Like most industries the hotel trade is enduring a torrid time, with revenues across the sector falling 9% during the first quarter of 2009.
But look a little closer and the picture isn’t uniformly bad, as Alistair Murchie, who heads the Cirencester office of Colliers Robert Barry, which specialises in selling properties in the hospitality industry, explains: “It depends so much on where you are.
“Places with a lot of tourist visitors seem to be holding up pretty well, because of the weak pound, whereas if you’re dependent on conference trade you’re probably finding life much more difficult. Different styles of hotels would say different things.”
The Guild of Travel Management Companies, the voice of the business travel industry, reported an 8% drop in reservations in January and February, figures described as “catastrophic” by Hyatt International vice-president of sales and marketing Andrew Ashmore.
Budget chains such as Ibis, Travelodge and Holiday Inn are also proving resilient as businesses and tourists cut back
However, London hotels seem to be largely unscathed by the recession as tourists flock to the capital to take advantage of the weak pound. InterContinental Hotels, the world’s biggest hotel group, said that its 49 London hotels are a rare ‘bright spot’ in a market where its profits have tumbled 44% in the first quarter of this year.
Budget chains such as Ibis, Travelodge and Holiday Inn are also proving resilient as businesses and tourists cut back.
Fortunes can change quickly in this sector.
As hotels in the capital escape the worst of the recession following the precipitous collapse in the pound, it seems a long time ago that sterling reached a 26-year high against the dollar, slowing the flow of American visitors and money into the UK. But it was only two years ago that the exchange rate reached the other extreme.
Two years before that tourist numbers in the capital collapsed following the 7 July terrorist attacks.
Health scares, too, can decimate the trade. In recent years we’ve had the SARS outbreak costing the hospitality sector in East Asia millions, foot-and-mouth damaging tourism on these shores and, just recently, the swine flu outbreak devastating the hotel trade – and admittedly all other sectors – in Mexico.
Susceptible to the vagaries of geopolitics, terrorism, health scares and the money markets, big news events can send share prices tumbling for companies with portfolios concentrated in the affected region. The more countries and regions hotel groups operate in, the more they spread their risk, and the more insulated they’ll be.
Emerging markets
Expanding presence in particular regions serves another strategic purpose, namely capitalising on the gradual shift in global economic power. The shrewdest operators have been proactive in responding to the inexorable ascent to the economic top table of India and China, which together account for one in three people on the planet.
Now that the global slowdown is taking its toll on traditional locations, however, this process is accelerating.
Marriott, the US-based chain, is to open about 65 hotels in the world’s two most populous nations, as well as in the UAE. French-based Accor, meanwhile, Europe’s largest hotelier, is tripling the number of hotels it has in the Middle East.
Emerging markets still represent a relatively minor part of the business of large North American and European chains, but they’ll be highly significant in the long term. Robert O'Hanlon, tourism, hospitality and leisure partner at consultant Deloitte Middle East, says: “There is genuine belief that markets like China and India are underserved and in terms of business tourism and hospitality tourism there are opportunities for growth.”
Low interest rates are, unsurprisingly, exerting a significant effect on the market, as Alistair Murchie, who has played a major part in the sale of numerous hospitality businesses around the Bath and Cotswolds area in recent years, explains: “There’s been strong interest in certain sections of the market, particularly those where investors rather than hands-on operators are active.
“This is largely driven by low interest rates, so that these sorts of buyers are getting very little return on their money on deposit, and they’re keen to get into something with a better yield. They’re looking for quality properties, and those are getting a very good response indeed.”
As with so many sectors right now, values are failing but well-run businesses are holding up better and still attracting significant attention. If anything, the appeal of successful, accomplished businesses is all the greater for being a reliable sanctuary from the current pervasive uncertainty.
