AHC

Hope for long term

The hotel sector remains attractive to hotel investors, attendees of The AHC Reimagined heard this week.

Desmond Taljaard, managing director, London & Regional Hotels, said that the group was planning to be “net investors. Long term the human instinct is to travel and be curious”.

Taljaard added that the group was “happy to buy those hotels no-one else wants”, acknowledging the issues around corporate and event-driven hotels, adding: “any valuation is wrong and arguably meaningless at the moment”.

Looking at the wider economy, John Ashcroft, founder, The Saturday Economist, said: “It’s always a V-shaped recovery  - it’s the shape of recovery, but it won’t go back to normal for everyone. We have seen an incredible shock to hotels and tourism. Tourism fell around 40% in the final month of the first quarter. Passenger numbers in Q2 dropped by 99%. In Q3 we think there has been a rally but we expect some acceleration in the final quarter of the year and by the time we get to Easter we should see a huge surge in growth.

“If everybody behaves well, the students will be home for Christmas. If everybody behaves well we should have more than six around the table. But the final question is what will happen to unemployment? Rishi Sunak has made it clear that he cannot save every job. The furlough scheme comes to an end at the end of October. Around 10% of the workforce is still on the scheme and they could be added to the ranks of the unemployed. That’s why most economists were pushing for one extension of the furlough scheme into next year.

“The good news is economies do return to normality. Some sectors may lag, but economies do return to the mean. There will be a setback this year but the economy will get better in 2021, it is important to look ahead. As we get into Spring next year the world will look a lot brighter.”

Thomas Emanuel, director, STR echoed Taljaard, commenting: “At STR we believe that long term travel will recover. People’s desire to travel won’t go away. The travel ecosystem has been shaken to its core and it will take years for flight numbers to return. People want to meet, network and learn and once we can meet again there will be more demand.

“We expect rates to come back to 2019 levels by 2024. We need vaccinations, we need cures, we need treatments before we see a return to travel. The UK government were encouraging us to go back to the office, now they are telling us to stay at home. There have been bumps in the road.

“Pickup is now positive. Booking windows are now short - people aren’t making longterm plans. When we look at existing levels of occupancy, we believe that they are going to move back by 5% to 10% in the coming weeks, there is not the pickup to sustain more. Business on the books is a half or a third behind what we would expect to it to be.”

There was further data from Michael Grove, managing director, EMEA, HotStats, who said: “The provinces are outperforming the cities around the world. Government payroll support has been a good thing for the industry. Last year is of little relevance right now, context is key in understanding performance - don’t drive in the dark without your lights on.”

The need for a sound testing regime in the UK was repeated on a number of panels. Hubert Viriot, CEO, Yotel, said: “It’s hard to pinpoint a date for London recovery. We need testing, testing, testing to ensure that customers are confident. We have a hotel in Istanbul where testing is required on arrival at the airport and occupancy has recovered. Here we’re pretty much locked down from the rest of the world.”

While the pandemic made for a  new topic of conversation for the AHC, there were some familiar themes. Al-Karim Nathoo, managing director, 4C Hotel Group, said: “There has been brand oneupmanship on the brand hygiene measures. We’ve been sensible but going forward there will be challenges - the fallout from business interruption insurance, the fallout from Brexit the shift in demand from leisure which has meant a growth in OTA bookings. The onus will be on the brand to prove their worth and work that much harder if your distribution skews more towards OTAs - what is a brand for?”

Stepping up to defend the brands was Stuart Symes, VP, franchise operations Northern Europe , Accor, who said: “The loyalty programmes are hugely powerful  - they give the guest a price advantage and they can be hugely powerful at bringing back guests and giving you knowledge of the guests.”

 

Insight: The brands will indeed be required to step up and, in the current battle for Travelodge, being able to deliver guests is absolutely key for investors at the moment.

There was hope at the event, with attendees eager to get back out there and get back to the business of hoteling. But when will they be allowed? For this is a not a pandemic of the hotels’ making, or a downturn which they have provoked.

All rests on the actions of government. This week Scotland moved closer to lockdown and England will surely be following it two weeks behind. Hotels can only do so much to help themselves in terms of operations, what they must now do is find their voice and ensure that government is made to listen.