The Annual Hotel Conference (AHC) saw over 1,000 delegates attend the Manchester Central Convention Complex, including representatives from Trowers & Hamlins' London, Birmingham and Manchester offices.
The AHC covered a breadth of areas relevant to the hospitality sector; from funding to development, ESG and the wider regenerative potential of hotel and leisure development.
This year, in the evolving landscape of the UK hotel industry in 2023 and undoubted challenges in the wider global economy, it appears that there are still plenty of reasons for optimism. The sector outlook from the likes of Christie & Co, HSBC, Oxford Economics, HotStats and STR, showed resiliency and room for growth, with luxury prime assets continuing to outperform not only other hotel assets but also when compared to equivalent rental yields generated by traditional office space.
The importance of comprehending hotels in "granular detail" to succeed was stressed. Hugh Taylor, CEO of Michels & Taylor, managing over 3,000 hotel rooms, emphasised that understanding the market, both macro and micro, is essential. He highlighted the need for hourly and market-specific insights, underlining the dynamic nature of hotel management. Taylor illustrated the necessity for individualised strategies by comparing Hilton Waterloo, with minimal F&B, achieving fantastic profitability, compared to full-service hotels requiring more attention. The industry faces diverse challenges, from rising debt costs to inflated expenses.
One challenge discussed at the AHC is the severe shortage of staff, which is driving up wage growth and putting pressure on margins. This is due to a number of factors, including the UK's post-Brexit immigration policy, which has made it more difficult for businesses to hire foreign workers, and the COVID-19 pandemic, which has led to many people leaving the sector. Hospitality vacancies in the UK fell to 124,000 between May 2023 and July 2023 , a drop of 47,000 compared to the same dates in 2022. Despite reports that the government is considering a short-term visa scheme for under-30s from countries such as Taiwan, Norway, and South Korea, the Home Office has also announced plans to increase the immigration health surcharge and the application fee for skilled worker visas. As a consequence of the workforce shortages, businesses in the UK are seeing a c.7% wage growth. James Pomeroy, global economist at HSBC, commented at the AHC that a strong wage growth helps to keep people spending. Whilst wage growth may pose a problem for business, Pomeroy stated they are playing a 'massive role in keeping us [the UK] out of recession'.
Neil Kirk, COO of L&R Hotel, argued for collective action in the energy market to alleviate industry struggles due to unfavourable contracts. Whilst energy prices have fallen since last year, it will take some time to filter through to the prices being paid by consumers. Pomeroy noted that wholesale food prices have decreased some 25%-35% in some places from last year. However, due to the Russian Grain Deal and India's rice export ban, some prices may stop falling.
Puneet Kanuga, CIO of EQ Group, with €2.3 billion in hotel real estate, noted the difficulty of fundraising. Pomeroy was 'reasonably confident' that the UK will not face a recession in the short term, but there still remains a 'huge risk' of interest rates which will affect UK government spending and businesses who are renegotiating loans and mortgages. The upsurge in hotels' average daily rates (ADR) have been a lifeline in the light of these challenges, though sustainability concerns persist.
Also noted at the AHC was the need for hotel, hospitality, and leisure industries to be more integrated in order to take advantage of opportunities arising from events like concerts and sports. Simon Wood, Chef Patron and Director of Wood Restaurant Group, commented that hotels should be more aligned with dining options. Manchester recently hosted Pride, international cricket, both Manchester football teams and Creamfields festival in the span of a couple of weeks. During this time, he witnessed a huge surge in hotel pricing meaning that consumers may look for affordable meals instead. As such, Wood reviewed the restaurants' offerings and devised a tasting menu of small and large plates, not compromising the fine dining aspect but yet curating the experience to mirror the market requirements. He noted that people want to choose all the elements of their trips, and that bookings in an app for a particular local neighbourhood would make that process simpler.
Trowers & Hamlins boasts experts from across the UK and internationally, experienced in all aspects of the Hospitality & Leisure sector. For more details, contact the UK team, details of whom can be found here.