Insider

The end of uncertainty

This week saw CBRE say that it no longer saw any “material uncertainty” in real estate valuations, giving funds the chance to pile back in. Given the UK government’s mixed messages this week - go to work, don’t mix with more than five people at home - uncertainty was the message coming out of Number 10 and the message we are all getting as the number of Covid-19 cases rising across Europe.

We’re all wary about this rise and rightly so. Memories are fresh about how little fun the lockdown was and many restrictions are still in place preventing us from reverting back to our pre-Covid-19 lives - particularly those of us who used to gad around the world, and, pertinently, those who travel for business.

But the pandemic is now a known evil and, for the valuers, there is nothing they haven’t seen before waiting around the corner. There is also the likelihood that things will not be as they were, with governments having learned a thing or two and not fancying losing access to all the cash that we have been hoarding over the pandemic - with the exception of that which found its way to Amazon.

In a webinar held earlier this week by HVS, delegates echoed our own investor sentiment survey,  demonstrating an optimistic investment approach, with 45% preferring a “hold and buy” strategy.

Most expected hotel values to return to 2019 levels by 2023, with 28% envisaging this in 2024.

And sure enough, September has shown itself to be very much like Septembers of yore, with deals popping up all over the show - Covivio completing its Värde buy at the same price agreed in January, The Portfolio Club banking on London and, my personal favourite, The Apartment Group buying near Barnard Castle. Even in lockdown, it can guarantee a certain level of occupancy.

But while the valuers might see the mists clearing from their crystal balls, clarity doesn’t make it all better on the operations side, as we saw in graphic form with Marriott International’s announcement of job losses this week. Stop/go lockdowns and varying quarantines will not encourage travel, or lengthen booking windows.

The hit on operations is an issue focused in great part on the UK - mainland European governments have lengthy furlough plans and the French are not known for their fear of public debt - where furlough is running down, just as restrictions on the sector are ramping up.

The announcement of the Rule of Six was followed by news of grants for forcibly closed venues, with businesses in England required to close due to local lockdowns or targeted restrictions able to receive grants worth up to £1,500 every three weeks, according to their rateable value. A whole £1,500, you may indeed be saying.

Looking at the furlough scheme, UKHospitality CEO Kate Nicholls said: “Since the pandemic broke, it has become inarguably clear that hospitality is justifiably front of the queue for inclusion, and our supply chain benefits from our recovery. We realise, of course, that any employment support cannot be open-ended but, based on the rate of recovery of the sector thus far, we would propose a potential winding down at the end of Q1 2021, as the sector looks forward to the summer season.”

The hospitality sector has always been back of mind for the UK government and, despite the sterling work of many hotels in providing accommodation for NHS and key workers, there is much work to be done to pull the sector into the community and raise its profile.

There is some cause to suggest that this is happening, driven by the need for revenue during the pandemic. Without heads in beds, heads are needed elsewhere and hotels are looking to coworking, and providing socially-distanced meeting spaces and, in some areas, space for schools. These may be helping locals appreciate what hotels can offer and providing those valuers with something else to factor in during uncertain times.