Understanding of hotels in ‘granular detail’ needed to succeed in 2023

An understanding of hotels in “granular detail” is needed to succeed in the UK hotel industry in 2023, agreed a panel of experts at this year’s Annual Hotel Conference (AHC).

“What you’ve got to do when you have a hotel is understand your market incredibly well, know what the drivers are, know the macro- and micro-environment... and make sure you can mitigate where required,” said Hugh Taylor, chief executive of hotel management business Michels & Taylor, speaking at the conference in Manchester today (11 September).

“Never before can I remember a time when the granular nature of hotel management has been so important,” he said, stressing that it’s not only understanding month by month, but hour by hour, and market by market.

Michels & Taylor manages more than 3,000 hotel rooms, including Ellenborough Park near Cheltenham and Hilton-branded hotels including the DoubleTree by Hilton London Elstree, the Hampton by Hilton London Waterloo, and the DoubleTree by Hilton Cheltenham.

This need to understand each hotel individually is demonstrated in the differences between the Hilton Waterloo hotel, which has very little F&B and the conversion to profit has been “fantastic”, said Taylor, while some full-service hotels have required far more attention.

“We have so many different indicators suggesting different things,” he said, quoting the variety of challenges facing the market, from the cost of debt to rate increases and inflated costs.

The boost to hotels’ average daily rate (ADR) has been the “saviour”, he said, although expressed concerns that this may be unsustainable.

“It’s far more difficult to make money in our industry,” he added. “It’s increasingly difficult when energy costs go up 200%, whatever you do on the edges... we need to find a different way of making money in a world that is very different to what it was pre-Covid.”

Neil Kirk, COO of L&R Hotel – a 23,300-room portfolio spanning Europe, the US, and the Caribbean, including the Iconic Luxury Hotels portfolio, the Chelsea Townhouse in London and the £25m Mole Resort in Devon – argued that the sector needs to do more collectively to lobby against unfairness in the energy market. He said the industry had “suffered” in not being able to get good contracts with some “stuck in contracts from last year”.

UKHospitality, together with more than 350 businesses, has demanded the urgent implementation of the recommendations set out in energy sector regulator Ofgem’s recent review of the non-domestic energy market.

Puneet Kanuga, chief investment officer at EQ Group, a European hospitality investment and management platform with over €2.3 billion of hotel real estate across 5,000 keys, said fundraising, meanwhile, was “harder than it’s been in a long time”.

EQ Hotels recently announced that The Store Oxford, a new boutique hotel, is set to open in the former Boswells department store in Oxford, England this December. The business also owns several Marriott and Hilton-branded hotels across the UK, Blakes London, hotels in Paris and Barcelona, and Six Senses and W hotels in Ibiza.

Despite the challenges, however, there are positives to be found, and while forecasts that demand will taper are a concern, it isn’t something EQ is seeing yet, said Kanuga. “We are materially higher on top line and London is an outlier, London has been great for us. GOP is higher than 2022 but we’ve had to work hard for that,” he explained. MICE has also been “really strong” for the group.

“Last year across our whole portfolio, MICE in terms of revenue was equal to 2019, lower volumes but higher spend. This year we’ve hit 2019 volumes, this year’s going to be a bumper year for MICE and 2024 is pacing ahead of 2023,” he continued.

The market is changing, he suggested, with higher take-up of smaller meetings and events as businesses give up office space, and while larger events have been slower to come back, they have returned to 2019 levels.

Kirk said L&R was starting to see the return of long-haul travel from North America and Europe, including corporate international travel, with Asia expected to follow. He suggested that the levels of distress seen post-financial crisis won’t be replicated, with hotels “a much more established asset class” than they were in 2008.

“The banks are in a very different place to where they were in that period,” agreed Taylor. “They’re not as exposed, they’re more supportive in many ways, and they generally seem to be there for their clients.”

However, he added: “The next 18 months are going to be very interesting through as we start to revisit business plans, as people refinance in bigger numbers... there may be some more movement.”

In terms of who the ‘winners’ will be, he stressed that those who really understand the industry will be the ones to come out on top: “You can still make good money, you can still have a very solid return on the investments you’re making... I am very optimistic that we’ll go from strength to strength.”