Financing in the hotel sector will need to be more flexible in the coming years, as we enter an era of lower gearing, more mezzanine finance and more joint venture finance.
The sector must try and adapt to “a life of constant uncertainty”, according to HVS London chairman Russell Kett, chairing a recent webinar.
AlixPartners’ managing director Graeme Smith, said: “Scenario planning and coping with uncertainty is key,” he said, urging that hotels develop a 13-week and mid-term cash flow to assess cash impact, keep support teams lean by considering the minimum central team required, and be operationally agile as recovery was likely to be volatile.
“Implementing a baseline 13-week cash flow forecast is critical to managing and tracking all cash outflows and inflows,” he said. “With scenarios assessed and funding needs understood, operators can then engage with existing financial stakeholders.” He outlined the wide range of funding options available for hoteliers, including government-backed schemes, bank and credit funds, and private equity.
A discussion on contract negotiations and obtaining debt by Bird & Bird partners Karen Friebe and James Salford concluded that the overall impact on the sector was likely to be much lower gearing over the next two to three years, an increase in mezzanine finance and a greater level of joint venture finance.
Eva Bachmann of Ennismore said: “It’s important to remain flexible and agile – it’s difficult to anticipate what will happen next. As soon as the government makes further announcements you must think about how that’s going to impact the business, brand standards and staff. We must be alert and keep on top of what is going on and react quickly.”