrid. The top three are the same as last year, albeit in a different order, while the two Iberian destinations are new entries.
European hotel transaction volumes were up a healthy 15.72 per cent in the year to Q2 2019, said Scriven.
Deloitte Germany’s chief economist Dr Alexander Boersch then looked at the global and European economic situation. He painted a fairly bleak picture: international trade growth is at an all-time low, with the exception of the global financial crisis period, the manufacturing sector is contracting and an ageing population means that 1.5 million working age people are leaving the European workforce annually. Further growth slowdown is expected in 2020 in every region except India, he added. Boersch said that longer working lives could mean that older employees become a new labour pool across Europe.
Sally Jones, director of international trade policy and global Brexit insight lead at Deloitte then gave a fascinating update on Brexit which is subject to Chatham House rules so I can’t tell you about it except to say the situation is even more complicated than I had realised!
STR’s Robin Rossmann, still on a high after South Africa’s rugby World Cup win, highlighted a growing regional disparity in European hotel performance and pointed out that in general terms, demand growth has fallen behind supply growth for the first time in many years.
In the View from the Top panel, Belmond CEO Roeland Vos said the value of the pound is a big factor for the company as outbound UK travel makes up a significant proportion of its business. He added that the company was looking at a range of routes for growth, including asset acquisitions, joint ventures and management agreements.
Martin Brühl, chief investment officer at Union Investment Real Estate, said what many of the hotel company representatives in the room wouldn’t: “There are too many brands, which results in confusion for the consumer. We’ll see a consolidation of brands when the market softens.” He also alluded to the “Japanification” of Europe’s economy – a phenomenon which involves deflation, low growth, ineffective monetary stimulus and falling bond yields.
In a social media spotlight, Jeremy Jauncey, founder and CEO of Beautiful Destinations, said UK consumers spend an average of four hours a day on their mobile devices, viewing 300 feet of content per day.
A panel on consumer behaviour featured Wyndham’s European president and MD Dimitris Manikis, who said: “Trying to put consumers in to tightly defined tribes is not the way to go, as they behave differently according to the location and purpose of their trip.”
Moderator Guy Langford pointed out that there have been 52 new brand launches across the hotel sector in 2019, which prompted Radisson’s Elie Younes to spice the session up by saying: “We are not leaders in this industry – we don’t drag people along, we tag along behind other industries. We are disrupted more than we disrupt. I would struggle to find someone in this room who could convince me that we need the 52 new brands and that they were driven by consumer demand. If you have too many brands you become more of a distributor than a brand manager.”
IHG’s Karin Sheppard said: “The consumer has raised expectations of sustainability performance, as do our colleagues”, adding that “physical spaces in hotels need to change to reflect the blurring between leisure and business travel”.
An investment panel saw some surprisingly bullish comments on the future from Credit Suisse managing director Steffen Doyle, who said: “We could be at a false peak and I think we may see a very strong performance over the next 24 months. Trump will tone down the trade war as he wants to be re-elected and we could be surprised by the level of deal activity in the next 18 to 24 months. I think we will see another major consolidation deal in the sector before the cycle peaks.”
Yotel CEO Hubert Viriot added: “There has never been so much liquidity in the market. There are so many people chasing the same deals, and the cost of capital is extremely low.” He added that Yotel is looking to fast-track its growth through organic means and by acquiring smaller competitors – with in the form of operating platforms or assets.
The day’s final session, called Future Opportunities, highlighted an issue that, although not specifically included in the agenda, was the recurring theme of the day – sustainability. I have never been at a hotel conference where sustainability was mentioned so often and with so much importance planned upon it.
In this session, moderator Simon Oaten of Deloitte said: “For the first time the demand for sustainability is coming from the consumer rather than from government, from regulation or from owners.”
Ruby Hotels’ Michael Struck added: “For us it’s an occupancy issue – the type off customers who book with us simply wouldn’t stay at our hotels if we didn’t have a high level of sustainability. Also, having an energy efficient building immediately benefits the bottom line.”
Carlton Ervin, chief development officer at Marriott International said he was “very surprised” at the lack of focus on hostels among the major hotel companies. “That will change over the next few years,” he predicted.
