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Colliers Webinar Series | Part 1: Hotels & Hospitality. The Road Out of Lockdown to a New Norm

Posted: 26 May, 2020

In our most recent webinar, kindly hosted by Colliers International and moderated by Nick Hammond from Colliers, we heard from four experts including Tim Rumney, Chairman of Best Western Hotels & Resorts, who each gave us their take on what the road out of lockdown will look like for the hotel and hospitality sector.

This insightful webinar was attended by over 350 people and can be accessed here.

 

Overview: A Restructuring Perspective

Nick Hammond, Head of Advisory & Restructuring at Colliers, who was moderating the discussion, commented: “We are very pleased to be hosting this series of webinars in partnership with the TMA and are delighted that this first event was so well received.”

“The UK hotel and hospitality industry is under great strain at the moment, having closed pretty much overnight and has been in hibernation for around two months.  With any reopening on hold until July at the earliest and likely to be on a phased basis with reduced trading capacity, there are certainly challenging times ahead.”

“That said, many hoteliers and leisure businesses are innovative, entrepreneurial operators, so those who are able to adapt their business models and continue to service their customers in a productive and cost-effective way will be more resilient.”

“As these businesses prepare for the road out of lockdown, it’s important to be actively engaging with all stakeholders and advisors to identify pressure points and agree constructive solutions”.

 

A Hotel Agent’s Perspective

Julian Troup, Colliers’ Head of UK Hotel Agency, kicked off the webinar with a summary of just how important the industry is to the UK as the country’s fourth largest employer and adding £72 billion to the economy each year.

But since the pandemic began, 2.5m staff in the industry have been furloughed and just 20% of hotels have remained open. Transaction activity has inevitably taken a dive with only some opportunistic and overseas buyers making enquiries while the majority have adopted a wait and see approach.

And the Government initiatives haven’t helped everyone. 57% of hoteliers that applied for a CBILS loan were rejected due to their business not being deemed viable and many haven’t been able to claim disruption insurance.

But despite the challenges, Julian’s outlook for the future was positive saying “hotels is a robust and resilient business” adding that “Colliers transact on around 100 UK hotels each year and there will always be a flow of people buying and selling hotels so it’s not a case of ‘if’ but ‘when’ for the market to get moving again”.

 

An Asset Manager’s Perspective

Ben Godon, Head of Hospitality Asset Management at Colliers, then talked about how the crisis is affecting profit and loss accounts and how his team is advising the hotels they manage.

With every hotel currently closed, Ben and his team have been calculating the minimum amount it will take to open and looking for ways to reduce and flex costs in an industry which is notorious for having high fixed and operating costs.

Preparing for a phased reopening of the hotels, Ben expects that most won’t be able to reopen until the end of July or into August. He said it will be crucial to only open the hotels when they can break-even and that they will be relying on the flexibility of the furlough measures.

In terms of recovery, Ben doesn’t expect to see RevPAR – revenue per available room – to return to 2019 levels until 2022 and thinks profitability will lag by another 18-24 months.

 

An International Brand’s Perspective

Tim Rumney, Chairman of Best Western Hotels & Resorts, hotel owner and business consultant then gave us his take on how this crisis will affect hotel operations saying “this pandemic will force the most significant change the hotel industry has ever seen” and that the era of the unsophisticated hotel operator is over.

As a brand, Best Western has implemented new operating procedures focusing on safety, hygiene and cleanliness. Their new operating norm includes remote check in and check out, grab and go breakfasts, sanitation facilities installed throughout hotels and plexiglass separating staff and guests at reception areas.

All of this will inevitably mean increased costs which Tim thinks will be the undoing of some hotel operators who will not be able to operate profitably unless they change their approach to the business.

In his own hotel, Tim is looking at streamlining costs by training staff in multiple skills so they can work across all departments as well as looking for new revenue streams.

He said the key challenge for many hotel operators coming out of lockdown will be how they can provide genuine customer service when staff and guest interaction will be limited.

 

A Leisure Agent’s Perspective

 

And finally, Ross Kirton, Head of Colliers’ UK Leisure Agency, spoke about the wider hospitality and leisure sector which generates around £117 billion (7.4% of GDP) each year and accounts for 1 in 8 jobs.

With the sector severely restricted, many have shown agility by setting up food delivery kits or online gym classes to retain some cash flow.

Talking about the sector’s road out of lockdown, Ross expects businesses in CBDs to struggle for longer as work from home continues while businesses in suburbs and rural areas will see an earlier bounce in sales. He also expects to see widescale restructuring and consolidation in the coming months, far beyond just trying to make ‘version 8’ of old business plans work.

Overall, all the speakers agreed that the road out of lockdown won’t be easy for the sector, but that owners and operators in the hotel and hospitality sector are resilient and those that are able to adapt to the new norm will have a good chance at survival and recovery.

 

Thank you to all the speakers for giving up their time and to everyone who joined the webinar. Part 2 of the webinar series will take place on 17th June with details of how to join released soon.


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