Middle East war causing demand displacement

There were hopes for a strong summer to counter rising costs on this morning’s HOSPA webinar.

Michael Grove, CEO, HotStats, told attendees: “There’s a lot of [investment] appetite around hotels, they sit in the primary real estate class and for good reason. Even in difficult times people are spending more money on tourism and travel.

“There are always winners and losers when we have crises like these and for the Middle East there has been a slowdown and cancelling in events. But there have been beneficiaries elsewhere - we have seen strong performance in Southern Europe and corporate travel has been relocated to key cities such as London and Paris

“The potential downside of that is that London in the summer months has high demand from high spenders in the Middle East, but staycation demand is mixing with the costs of flights and that there are less and less people wanting to go to the US. Don’t underestimate the impact of the World Cup, which will be a driver, certainly for F&B.”

“Going into this year, in the UK we have seen 2% growth on the topline and a drop off in profitability as we continue to see cost increases - 2% is not enough to offset the cost challenges we know are coming our way. We’re incredibly boring about driving ancillary revenues. If you enable your team to drive revenues, the limiting cost of labour becomes less of an issue because they can be driven into an ROI discussion rather than a cost-centre discussion.

“Labour costs are up significantly compared with last year, but they are much tamer than they were last year. Utility costs are 3.7% down, although we have seen an increase in water costs this year, particularly in the Thames Water area. It’s not a huge part of the P&L, but a significant part. We do need to keep a close eye on the Middle East in terms of oil prices.

“We have seen 1.8% growth in revpar YTD, wellness up 4.7% conferences and events growth up 6.3%.  Topline growth is slow, payroll expenses are nearly double that of revenue growth, but I do see that slowing down and if we have a strong summer then it should be less of an issue than last year.”

Louise Green, managing director, RBH Management, added: “We need revenue growth and we’re starting to see it. It’s been hard to work to get to where we are; we’re seeing strong demand on social events but you have to up your game on quality and offer something different.

“When we look ahead at the summer it’s looking healthy and we’re about to see bookings accelerate. The Edinburgh market was forecast to decline this year, but it has held.”