Confidence returns to the hotel market

by Janet Harmer , Friday 20th November 2009 08:00

Despite a terrible year for hoteliers, there is now room for cautious optimism, delegates were told at the 2009 Annual Hotel Conference, hosted in Manchester by law firm Halliwells.

Jonathan Langston, managing director of TRI Hospitality Consulting, said things were not as bad as had been predicted and confidence was returning.

Keynote speaker Surinder Arora, chairman of Arora Hotels, agreed that the hotel climate was improving and added that he was relieved that the "good old days" of excessive lending were now over.

"It was absolutely suicidal," he said of the boom. "Lenders were throwing money at clients - it was crazy and unreal. After the worst recession in the UK's history, things are slowly getting better now."

Good news was also reported to delegates on how hotels had capitalised on the growth in domestic tourism. Managing director of Visit Manchester, Paul Simpson, said that the staycation had provided a good opportunity for the industry to showcase its properties to a new audience over the next couple of years.

"The challenge for hoteliers is to seek new routes to their markets, either by using their tourist boards, maximising local events, or through websites," Simpson said.


LONDON NOSES AHEAD

While hotel occupancies and average room rates have fallen throughout 2009, London has actually fared better than other European cities.

While the UK capital saw a 9% fall in hotel revenue this year compared with the first 10 months of 2008, revenue dropped by 13% in Paris, 16% in Rome, 18% in Frankfurt, 21% in Amsterdam and 25% in Prague.

Langston explained: "There has been a blood bath out there, but London has held up largely as a result of the weak pound,"


PROPERTY PICKS UP

The hotel property market is also showing signs of recovery, according to Chris Moore, head of hotels at agent Colliers Robert Barry. "We've finally got some good news, with demand being focused on prime property," he said.

Potential buyers include people who are using their life savings or redundancy payments to enter the market for the first time, particularly at the low end, with interest for quality, trophy hotels from overseas and institutional cash buyers who are taking advantage of the weak pound.

"There is also evidence that interest is returning for hotels in between," said Moore. "Interest in this area, though, is very much dependent upon well maintained properties with up-to-date accounts."

Looking towards the next three months, 61% of the 107 UK chain hotel general managers surveyed by TRI Hospitality Consulting said they were either optimistic or very optimistic about their hotel's trading performance.


THE FUTURE

Nick Smart, vice-president development, Hilton UK & Ireland, was optimistic about the future, particularly in the short term while interest rates remain low.

"The staycation is not going to replace the annual two-week holiday, but we are going to see more short breaks of two to three days," he said.

"With 150 new hotels being built every year and more properties dropping out of the market at the low end, the quality of the hotel experience in the UK is improving dramatically every year."

Other trends to watch out for according to Langston include more discerning consumers demanding quality and value for money from hotels; increasingly aggressive marketing from the major budget hotel groups; continued hotel openings, predominately in the budget sector; and ongoing discounting and value-added packages.

By Janet Harmer


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