Bursting the bubble

Madeira

The race is on to see whether destinations can open up faster than hotel companies can go under and the eye of judgment this week was on Spain, with results from NH Hotel Group and Mélia Hotels International being released as the country started to move towards reopening its hotels; under stringent guidance.

With the global branded players lining up to outline their liquidity levels this results season, the Spanish operators were not high up in the rankings. NH has $675m. Mélia has access to €450m. Marriott has $4.3bn. Hilton has $2.8bn. IHG has $2bn. This isn’t the kind of race such as you see as a progressive primary school - not everyone will be winners.

Much will depend on government support. In Spain tourism accounts for 11% of GDP. The Spanish government has approved a range of measures to support the tourism sector, which include a €400m, state-guaranteed credit line and some wiggle room when paying taxes. The French government announced a €18bn rescue plan to support the tourism sector. The UK government was, at the last count, trying to work out whether tents or hotels could harbour more virus while also undergoing a very confusing health arse/elbow debate.

In this globalised world, where you have your hotel has never mattered more when it comes to its likely survival and that must now be a consideration on developers’ minds. It’s certainly on investors’ minds as they look at adding extended stay components to every hotel which could possibly sustain it.

Governments will hold more sway that just in matters of cash and cleaning: the term ‘travel bubble’ has entered the vernacular and has quickly become the latest trend to be concerned about if you’re a hotel. A bubble is formed between countries who feel that they can safely trade travellers with each other- the European Commission suggested it only this week as a way to start opening up the bloc.

So far Australia and New Zealand have started negotiating one. Greece, Cyprus and Israel are also in talks. Travellers are the new currency; I’ll have some of yours, but I’m not interested if they’ve been devalued by illness and are going to come and infect me. With countries looking to trade with those at similar levels of containment, it seems likely that the US and the UK will be kept out of others’ travel bubbles.

The hospitality recovery is not just about the work hotels are doing to make guests safe, it must be backed by governments too. And at the moment, not all are up to speed. Those who aren’t able to access bubbles must be prepared to bail out their tourism sectors.

As with all trade, there will be protectionism. Countries will not way to lose valuable domestic business by letting travellers out to other countries when they could be at home gorging on, say, cream teas.

But back to Spain. Dependent on tourism it may be, but it is still very clear that the virus comes first and it is not opening its travel bubble to just anyone. When it comes to global pandemics, you’re only as strong as your weakest link and the government will keep Spain as an island in its own bubble if it has to. For those operators with less liquidity, the bubble will not protect them from overseas predators.

 

To carry on taking the temperature of the sector, join us and the market’s leaders on Monday and Tuesday at In Sync by signing up here: https://www.hospitalityinsights.com/in-sync