Author: Dan Akhtar

Insights from International Hospitality Investment Forum (IHIF) 2024

Posted on by Dan Akhtar

The International Hospitality Investment Forum (IHIF) 2024 took place in Berlin in mid April 2024. Like many recent articles, insights and data we have seen recently, the increasingly positive results in terms of sector growth continue to be treated with caution as investors seek to secure long-term value. 

Here we look at the current UK investment landscape and highlight some of the key themes from IHIF such as expansion strategies, the future of hotel operations and what they mean to the global investment infrastructure. 

UK Investment and Market Dynamics
The UK hotel market has seen a robust recovery, with investments soaring to £1.7 billion in the first quarter of 2024—marking the highest level since 2019 and a 138% increase from the first quarter of 2023. 

In this article from Hotels, David Eisen cites recent data from Cushman and Wakefield to say “London accounted for 60% of major deals by volume and included the sale of Atlas House to Integrity International Group and the BT Tower to U.S.-based hotel owner and operator MCR Hotels” These deals highlight a growing trend of converting non-hotel assets into hotels, a strategy expected to continue shaping the market. 

The transaction volume in this quarter spanned 93 properties across the UK, encompassing around 7,600 rooms. Major portfolio deals like the Edwardian UK Radisson Hotel Portfolio and the LXi REIT Travelodge Portfolio made up 60% of the transaction volume. Private buyers dominated the market, responsible for 69% of the transactions, followed by public investors and institutional-backed capital. 

Ed Fitch, head of hospitality UK & Ireland at Cushman & Wakefield, commented on the sustained high performance of the UK hotel sector, which is stabilising as the new norm. Despite a strong capital interest, the market faces constraints due to a limited number of available properties and cautious buyer sentiment ahead of expected base rate cuts and the upcoming UK election. 

Strategic Expansion 
Speaking at IHIF in Berlin, Sir Rocco Forte outlined his group’s strategy to leverage its strong U.S. customer base, where 40% of its business originates, and explore high-demand locations like New York, Los Angeles, Beverly Hills, and Miami, despite high entry costs. The investment from PIF, which acquired a 49% stake in the hotel group, is poised to double the size of Rocco Forte’s portfolio within five years, including launching The Carlton Hotel in Milan and a new venture with fashion company Capri Group in Naples by 2027. 

Sir Rocco highlighted the group’s commitment to maintaining high service standards in the face of rising costs and continuing to manage food and beverage operations in-house to ensure quality. He also emphasised the importance of enhancing employee remuneration and working conditions, reflecting on COVID-19 as a catalyst for improving employee welfare and aligning hotel operations closely with local cultures. 

Regional Opportunities
On Day 2 of IHIF, hotel executives highlighted increasing investments and travel interest in Mediterranean destinations, contrasting with the economic challenges in northern Europe such as Germany.  

Hotel News Now reported that that Tim Abram of Starwood Capital acknowledges the difficulties in Germany due to a sluggish economy and high interest rates but reiterated the country’s strong investment potential. 

On the other side of the coin, Italy is being seen as an emerging hotspot for hotel investments, similar to Spain a decade ago. Marcello Cicalò of Bluserena Hotels & Resorts noted Italy’s fragmented market and rising asset values are attracting significant private equity interest. Andreea Bodea of Pygmalion Capital noted that while Italy can boast the highest room count in Italy, many owners are still struggling to attract the investment their properties need in order to meet and exceed the expectations of the modern traveller. 

Operational Insights and Future Prospects
The forum highlighted the critical need for operational efficiency and adapting to evolving consumer expectations. The changing landscape of hotel food and beverage services was a focal point, emphasising innovation and operational optimisation to boost profitability. Sébastien Bazin of Accor shared insights from the company’s decade-long transformation, emphasising the importance of digital integration and stable leadership amidst a volatile geopolitical landscape. “Navigating new challenges requires a robust blend of innovation and tradition,” Bazin remarked during his session. 

Customer Loyalty and Guest Experience
Hospitality Investor reported on a fascinating panel discussion that once again highlighted the evolving concept of loyalty in the hospitality sector. The discussion, featuring insights from Antonio Gonzalez, CEO of Sunset Hospitality Group, and Gregory Lanter, a senior executive at Club Med, emphasised the shift from traditional transactional loyalty to a more emotionally driven model.  

Gonzalez elaborated on the importance of experiential hospitality that withstands changes in pricing strategies or market trends. By launching Sunset Hotels & Resorts, his group aims to expand its portfolio significantly by 2026 while focusing on crafting unique experiences that resonate on a personal level with guests. 

Lanter shared similar sentiments, pointing out that the real value lies in providing life-enriching human experiences beyond the standard offerings of rooms and amenities. He stressed that the key to achieving this is through employees who possess strong interpersonal skills rather than just technical capabilities, enabling them to engage with guests meaningfully. 

Both leaders highlighted the role of technology in enhancing guest experiences. Gonzalez discussed how technology could leverage data to better predict customer preferences and streamline experiences, making them more seamless and personalised.  

Meanwhile, Lanter viewed AI as a disruptive tool that can revolutionise how guest services are delivered, particularly in tailoring the marketing and distribution of these personalised experiences. 

Market Optimism Amidst Challenges
Despite macroeconomic uncertainties, the forum radiated a general optimism about the hospitality market’s future. The European M&A outlook appears promising, reflecting improvements in deal structures and an increase in strategic investments. However, the forum also acknowledged challenges such as rising costs, interest rates, the current geo-political instability and the necessity for flexible business models to adapt to rapidly changing market conditions. 

In conclusion, IHIF 2024 offered invaluable perspectives on the continued resilience and adaptability of the hospitality industry, highlighting the sector’s commitment to growth and innovation. The discussions reflect the industry’s concerted efforts to navigate a complex global landscape while pursuing expansion and refinement. 

 

 

Global Hospitality Investment Insights – Spring 2024 

Posted on by Dan Akhtar

With IHIF (Berlin), Caribbean Hotel and Resort Investment Summit (Florida) and Future Hospitality Investment Summit (Saudi Arabia) all taking place in April, it presents an opportune time to delve into the current state of hospitality investment, spotlighting the investment landscape across the UK, Europe, and the Middle East, while referencing global patterns that offer insights into the future of hospitality. 

Recovery and Reorientation: A Global Snapshot
The hotel industry has continued to show remarkable resilience in the face of adversity. According to the Global Hotel Investment Outlook 2024 by JLL, by the end of 2023, global Revenue Per Available Room (RevPAR) not only recovered but in some regions exceeded 2019’s figures, showcasing an industry on the rebound.  

This resurgence is underpinned by a burgeoning interest in urban markets such as London, New York, and Tokyo, which are now prime targets for hotel investors. However, the narrative varies by region, with the Middle East and Europe leading the charge, with Asia Pacific trailing slightly, as it grapples with slower recovery rates. 

The JLL article also reveals that while RevPAR recovered, global hotel investment volume was significantly low in 2023, marking the lowest total since 2012 (excluding the COVID-19 impacted 2020). This decline was attributed to capital market dislocation caused by high-interest rates and geopolitical instability.  

Despite these challenges, the year witnessed a large number of global trades, indicating a continued interest in the hotel sector. However, there was a notable shift towards smaller, single-asset trades and a decline in high-dollar portfolio transactions. 

Chinese Market: The Awaited Return
A critical element in the global travel and hospitality puzzle is the return of Chinese international travellers. Pre-pandemic, this demographic was a powerhouse of spending and mobility.  

However, as Hospitality Investor reports, despite the lifting of travel bans, Chinese international seat capacity in early 2024 remained 30% lower than 2019 levels. The expected revival of Chinese outbound travel could catalyse significant shifts, particularly in markets heavily reliant on this segment but there remain significant challenges. The UK, with a strong influx of students and their families returning, has done well but, the overall picture for Europe is less impressive. War in mainland Europe and the diversion of direct flights over Russia alongside and reprioritisation of the economic landscape at home has led to a slower recovery in the long-haul sector with gateway cities in the US and Asia the primary benefactors in the recovery so far. 

Luxury and Beyond
While the luxury market has performed better than any other segment post-pandemic, this is now facing a potential slowdown. Hospitality Investor writes that significant brands like Burberry are signalling a downturn due to decreased spending by aspirational shoppers. While this trend, coupled with a general market correction following years of growth, poses challenges for luxury goods, the impact on the luxury travel and accommodation sector remains nuanced. The travel industry may still find resilience through a shift in consumer preferences towards meaningful luxury experiences over goods.  

The luxury travel market is expected to continue growing, driven by unique, personalised experiences that cater to high-net-worth individuals. The evolving luxury landscape suggests polarised spending towards high-value and luxury experiences, with an ongoing demand for unique and immersive travel experiences despite broader market challenges. 

Furthermore, the narrative extends beyond mere accommodation to embrace sustainability, wellness, and authenticity, elements now integral to brand differentiation and investment appeal. The evolving expectations of travellers are reshaping the essence of hotel branding, with a marked shift towards experiences aligned with personal values. 

Market Movements: Europe and the Middle East in Focus
Europe presents a mixed bag; the allure remains strong for domestic and international travellers alike, buoyed by events such as the Summer Olympics and Taylor Swift’s Mega Tour. However, the shadow of geopolitical tensions and economic uncertainties looms large, affecting travel dynamics, particularly from key markets like the aforementioned China. 

The Middle East, particularly Saudi Arabia, has emerged as a beacon of growth and investment, catalysed by major initiatives to boost tourism and hospitality as part of broader economic diversification efforts. This region’s upward trajectory offers a compelling narrative for investors, but the ongoing conflict in Gaza has started to impact revenues and the longer-term impact is hard to predict. Bloomberg recently reported that Dubai based Emaar Properties PJSC posted a 33% drop in fourth-quarter revenue despite a record annual profit in 2023. The conflict has also led to wider regional effects, including consumer boycotts of major foreign brands and a decline in tourism in nearby countries.  

Looking Ahead
The global hotel industry, particularly in strategic markets like the UK, Europe, and the Middle East, is at a pivotal juncture, shaped by the slow yet steady return of Chinese travellers, the polarisation between luxury and value and the increasing emphasis on sustainability and experiential luxury. Together with the unpredictable global geopolitical landscape, there are significant opportunities for hospitality investors. 

While the landscape is fraught with uncertainties, the undercurrents of recovery, innovation, and a renewed focus on quality and sustainability signal a new era for hotel investment. The industry’s ability to adapt, innovate, and cater to the evolving preferences of global travellers will define the success of investments in the coming years. 

This month, we will be attending the Caribbean Hotel and Resort Investment Summit in Florida and the Future Hospitality Investment Summit in Saudi Arabia. These conferences serve as critical platforms for industry stakeholders to converge, share insights, and forge the path ahead. We remain committed to providing our clients with nuanced, forward-looking advice, grounded in a deep understanding of global trends. 

If you are attending the Caribbean Hotel and Resort Investment Summit in Florida and would like to set up a chat, please contact Dan Akhtar or Andrea Shaw. 

If you are heading to Saudi Arabia for the Future Hospitality Investment Summit, Guy Lean will be our representative. Please contact him to set up a chat. 

Dan Akhtar, Managing Director – HPG Advisory Services 
+44 208 600 1166 / +44 7808 157796 
dan@hpgsearch.com   

Guy Lean, Managing Director – Madison Mayfair 
+44 20 8 600 1180 / +44 7813 009787 
guylean@madisonmayfair.com   

Andrea Shaw, Director – FM Recruitment 
+44 20 8 600 1160 / +44 7714 236469 
andreashaw@fmrecruitment.co.uk 

 

Insights from The Resort & Residential Hospitality Forum 2023

Posted on by Dan Akhtar

With the Resort & Residential (R & R) Hospitality Forum recently taking place in Lisbon, we delve into some of the key insights to uncover opportunities in leisure hospitality investment in the Mediterranean and Southern Europe.

This event is run by Questex, the same team behind the International Hotel Investment Forum (IHIF), which Dan and Mara attended in May, and the Annual Hotel Conference (AHC), which was attended by our colleague, Guy Lean, in September.  

Here is a brief summary and some ke takeaways from The Resort & Residential Hospitality Forum 

Attendance and Demographics
The forum saw a total of 390 delegates, with an impressive 58% being first-timers. Significantly, 98 of them, which is over 25% of the total count, were investors, proving that leisure hospitality continues to draw attention from varied capital sources. 

Theme: Leisure to the Core
This conference has now evolved from its traditional emphasis on beach resorts. It includes a wide variety of leisure offerings like wellness retreats, Alpine resorts and hotels which used to be more corporate-centric but are now welcoming leisure guests. This shift also indicates a new wave of investors who perceive these assets not as fleeting opportunities, but as long-term investments. 

The Market’s Perception of Leisure Hospitality
One of the most discussed topics was the resilience of the leisure hospitality sector. Despite the numerous challenges thrown at the travel industry in recent times, including wildfires, air traffic control strikes, and even the aftermath of COVID-19, the demand for leisure hospitality remains strong.  

This is evidenced by statistics presented by STR, Hotstats, and tourism economic analyses. This steadfast demand, combined with an observed savings glut during the pandemic, suggests there’s ample room for optimistic growth projections. 

Investment Trends
Patrick Whyte, from Hospitality Investor, shed light on emerging investment patterns. He highlighted the contrast between struggling transaction volumes in Northern Europe and flourishing ones in Southern Europe, particularly in countries like Portugal, Spain, and Greece. This is likely because of owner-operators and family businesses seeking exits or joint ventures after facing post-COVID challenges. 

Supply Evolution and Professionalisation
The forum also touched upon the professionalisation of assets. Opportunistic funds, for instance, are keen to understand how to better position an asset to appeal to long-term buyers. A significant part of this involves understanding modern demand, where travellers seek unique and local experiences, rather than traditional resort offerings. 

Climate Change and Extending Seasons
Climate change, which has its set of challenges, is inadvertently offering opportunities by reshaping travel seasons. Investors and hoteliers are capitalising on this by expanding resort seasons, finding profitability in previously off-peak months. 

Branded Residential Growth
The conference highlighted a growing interest in branded residences, with large hotel brands like Marriott and Wyndham leading the way. However, they face competition from luxury non-hospitality brands seeing potential in this market. 

Destinations in Focus
Southern European destinations are garnering the most investor attention. Greece, particularly, stands out due to supportive government policies and market conditions. Additionally, emerging markets like Montenegro, Bosnia, Slovenia, and Albania were discussed as potential growth areas. 

Experiential Elements
Lastly, the forum emphasised the importance of offering a holistic experience to its delegates. From rooftop receptions to hotel tours, participants had the opportunity to truly experience the best of Lisbon’s hospitality. This reflects the increasing trend for more experiential localised experiences that customers are demanding. 

Summary
In conclusion, the R&R 2023 was a comprehensive showcase of trends, challenges, and opportunities in the leisure hospitality sector for the Mediterranean and Southern Europe regions.  

With a broad range of speakers on various topics, it clearly has its finger on the pulse of the industry and the digital debrief offered through multiple videos on the R & R Digital page is an extremely valuable asset.  

Next year’s event is moving to its new home in Athens, tipping its hat to Greece’s growing influence in the hospitality industry. 

If you would like to read more about our personal experiences at International Hotel Investment Forum, Annual Hotel Conference or Future Hospitality Summit this year, then please click on the links.  

If you would like to discuss any of the topics shared in this article or would like to speak to us about your people strategy and our advisory services, then please get in touch. 

Dan Akhtar, Managing Director of HPG Advisory Services +44 20 8600 1166 / +44 7808 157796 / dan@hpgsearch.com

The Evolving Role and Importance of the Hotel Asset Manager

Posted on by Dan Akhtar

In the dynamic and ever-changing hospitality industry, the role of the Hotel Asset Manager has become increasingly more visible and vital to the investor, owner and operator relationship.   

For some time, HPG Advisory Services has been familiar with the position, as hotel owners and investors build an independent connection to the day-to-day operations of their properties, while savvy operators prove their commercial acumen by adding this additional skill to their property management arsenal.  

Historically, owners would have liaised directly with hotel General Managers and Finance Directors to measure performance. Over the last 20 years, we have seen the emergence of dedicated Hotel Asset Managers who play a crucial role in maximising profitability, ensuring operational efficiency, enhancing the overall guest experience and ultimately, maximising the return on investment. In an interview with Hotelier Middle East last year, Hospitality Asset Managers Association’s Vice President Amit Nayak said that owners have realised that “you need a certain category of individuals to run your asset, those who understand operations; those who understand corporate finance and lending; and those who understand relationships.” 

Here, we explore the ever-evolving responsibilities and significance of hotel asset managers in the hotel industry. 

Financial Performance and Revenue Optimisation 

One of the primary responsibilities of a hotel asset manager is to drive financial performance and revenue optimisation. With a highly competitive market, rising costs, and fluctuating demand, it has become crucial to engage experts who can analyse data, identify new revenue opportunities, and implement strategies to protect profits. Hotel asset managers work closely with hotel owners, management teams, and other stakeholders to develop comprehensive financial plans, set performance benchmarks, and monitor key performance indicators (KPIs). They provide valuable insights on pricing, revenue management, cost control, and expense reduction to achieve sustainable financial growth. 

Risk Management and Investment Strategy 

As the hospitality industry faces various risks and uncertainties, effective risk management and investment strategy have become paramount. Hotel asset managers are responsible for evaluating potential risks, assessing market conditions, and implementing risk mitigation measures. They play a pivotal role in determining the investment strategy, analysing market trends, conducting feasibility studies, and assessing the viability of expansion projects or acquisitions. By carefully managing risks and making informed investment decisions, hotel asset managers protect the interests of owners and investors while maximising returns. 

Operational Efficiency and Quality Assurance 

 In an era where guest expectations are continuously evolving, operational efficiency, quality assurance and a clear focus on the customer experience are essential for maintaining a competitive edge. Hotel asset managers collaborate with operational teams to streamline processes, enhance productivity, and improve service quality. They implement industry best practices, conduct regular operational audits, and identify areas for improvement. By analysing guest feedback, monitoring online reviews, and benchmarking performance against competitors, hotel asset managers ensure that the hotel maintains high standards of service delivery and guest satisfaction. 

Asset Enhancement and Capital Expenditure 

Hotels require ongoing capital investments and asset enhancements to stay relevant and attractive to guests. Hotel asset managers develop long-term asset enhancement plans, aligning them with the overall business strategy. They identify areas where renovations, technology upgrades, or repositioning efforts can add value and increase profitability. By closely monitoring industry trends and guest preferences, hotel asset managers play a crucial role in guiding capital expenditure decisions that optimise returns and enhance the guest experience. 

Relationship Management and Brand Alignment 

Building and nurturing strong relationships with stakeholders, including hotel owners, operators, brands, and third-party vendors, is a critical aspect of the hotel asset manager’s role. They act as a liaison between owners and operators, ensuring alignment of goals, contractual compliance, and effective communication. Furthermore, they work closely with brand representatives to ensure brand standards are met and brand values are upheld. By fostering collaborative relationships, hotel asset managers create an environment of trust and transparency that leads to successful long-term partnerships. 

Conclusion 

The hotel Asset Manager role has become a multifaceted and indispensable position for many hotel operators, owners and investors. Their expertise in financial management, risk assessment, operational efficiency, and relationship management contributes significantly to the success and sustainability of hotels in a competitive market. The ability to adapt to evolving industry trends, leverage data-driven insights, and make strategic decisions is essential for maximising profitability, enhancing guest experiences, and ensuring long-term success in an uncertain landscape. 

HPG Advisory Services are specialists in the hospitality Investor, Owner and Operator landscape.  If you would like to have a deeper conversation about asset management, or any of the other services we can offer, then please reach out to set up a call. 

Dan Akhtar, Managing Director of HPG Advisory Services +44 20 8600 1166 / +44 7808 157796 / dan@hpgsearch.com 

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