The UK hotels and hospitality sectors are set for a broadly positive future beyond lockdown, despite needing to navigate several financial and operational challenges, according to industry experts speaking at the webinar Life after Lockdown.
This fourth instalment of the webinar series Real Estate Restructuring Strategies: Beyond COVID-19, hosted by real estate specialist Colliers in partnership with the Turnaround Management Association (TMA) was attended by more than 200 people and moderated by Nick Hammond, head of Advisory & Restructuring at Colliers.
Panellists were Peter Stevens, former UK TMA President and senior advisor at SME Capital; Nicholas Northam, executive vice-president international at Interstate Hotels & Resorts; Ben Godon, head of Hospitality and Asset Management at Colliers; Julian Troup, head of UK Hotels Agency at Colliers; and Ross Kirton, head of UK Leisure Agency at Colliers.
Nick Hammond introduced the webinar by noting it was one year on from the previous Colliers and TMA event on this topic, one month on from the relaxation of indoor trading restrictions and that we should have been on the cusp of a full reopening, but that the industry now has another agonising four weeks to wait.
He cited a number of positives throughout the discussion, including that “hoteliers and leisure operators are often innovative and entrepreneurial business people”. In addition, he and fellow panellists discussed the importance of managing costs and cash; the outlook for subdued revenue and profitability levels for at least another 18-24 months until the benefits of full reopening are felt; and how the current disparity between city, suburban, corporate and leisure spend is creating marginalised assets, as well as new opportunities.
The generally positive tone was continued by Nicholas Northam who provided examples of the agility shown by hoteliers in responding to the impact of lockdown upon their business, including an innovative scheme from his own firm leading independent multinational hotel operator Interstate Hotels & Resorts.
“One of the things that we’ve done which has been very successful is that we’ve converted a number of hotel meeting spaces into courtrooms, as the backlog in the courts and the legal system is so great that they do not have the space to manage all the requirements,” he said.
He added that the speed and agility that hotel operators had shown over the past 14 months in adapting their offering, embracing digital and reducing their cost bases would need to continue even after lockdown was lifted.
“We’re going to have to react to the changes that get thrown at us, and I think they will continue to come at us in one shape or another. I don’t think we can say ‘Great, 19 July, everything’s back to normal’. I think there will be changes and the ability of hoteliers to be agile is going to be absolutely critical.”
The way in which the hotels sector had defied gloomy predictions made in the early days of lockdown was highlighted by Julian Troup, who said that Colliers Hotels Agency team had seen sales ‘flying’ in prime staycation areas such as the Lake District and Cotswolds, and that values were holding up well in these areas with pre-COVID prices often being paid, often because of a lack of stock.
He noted that there had been a significant shift in the way in which investors looked at hotels, with a greater focus being placed upon potential future revenue.
“In years gone by we’ve sold hotels on the basis of actual performance, on trading figures, but now we’re seeing people prepared to buy on the basis of what is around the corner,” he said.
Ben Godon commented that hotels were presently attracting attention from a range of potential investors. “On the investment side, we are seeing a lot of interest into UK hospitality, certainly hotels, whether it’s domestic investors or overseas investors looking to put their money into the UK, there is continuing to be very strong demand, which has got to be good news for the sector in the long term,” he said.
Commenting on investment in hospitality and leisure, Ross Kirton said: “There are a lot of private equity firms that have managed to pick up restaurant groups cheaply during the pandemic. We’ve also had a number of IPOs and share placings with more to follow; so we are now seeing stock market money keen to invest in the sector showing confidence in its long term outlook.”
The message from Peter Stevens was that hotel and hospitality operators should seek to stabilise their businesses, and that for those with a track record there would be lenders willing to provide funding.
“The turnaround industry encourages businesses to look to stabilise their operations to see them through these tough times, by reducing costs as much as you can, and then weathering the storm until times are better. Patience is probably the inevitable and only option,” he said.