Checking In

Q&A with Chris Graham, Managing Director, Graham Associates

In the latest in a series talking to members of the sector during the COVID-19 outbreak, Emily Newman interviews Chris Graham, Managing Director, founder of Graham Associates and author of "Branded Residences: An Overview"

What is your immediate priority at the moment?

Apart from trying to stay safe and sane during this protracted lockdown period, much of my time is spent re-strategising with clients and planning for when we eventually emerge from this global crisis. Also, it is proving to be quite an effective time to reach people stuck at home and spending more time online, so our lead generation campaigns continue to perform well.


How has this crisis affected branded residences?
The IMF warns that the world faces its worst recession since the Great Depression, expecting the global economy to shrink by 3% this year rather than expand by 3.3% as it predicted in January. This will inevitably impact real estate markets, although forecasters talk about waiting until Q3 2020 before meaningfully assessing the extent of the damage.  However, with global investment markets taking a pounding, many believe that investors will turn to real estate as a stable asset class. Whilst there is likely to be downward pressure on prices in the short- to mid-term (especially in oversupplied markets), this will create some attractive buying opportunities which, in turn, should drive up transaction volumes and help to stabilise markets.


Although branded residences sell at an average 30% premium over non-branded units, the additional benefits that they offer to buyers won’t change and they will continue to be seen as an investment that holds relative value and delivers higher yields. As in all markets it comes down to supply and demand, but I wouldn’t expect to see any notable swings in terms of sentiment and market share.  


We have heard that many development projects, as long as they have cash, are continuing. Is this true for branded residences?


Absolutely. Whilst confidence has been knocked, there is the realisation that life will go on. Even some projects that don’t yet have the cash are progressing with their plans. In the past few weeks, we’ve been approached by several developers who are keen to use this time constructively to prepare their post-Covid marketing strategies. We’ve certainly been polishing our presentation skills on Zoom and Teams!


Branded residences are built on a relationship between developers, operator brands and purchasers. Will this crisis affect the balance of power within that relationship?


Every project is different so it is always risky to generalise, but fundamentally I believe that each party will need to adapt according to the demands of the local environment, whilst ensuring that the benefits for each party remain.  To deliver a successful project, they must pull in the same direction to achieve a “win-win-win” situation.  Frederic Simon at Commune Hotels & Resorts sums this up in my report: “As in any long-term partnership, success is built on mutual respect between the developer and the hotel operator and an understanding of the latter’s brand ethos and core values.”

Certainly, the brands will have an important role in supporting their property owners through these tough times. Occupiers are renegotiating and landlords are being pushed hard. It’s worth noting that over 50% of new hotel branded resort projects now have a residential component, so investors/developers are selecting brands not simply on their hotel operating credentials, but increasingly on their residential track records and expertise. Additionally, there is growing competition from non-hospitality brands, which is why there is more focus on professional marketing, to ensure that the lifestyle and investment benefits offered by one branded development over its competition are communicated effectively to buyers.


Do you envisage changes to how people travel?


We’ve yet to assess the impact on global airlines but the outlook is fairly bleak, with Virgin Australia recently going into administration and many national airlines seeking Government bailouts. Fewer airlines or flights means less airlift into many destinations, so ticket prices will increase.  Additionally, the requirement of social distancing - which may see the removal of middle seats - will reduce capacity and therefore add further to the cost.  Then there are the environmental taxes on flights that have already pushed prices skywards.  


All these could have a major impact on hospitality and real estate markets, as the cost of flying a family to a far-flung overseas destination home two to three times a year would increase significantly.  Furthermore, we may well see growing environmental stigma associated with ‘unnecessary’ long-haul travel. As such, people may begin to look at buying in destinations closer to home, while developers consider ways to ensure that their resorts offer carbon/pollution offsets to negate the impact for increasingly environmentally conscious travellers.  


What is your hope for the hospitality industry in a post COVID-19 world?


To me, the greatest benefit of the global expansion of the hospitality industry is choice. The world has become accessible; travellers on most budgets can experience and explore new countries and cultures in previously unseen and remote corners of the world. Few places remain off the map, and the hospitality industry has been a key driver in achieving this.  


I recently saw Covid-19 described as ‘the hospitality industry’s modern-day Armageddon’; it has put the sector front and centre in its sights and the economic impact will be very damaging. No business will emerge unscathed; many will not emerge at all.  As such, this pandemic will have a devastating effect on local communities that rely on tourism revenues. My hope therefore is that people will not be deterred and quickly resume their enthusiasm for responsible travel, thereby helping to minimise the unavoidable period of anguish and hardship for hospitality workers around the world.  And, of course, for the continuance of choice.


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Never has it been more important for us to stay close to the sector, to inform and support. We're running a new series of conversations - Checking In - and will be talking to members of the sector during the COVID-19 outbreak. If you'd like to be involved, please get in touch. #solidaritywithhospitality