We’ve taken the last few days to take stock of all that went down at IHIF EMEA 2024. Here are our top trends to watch.
Focus shifts east
From the spending power of India’s growing middle class to the investment appetite of Middle East sovereign wealth funds, this year’s IHIF EMEA demonstrated just how much of our attention is now focussed away from the traditional powerhouses of North America and Europe.
David Goodger, managing director EMEA at Tourism Economics, believes that the Chinese market is set to make its long anticipated return to international travel in 2024.
Goodger said: “This year going into the medium term we do expect China to be the real stand out contributor, partly because of the size of the market and because of an increase in middle class households and wealth in China.”
Elsewhere, Sir Rocco Forte, fresh from securing an investment from Saudi Arabia’s Public Investment Fund (PIF), is looking to bring his hotel brand into the country as well as to other locations in the Middle East.
Deal flow optimism
Whenever the subject of the transaction market came up in Berlin, I wasn’t surprised to hear people being much more positive about it. Granted, there were similar views held last year and an event full of investors, advisors and lawyers isn’t going to be downbeat but I was still persuaded that things are about to unlock for a couple of reasons:
- Time – We’re more than a year out from peak inflation and interest rates have stabilised with a drop looking likely in the second half of the year. We’ve all gotten comfortable with the current situation and it looks like it will improve shortly.
- Money – There’s still a lot of money sloshing about on the sidelines, plus more and more properties that were bought pre-Covid are due for refinancing.
“There is going to be a lot of debt coming due in Europe and the US, and there’s nothing that focuses the mind like a maturity date," said Josh Cleveland, partner & head of EMEA, real estate, Stepstone Group.
“That is going to trigger a lot of transactional activity, and that’s what we’re looking for. The market still hasn’t bounced back fully; we’re looking for situations where time and capital is short.”
Consumer demand still there
At the end of 2023 all the talk was of top line growth stalling but so far this doesn’t seem to have been the case. Demand is still very much there but it is ore discerning than it was in the wake of lockdown restrictions when guests were happy to forgive lax service or a tired design. As prices have risen, so have expectations.
“At top end hotels, almost everyday there is a gift for guests, so you find a toy or something new in your bedroom. I was at a very nice beach resort in Italy and a guy comes around with a spray to clean your sunglasses. Operators are trying desperately to differentiate and offer something to surprise. And especially, it all comes down to experience: a fun story you can tell others about when you return home," Gabriele Burgio, president & CEO, Alpitour World said.
Holidays have become an integral part of consumer spending and that doesn’t seem to be changing any time soon.
“Rather than changing their cars or their homes, people want to keep on travelling. We look at the numbers and we think: ‘Oh, another six months and it’s going to go down with everything happening in the world.’ But no. It keeps growing so we must be doing something right,” said Kike Sarasola, president, Room Mate Hotels.
Big brands get bigger
The big listed hotel brands have got to keep on growing to satisfy the stock market. But how are they able to do that when ground-up development has become so much harder? There are a couple of options:
- Convert other assets into hotels – This is something everyone is trying to do, some more successfully than others. Marriott International plans to add nearly 100 properties and over 12,000 rooms to its portfolio in Europe via conversions and adaptive reuse projects by the end of 2026. “Conversions with Marriott offer owners and franchisees the opportunity to leverage our well-established brands, competitive affiliation costs, the company’s powerful revenue generation engines and Marriott Bonvoy – our award-winning travel programme with more than 200 million members,” said Satya Anand, president EMEA, Marriott International.
- Expand through partnerships and bolt-on M&A – There have been a few rumours that a tie-up between one of the big hotel brands was on the cards. It almost happened with Wyndham and Choice but in this environment its hard to do. Smaller asset-light deals are flavour of the month and at IHIF that’s what IHG announced.
Hospitality over other asset classes
Everyone knows the challenges faced by other asset classes. Retail and office have both taken a hammering post-Covid. Of course data centres and warehouses are both popular but neither gives you the ability to reprice on a daily basis.
Vincent Mezard, global head of living & hospitality at AXA Investment Managers, said: “We are in a fortunate industry and asset class. We went through Covid without crashing operations, and we are going through this yield shift cycle without crashing valuations and the capital markets.
“We never went through the extremes of yield compression that we saw in offices and residential; we have these strong, structural tailwinds post-Covid; there is still capital available, and transactions are happening – there is equity out there.”