2018 Hotel Investment Conference
‘Reaching new heights’ was the theme of the international hotel investment conference held in Berlin and attracting over 2000 professionals.
The vibe was positive-most European markets are (in hotel terms) performing well and STR data supports this as shown below-green dots are good for the sector! Boosted by growing tourism numbers and huge potential from the ever growing Chinese travellers (loosening of travel restrictions) and even the US market (where there is still a low percentage of passport holders) –both offer potential and are likely to expand.
Consumers are exploring new experiential led products and the industry is responding not by producing more bland standardised boxes but with some innovative accommodation and hospitality offers. Gone are the cookie cutter standard basic room types and in are flexible spaces, social areas and innovative use of space. Thanks Citizen M and Starwoods W (who arguably developed flexible lobby concepts early) -you seemed to have led the way and everyone is now following.
(Image: The stunning Radisson Blu Berlin hotel lobby aquarium -fish reach new heights)
Manulife Asset Management led with an economic overview setting out positive consumer sentiment for most markets (although hard data supporting this in Europe does not do so in the US where this positive sentiment may be an illusion). There were hints that the debt overhang and cyclical factors could produce negative growth…but hey ho, that risk is ever present.
The industry is on the up and is undergoing some fundamental changes in product, marketing and service. We are going from traditional to flexible and from restrictive offering to exciting concepts-but as pointed out by an experienced old hand,,,new entrepreneurial products often get taken over by new and even sexier competitors unless they are systematically exploited and backed by an organisational and marketing machine….at which point the risk is they may become corporatized and bland again….ooh …that cycle again…
No conference has froth without rumours of mergers and acquisitions and names such as Accor,Belmond, Regent, Barcelo and NH provided some tasty M&A imagery and created new brand scenarios that in principle seemed to make some sense (if true). The valuers were rubbing their hands.
As always hotel speak came into its own with further talk of Manchises (a form of management agreement transferable to a franchise over time) and other forms of participation in the ownership and management of hotels.
On the investment side, hospitality generally and hotels specifically are now a recognised income producing asset class for institutional investors and are no longer a dark art practiced by people with funny pin striped suits with tails and chefs with tall white hats. Good news for all of us-the money's there, but where is the opportunity?
Technology?-yes its driving change as in every other sector and the trick will always be to ensure you use it and not let it use you –it is seen as ‘critical to consumer engagement’ but with a the caveat that rising labour costs shouldn’t let it replace the industry’s core hospitality offer of personal engagement and good service.
Airbnb? It’s is out there, challenging the sector as are the on line travel agencies and in some markets this is causing real difficulty by reducing available letting stock but this unexpected entrant to the sector has also led to some radical rethinking of products and services, probably for the good.
Any other dark clouds? Well, the restaurant sector is hurting-several chains are struggling, competition is fierce, pricing is cut throat and consumers may be tightening their belts…one insider said ‘this reflects the last downturn when restaurants were hit first and we were next’.
This coupled with increasing labour and utility costs and the uncertainty arising from the dreaded ‘B’ word and other political and economic changes do of course need to be taken into account but no crystal ball can guarantee which way things will turn and at present sentiment is positive. Let’s keep it that way.
At Arc Consulting Partners we see various aspects of the industry from a market, operational and construction point of view, overlaid with real estate expertise – let us help you identify opportunity, develop concepts, explore feasibility, develop realistic costings and asset manage profitably. www.arcconsultingpartners.com
Exciting times. Stay with us.