5 key trends from IHIF 2023: debt, deals, data, and more

The theme of this year’s IHIF was “Fortune Favours the Bold” and there was no shortage of examples of investors and operators going against the grain to achieve their aims, in what continues to be an unpredictable operating environment.

From original asset management strategies to creative debt financing, we heard plenty of bold ideas across the conference and here are our five key takeaways from the event.

Lack of deals still evident

There’s no getting away from it: the hotel transaction market is still subdued. We’re in that curious point of the cycle where buoyant demand keeps raising seller expectations and at the same time the cost of debt has increased making financing fiendishly tricky for would-be buyers. The gap between these two price points is just too high for the majority of deals at the moment.

At the same time as IHIF was taking place, news appeared in the Financial Times that Brookfield was launching the sale of Center Parcs at a price point of between £4 billion and £5 billion. The asking price seems a little bit steep given that Brookfield paid Blackstone £2.4 billion in 2015. Maybe the Canadian investor thinks we might be in for a rough ride shortly and now is the time to tap out?

ESG moving into next phase

It’s been incredible to trace the level of ESG discussion over the last couple of years at IHIF. It’s gone from a niche topic, where companies frequently talked in generalities to something much more concrete. This year IHIF went a step further and created a dedicated ESG Hub to explore the wider impact for investors.

There are two reasons why this is the case: the first is accelerating consumer demand (although there is limited evidence that they will pay a premium). The second is regulation and that is why bodies like the Energy & Environment Alliance are trying to steer the industry response.

During the conference Zeal Hotels signed an exclusivity agreement with IHG Hotels & Resorts for its first net zero carbon hotel. Brands and owners are going to have to find ways of bridging any gaps if the industry is to move froward.

Creative use of space

The hotelisation of real estate is about to kick up a gear thanks to structural changes in the way we work, shop and live. The shift we saw during the pandemic has continued and although many people have gone back to work the days of commuting into an office, five days a week are over for most service jobs. We are now starting to see an increase in distressed office sales. Some of those offices will get converted into hotels, while others will be augmented by fitness, wellness, F&B and accommodation - to incentivise their employers to come into work, as well as attracting external customers.

Accor CEO Sébastien Bazin is well known for his left-field takes on hospitality. In an interview this year he said he was turning hospitality “upside-down” by prioritising local communities over travellers. This means making sure a hotel is suitable for easting or working at for anyone, not just the guest.

Others on-stage in Berlin were also saying similar things: “People prefer mixed use for reasons of lifestyle and convenience. That means being more effective in the planning of projects and looking afresh at lobbies, rooftops and pools, while thinking about the dual complexities of spinning locations from a day to night function," said Nicholas Clayton, president, GOCO Americas at GOCO Hospitality.

Debt: tougher to get but still available

Debt is the most expensive it has been since the financial crisis making any deal much more costly than it would have been just a would have been just a couple of years ago. This means all-equity buyers are in vogue but there lenders out there willing to finance deals, they just have to be the right ones.

“Current debt is more expensive and less available. So we have to have more of an asset-by-asset approach. We do like the leisure trend, we see that business travel will take longer to come back, but we have a long-term focus,” said David Gorleku, managing director, real estate debt strategies, Blackstone.

The AI revolution is *almost* here

We’re at the dawning of a new age of artificial intelligence. When it launched at the end of last year ChatGPT changed everything. New uses for it are being discovered daily and for the hotel investment industry there could be potential upheaval in areas such as valuations. In an on-stage interview Expedia Group SVP, product & technology, Karen Bolda talked about her company’s use of the new technology.

“Every version introduces a whole bunch of new possibilities. On ChatGPT4 you can train the AI on a lot more of your data, but again it’s super early as it’s just come out,” she said.

Speaking earlier at IHIF, Jenny Southan, CEO, editor and founder, Globetrender, picked AI as one of her ig tredns for the future, saying it could revolutionise the industry with developments in bots, smart hotel room controls and analysis of market trends to optimise room pricing.