VILAMOURA, Portugal —The hotel industry should not repeat the mistakes of 2020, the president of Nikki Beach Hotels and Resorts Alexander Schneider, has warned.
At the beginning of the pandemic during the first wave of lockdowns, properties in key European markets were forced to slash costs with employees often bearing the brunt of the cuts.
The headline over the last few months suggest indicate we are heading towards a different crisis with recession warnings in many countries. Schneider said that the hotel industry should be cautious in its budgeting for next year to avoid having to make yet another round of staff cuts.
“If 2023 is tougher than we think, the worst that could happen is that again we start to slash jobs. I think we really failed as an industry in 2020 in many ways. Now we’re slowly climbing back and we see talent coming back that is re-gaining interest in the trade of hospitality and hotels. I mean, we cannot expect great, talented people to work for us if we don’t provide them with security and motivation,” he said.
Asked about his own budgeting Schneider replied: “Let’s not forget that the rate that you budget for, always comes with a cost for your operation, so we’d rather see 2023 in a positive but conservative light.
Permanent change to travel
The post-pandemic recovery has been driven by remarkable increases in average daily room rates (ADR). Across the current Nikki Beach portfolio of five hotels and resorts, Schneider said they had started off with a goal of €300 ADR, adding: “Now we’re at €450 to €1,000 so obviously the last years have helped us. Whether the rates are sustainable at the current level, the future will show.”
Interviewing Schneider was Alexi Khajavi president Hospitality, Travel and Wellness at Questex, the parent company of R&R, who noted that despite inflation and the cost-of-living crisis the appetite for travel remained very strong. Schneider said that this marks a permanent change in behaviour: “I wouldn’t even call it pent-up demand anymore. It’s a change of society.”
He explained: “I really think there is a correlation between the stress level of a society and the need for break-outs, short trips, leisure-related stuff. In the last three years, the world hasn’t become more comfortable, so we see a rise in demand for experiences. It will pivot now from just going somewhere and sitting on a sunbed to actively experiencing something that also distracts you from everyday hardships.”
Investor interest
For the first time ever, institutional capital is interested in investing in leisure. Schneider commented: “It shows that leisure was always treated like the red-haired stepchild of the industry. The resilience is much stronger than many would have anticipated. Do we see a rise in interest? Yes, but it’s not a game-changer because we intend to stay small. We can’t afford mistakes and I think we’ve always been very good at not only giving back to our staff but giving back to our investors and owners and we really want to keep it that way. We don’t like the model where the operator builds this shareholder value at a cost to the owner, so we need to stay on point.”
Nikki Beach, which evolved from an F&B business, currently has five hotels and resorts in coastal locations in Dubai; Koh Samui, Thailand; Porto Heli and Santorini, Greece; and Tivat Bay in Montenegro. Khajavi asked if there were plans to develop in urban or mountain settings.
“Yes. We’re doing it as we speak,” said Schneider. “We are developing something in Switzerland and also a new urban location because we believe that the typical business hotel model will come under more duress. We feel that decision-makers will continue to travel but they also want experiences during their stays in cities. So we have developed an urban resort model that we think can become very relevant.”
A further three Nikki Beach projects are in the pipeline; a resort in Muscat, Oman, due to open in autumn 2023, plus resorts in Thailand and the Caribbean.
Schneider said the brand was particularly keen on conversions, typically of midscale distressed assets, and achieved 300-500% uplift for owners and investors. The brand would never consider investing in established destinations such as Courchevel, France, he said, because purchase prices were too high. “A lot of destinations will overheat very soon,” he predicted.