Category: News

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 
[email protected]   

Guy Lean, Managing Director – Madison Mayfair 
+44 20 8 600 1180 / +44 7813 009787 
[email protected]   

Andrea Shaw, Director – FM Recruitment 
+44 20 8 600 1160 / +44 7714 236469 
[email protected] 

 

Imran Bhatia, a notable legal expert with a distinguished and dynamic career path, began his journey at Herbert Smith Freehills in 2011 as a Trainee Solicitor, where he qualified to an Associate role working on mergers and acquisitions, as well as other corporate transactional matters, for a range of international clients.   

 A pivotal moment in Imran’s career was his transition to JAG Shaw Baker (now, Withers Tech) in 2016. There, he delved into the fast-paced world of high-growth tech companies, gaining crucial experience in venture capital and working with founders and scale-up business, which later became invaluable in his proceeding roles.    

In 2018, Imran made a significant leap into hospitality, becoming the first legal counsel for both Ennismore and Norlake Hospitality. His tenure saw strategic growth and expansion, notably in the successful development and launch of new Hoxton, Gleneagles and Estelle hotels. His legal expertise was especially crucial during the COVID-19 pandemic, helping the company navigate challenging and unprecedented times for the sector, as well as leading Ennismore through a transformational merger with Accor.    

Following the merger, Imran continued his role with Norlake Hospitality, continuing to oversee the Hoxton, Gleneagles and Estelle properties but with more of an owner’s focus. In 2022, he simultaneously took on the challenge of General Counsel at Unbound, a venture capital firm focusing on disruptive tech startups, bringing a unique perspective from his vast experience.  

Imran’s educational background in law, including a Bachelor of Laws from UCL and postgraduate studies in Islamic Banking and Insurance, has been instrumental in his career success. His journey is a compelling example of strategic leadership and adaptability and highlights how diverse legal expertise can profoundly impact and drive the future of hospitality enterprises.  

As Imran prepares to take on his next challenge with one of the largest privately held hospitality organisations in the world, placed by HPG Advisory Services, we are delighted that he agreed to join us for a short Q & A as part of our latest Success Stories series.  

Based on your varied experiences, what advice would you give to young lawyers aspiring to transition from traditional law firms to in-house counsel roles in industries such as hospitality? 

The main piece of advice I can give is to keep an open mind and be curious. You simply don’t know what will appeal to your personality until you try it.  

Going back to the start of my career at Herbert Smith Freehills, I remember being delighted that my first trainee seat was in Corporate, so that I could get it out of the way as soon as possible whilst I was at my least experienced (as I was convinced I wanted to be a litigator). Fast forward two years and that was the department I wanted to qualify into.  

Then later, the decision to join Ennismore was more about the challenge of building a first legal function within an exciting scale-up business with serious growth plans and a really credible leadership team, as opposed to necessarily looking to join a hospitality company. However, being the legal counsel, especially the sole counsel, provides such a unique position to be able to explore, and have exposure to, different facets and areas of the business, that it led to me developing an interest in the industry more generally, hence my wanting to stay in the space for my next role.  

What skills or qualities do you believe have been most crucial to your success in transitioning across different legal roles in various industries? 

Firstly, luck! I’m incredibly fortunate that every organisation I have joined has given me the chance to work with brilliant people who I can learn from and who have helped me to settle into new environments. 

The other crucial part, I think, is to not take yourself too seriously and to have the confidence to bring your personality to the fore – and the rest will follow. The world has more than enough serious lawyers. Whenever I take on a legal role within a new organisation, I always believe that the recruiters and hiring panel within the business will have had their choice of lawyers to hire, with experience and expertise greater than, if not equal to, my own. In my mind, therefore, the deciding factor must have been a personality or culture fit that someone saw in me during the interview stage, and that is what I need to ensure I lead with.  

The organisation will take it for granted that I’ll be a technically competent lawyer, but bringing your true personality and an air of humility, especially in an industry that is new to you, is a crucial way to adapt, become comfortable, and be seen as approachable within the organisation. And if it’s genuine, that should be the easiest thing to do. 

Can you describe a moment in your career when you faced significant uncertainty or risk in making a job change? How did you navigate that decision? 

Leaving Herbert Smith Freehills to join JAG Shaw Baker was for sure a big call and a tough decision. I was happy at the only firm I’d ever worked at, one of the biggest in the world, in a team where I had a good reputation, surrounded by fantastic people and working on great deals. The decision to jump ship to a firm that no one at HSF had heard of was a tough call and it was met with some raised eyebrows.  

But for me, what swung the decision was precisely that – how different it was to HSF.  

I was clear in my mind that working with earlier stage companies, where I could have a more impactful and long-lasting relationship with my clients as only a 2-year qualified lawyer, had to be my next step. To join another large or medium sized firm in the City, where the change in organisation size and culture would have been less acute, would have made no sense given how happy I was at HSF. Stepping out of my comfort zone was crucial for me to really shift the type of work and clients that I was exposed to. Although I went from a firm that had the luxury of 24-hour document support, and joined a firm that had as many people as HSF had physical offices (and where you had to activate the burglar alarm if you were the last one out at night!), it was the best decision I could have made at the time.

When you began your roles at Ennismore and Norlake, you were very much a one-person band, in a role that had not previously existed. How did you approach setting up and evolving this role? 

I have had the chance to build a first legal function within a few organisations now. I consider it a privilege and a really interesting challenge, particularly within hospitality. There can be an instinctive (often, rightly) mistrust of lawyers within a hospitality business – that the creative and operational brilliance that has got the organisation to such a point that they even need a lawyer may now be curtailed or wrapped up in red-tape by the new bore in a suit.  

The golden balance to strike is to ensure that you protect the business (which as a lawyer, is of course the reason you are there), without being the fun police. It is a real hearts and minds battle which requires patience, humility and listening to people. If you get this balance right though, it is such a fun place to be. You can be the approachable, go-to person for everyone in the organisation (rather than the lawyer in the ivory tower), with the aim of being in the room when ideas are being discussed, rather than finding out about things too late (and when they have already gone wrong and need fixing). 

Someone once told me “you’re not what I thought a lawyer would be” – I wear that as a badge of honour. 

In your role as General Counsel, how do you balance the often divergentinterests of property ownership with the operational needs and goals of a business? 

Any in-house lawyer will tell you that a key skill is to be able to ‘live in the grey’ – to have an approach to risk that perhaps isn’t what you would have been taught in law school but lives in the commercial reality of the business and identifies what is a genuine legal risk and what is a tolerable trade-off for doing business. If you are involved in the operational side of a hotel business, understanding this balance and getting it right is crucial.  

A key way to get this right is to work closely with, and have a good relationship, with your General Managers and senior Ops staff. One thing I have learned is that GMs are geniuses at what they do, and will instinctively do everything they can to protect their hotels. Their risk radar is often set at exactly the right level, and so they are a great resource to leverage from when determining where you should set your balance as a lawyer. 

On the property ownership side, there can be a temptation to be more conservative and not as operationally liberal in approach. However, a key point to remember that between owner and operator, there should be an alignment in interests more than a divergence. At the end of the day, if the hotel is successful, everyone should stand to benefit. 

How have mentors and professional networks influenced your career decisions and progression? 

A key thing with mentors, especially within law, is that you can admire people and see them as mentors, without actually wanting to emulate their career paths. I’m very lucky to have Partners and other lawyers who I have worked with, both whilst in private practice and since, who I consider friends and who I have discussed my career moves with in a non-judgmental way, whose advice I deeply respect and appreciate (even though I don’t think I would ever go back to private practice myself!) 

Being in-house, and especially as a sole counsel, can be a lonely gig, but fortunately some fantastic networks for in-house lawyers have been formed over the last few years, which are great for sharing knowledge, tips and asking the questions you don’t want to be billed for by your retained lawyers. 

What would have been your Plan B? 

Ultimately, what I love the most about being a lawyer is the challenge of communicating information to people in a way that will resonate with and make sense to them. I think that’s why my Plan B would have been to be either a teacher or a journalist. Or, if talent wasn’t a requirement, centre forward for Liverpool FC. 

To discuss how we can support your businesses with our full suite of human capital services to help grow your hospitality business, please call HPG Advisory Services on +44 20 8600 1160 or email Dan Akhtar on [email protected]

 

The International Hospitality Investment Forum (IHIF) 2023 recently concluded with the theme “Fortune Favours the Bold”. This year’s event brought together a diverse group of industry leaders and experts to discuss the latest trends, challenges and opportunities in the dynamic world of hospitality. Here, Hospitality People Group’s Dan Akhtar and Mara Cattaneo share their highlights and key insights that continue to shape the hospitality landscape. 

The Battle to Attract & Retain
Earlier this year Hospitality People Group published an article on The Battle for Retention, that spotlighted the challenges that the hospitality industry continues to face, so it was no surprise that this topic took centre stage in Berlin. Jan Hein Simons, Hotels Director at Colliers specifically highlighted labour shortages as the major industry challenge, and said that “some companies had been turning down revenue because of a lack of staff.” Participants explored the increasing competition to attract and retain skilled professionals in an ever-evolving job market. As the industry faces a growing demand for talent, strategies and initiatives were shared to address this challenge. These included innovative recruitment practices, talent development programs, and creating a positive work culture to attract and retain the best talent available.  

Focus on Luxury
We found that there was huge optimism for the ongoing recovery of the luxury hospitality sector. The event shed light on the evolving expectations of luxury travellers and the growing demand for personalised and exclusive experiences. Concepts such as hyper-personalisation, unique amenities, and curated experiences were discussed as key drivers to enhance guest satisfaction in this segment. While the labour shortage has certainly affected the luxury segment’s ability to fill hotels, they have also been far more successful in passing increased room rate onto their guests than midscale properties, leading to ADRs that are already well ahead of 2019. The integration of cutting-edge technology and partnerships with luxury brands were also highlighted as strategies to provide unforgettable and personalised luxury experiences. 

ESG Goes Mainstream
The development of Environmental, Social, and Governance (ESG) considerations from a niche subject to centre stage at IHIF 2023 is remarkable. It clearly signals a willingness to shift towards more sustainable and responsible practices in the hospitality industry, driven by increasing consumer demand and regulatory requirements. However, it is still not clear that what consumers demand, and what they are willing to pay for are quite the same. Attendees discussed how governmental policy would likely drive the implementation of ESG strategies, including energy efficiency programs, waste reduction strategies, community engagement, and ethical sourcing. Overall, establishing your company’s values and beliefs and clearly communicating them with potential employees as well as customers seemed to be a growing trend and excellent advice to businesses looking to grow, attract investment and/or win the battle for retention. 

Subdued Hotel Transaction Market
From our experience at IHIF, there is usually a news ticker sharing updates on the various deals that have been struck during the week. This was noticeably absent this year and points to a hotel transaction market that remains subdued, with a gap between seller expectations and buyer financing capabilities. While it seems clear that there is capital available, rising seller expectations and the subsequent lack of distressed assets, coupled with the increased cost of debt have made financing a challenge for potential buyers. Despite the challenges, participants expressed great optimism about the market’s resilience and the potential for future growth. 

Financing Challenges
Participants highlighted the increased cost, and reduced accessibility of debt financing in the hospitality industry. However, it was noted that lenders are still open to financing projects that demonstrate institutional appeal and align with their investment criteria. Factors such as sustainable themes, commitment to the hospitality sector, and desirable locations were identified as crucial elements in securing financing for hospitality projects. Alternative financing options, such as private equity and crowdfunding, were also explored as viable alternatives to traditional debt financing. 

The Potential of AI
The potential of artificial intelligence (AI) to transform the hospitality industry was widely discussed at IHIF 2023. Participants delved into the various applications of AI, and how it could be leveraged to address the biggest challenges in the industry. Reducing the impact of mundane tasks on hospitality employees would likely increase employee retention. AI could also help with elements of the customer journey that are not considered to be drivers of delight, such as cleaning rooms, allowing the potentially reduced workforce to concentrate on ‘value-adding’ activities  The event showcased pilot projects and initiatives that leverage AI technologies, such as chatbots for personalised guest interactions, smart room controls for enhanced comfort and convenience, and AI-powered data analytics for market trend analysis and predictive modelling. While AI is still in its early stages, industry leaders expressed optimism about its ability to revolutionise how hotels operate and deliver exceptional guest experiences. 

Conclusion
IHIF 2023 provided a platform for industry professionals to gain valuable insights into the current state and future direction of the hospitality industry. The event emphasised the need for bold strategies and innovative approaches to address challenges such as the Battle for Retention, the evolving demands of luxury travellers, the mainstream adoption of ESG practices, the subdued hotel transaction market, financing challenges, and the future potential of AI. As the industry continues to evolve and build resilience, a forward-thinking mindset will be crucial to thrive in a rapidly changing landscape. 

If you would like to discuss any of the topics raised in this article or would like to chat about your people strategy, then please get in touch. 

Dan Akhtar, Managing Director of HPG Advisory Services +44 20 8600 1166 / +44 7808 157796 / [email protected]