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HOSPITALITY OUTLOOK

In it for the long haul

With pent-up customer demand promising a wave of fresh reservations in the coming season, hotel owners and operators are optimistic they will soon be fully booked. Isobel Lee reports

Guests can’t wait to fly in to the TUI Blue Bahari in Zanzibar once more

Although cancelled travel and vacant hotels remain an enduring memory of the pandemic, the real estate investment community is actively checking into the hospitality sector with a palpable sense of excitement. According to Patrick Saade, senior managing director of hotels & hospitality JLL, a significant majority of recent global hotel transactions — some 85% by value in 2021 — have been struck by private equity funds. “Investors are competing on a limited number of deals, which are being won by capital with strategic business plans and an edge,” he says. Meanwhile, in the continued absence of distress, lenders have been refinancing and acquisition-financing deals, aided by low interest rates. “If you don’t want to sell, you have a lot of debt options right now,” he says. Yet there are a few investors who are willing to divest hotels, and they include both family offices that are particularly exposed to the sector, and rather opportunistic sellers. “Family offices realise that they are going to have to increase their capital injection and pack more liabilities into those assets as time goes on, including employee payments, while a few opportunistic funds are selling because prices are holding up so well,” Saade says. On the buyer side, there is no shortage of fresh capital queuing up, in anticipation of the travel industry’s full recovery. “Leisure travel is pretty much back to normal,” he adds. “It’s only being impacted by government-imposed rules, including testing obligations. The moment that you allow people to travel freely, trains and planes and hotels are full.” Dieter Kornek, head of project scouting at TUI Hotels & Resorts, agrees. “The last months have shown that tourism is coming back powerfully and that tourism is still a growth market. Especially leisure hotels are benefiting from this trend and hence lot of investors, both institutional as private investors, are more and more interested in leisure hotels and the resort hospitality in general.” Kornek adds: “We noticed that clients are booking superior grades of hotels and rooms as well as booking already before departure optional extras and services for spending authentic holidays. We also observed that the average length of stay is slightly increasing. We are very optimistic for the future, and also look forward to the return of long-haul destinations, especially in South East Asia.” It’s not just far-flung resorts that have a sunny outlook. Marc Vieilledent, chief development officer of super budget brand easyHotel says that his firm’s Europe-focused urban and affordable formula proved resilient throughout the pandemic, and has significant room for growth. “In December, shareholders pledged to more than triple our estate by 2026 with a cash injection of €50m,” he says. The brand currently boasts 42 hotels with 3,977 rooms, and while leisure travel is the leading driver, the group has continued to welcome business travellers, largely domestic in nature, throughout the crisis, according to Vieilledent. “These customers are often entrepreneurs who need to move city to city to meet with clients. Its’ a resilient and evergreen sector which performed well during the pandemic and is set to grow further.”

The findings reflect Saade’s view that investors are optimistic about a broad variety of opportunities in the hospitality sector, “from ambitious resorts to shuttered, city-centre hotels” and even the beleaguered conference segment. Adds Saade: “Although the meetings, incentives, conferences and exhibitions (MICE) sector was hard hit at the height of the pandemic, there are plenty of investors who are now taking a contrarian position. It’s a segment which boomed in the middle of the last decade, offering re-

Agnès Roquefort, chief development officer, Accor

Marc Vieilledent, chief development officer, easyHotel cord revenue per available room (revPAR), and several funds are already anticipating its strong return.” For French multinational Accor, business also remains an important, if evolving, segment. “The corporate world has experienced a massive transformation of how it approaches work,” says Agnès Roquefort, Accor’s chief development officer. “Accor anticipates that business travel will continue to evolve in an integrated way with remote workspaces, workfrom-home, and hybrid work arrangements.” In the meantime, the pandemic has also provided many owners and operators with a chance to transform their existing stock. Adds Roquefort: “The recent experience of lower-than-normal occupancies has given us opportunities to reposition, refurbish, and in some cases, reflag properties that needed a boost. At the same, the industry has presented an ideal time to invest in hotel assets at attractive prices.” Despite all of the positive signs in the industry, it seems clear that the pandemic has also wrought permanent change in some areas — although that’s not necessarily a bad thing. “Increasing digitalisation is one of the most important instruments in all our business units, from tour operation to hotel management and customer experiences,” Kornek says. Roquefort agrees: “Coming out of a time when the whole world developed a greater reliance on technology for connectivity than ever before, hotel guests now have higher expectations for digital solutions and seamless technology. Accor’s approach is to leverage technology to complement, not replace, the human element of hospitality, in order to enhance the guest experience and support operational excellence.”

However, Johanna Capoani, head of hospitality portfolio management at Swiss Life Asset Managers France, warns that the industry still has plenty to do in this area. “There is still a huge gap between the low-tech exposure of the hotel industry and the global digital transformation wrought by the pandemic,” she says. “Digital transformation is particularly crucial in the light of the labour shortages the industry is experiencing, as well as social and environmental issues which are driving the entire value chain.” For Capoani, the challenge will be to “combine efficiency gains with improved customer experience, notably by focusing the staff on real added value tasks”. She concludes: “We believe that in future, people will choose a hotel based on experience as well as social and environmental responsibility.” All that means that the industry’s considerable carbon footprint and ongoing water and energy requirements are likely to place it in the firing line for environmental penalties in the not-sodistant future. Yet in the meantime, as the pandemic subsides and travel resumes fully, many hotel operators and investors are looking forward to a period of sustained demand.