2021 Review: Hospitality Q&As, Part One

2021 was another tumultuous year for the hospitality industry with Covid-19 creating continued uncertainty. We asked a number of leaders from the sector to give us their views on how things unfolded.

What do you think has been the most interesting news story/trend of 2021?

Roger Allen, group CEO, RLA Global: The leisure segment spearheading hotel recovery, that undoubtably led to the ugly duckling of the hotel sector turning into a beautiful swan that has investors not just turning heads but doing deals.

Philip Bacon, senior director, Horwath HTL: What has been most interesting for me is the sharp focus on the acceleration of concerns surrounding ESG within the hospitality sector and the overlap of this key issue with the way in which people manage their lives in the face of the restrictions placed upon all of us by the various measures put in place to fight the pandemic. The growth in products and business models that combine living, working and playing, and our ability to do all of these in multiple locations, is something that has been given new momentum this year and I look forward to watching this trend gain more focus from operators and investors.

Michael Grove, chief operating officer, Hotstats: The innovative implementation of a “root and branch” review of costs by operators around the world has challenged all areas of hotel operations and should in theory, stand hotels in good stead when performance ramps up. The staffing / labour crisis has also been both interesting and worrying as the impact of the pandemic has left the industry with a stigma. Brexit has limited access to international labour and the industry is now finally focused on people initiatives as competition for talent increases.

Carl Ridgley, partner - hospitality EMEA, at Cushman & Wakefield: The trends that stick out are the speed at which demand has returned to the regional market, I think this has been far quicker than most people anticipated. The trends around staffing have also been fascinating and it will be interesting to see how these pan out next year and how these influence operating performance.      

Andreas Ewald, founder and managing partner, Engel & Völkers Hotel Consulting: We saw the effectiveness of governmental help in some markets, whether this delayed the effects of the pandemic or the inevitable market mechanics will be seen. We have to ackowledge a positive alignment of owners and operators in 2021. Balancing out macroeconomic impact and the pandemic: Inflation puts pressure on operator’s costs. One reason of the market’s standstill were the challenges of financing.

Do any deals spring to mind?

Roger Allen: The Hyatt acquisition of Apple Leisure probably grabs all the headlines but there was plenty of other M&A activity in the resort and leisure segment that reaffirmed all the interest in leisure is here to stay.  

Philip Bacon: In terms of both size and significance, the recently-closed Hyatt/ALG deal has global implications for the leisure segment, not only because of the embracing by another of the world’s leading hotel chains of the all-inclusive model, but also because of the clear statement that it makes about the sustainability of the resort and vacation markets, something that followers of the R&R Forum have known for a long time, but it has taken centre stage. 

Carl Ridgley: No one deal springs to mind but it is encouraging to see the increased volume of transactions and the level of investor appetite. This really underpins the long term confidence in the sector.   

Andreas Ewald: Backed operators such as Premier Inn in Germany are fully loaded on the look out for portfolios. I remember Deutsche Hospitality saying during IHIF: “We would like to grow, not to double but to quadruple, and that is what we’re going to do”.

What changed the most for your business during 2021?

Roger Allen: Optimism and a sense of certainty replacing the doubt and unpredictability of 2020. Investors have shown a willingness to develop projects in more unknown locations and we have seen larger destination developments coming through the pipeline.

Philip Bacon: We are seeing a general shift in the needs of our clients towards more hands-on, multi-disciplinary involvement in their business planning and asset management processes. Most significant was the increased emphasis on change management, both for existing properties and for new developments. 

Michael Grove: We accelerated the development of our new expanded and detailed reporting site for our customers to utilise during and whilst emerging from the other side of the crisis. In addition, we have seen the investor community demanding profitability tracking and moving away from focusing on RevPAR as the leading indicator. This has of course been a long time coming, but catalysed by the pandemic and means a much higher level of engagement between owner and operator.

Carl Ridgley: The transition from working with the impacts of lockdown in the first part of the year to the lifting of restrictions has been incredible on the pick up in workloads.

Andreas Ewald: Shift in time lines, extended project timeline. Markets oscillate between stand still because of general uncertainty and time pressure due to the fear of closing time slots for opportunities. Lack of transaction opportunities due to deferred pressure on cash.