The past 18 months has been an unprecedented time for hotels. The pandemic and on-going supply issues have prompted key changes in the hotel sector, many of which are long-term, if not permanent.
In order to survive businesses must embrace change across their entire operation and do so quickly. Here are seven changes that businesses can’t afford to ignore as we move into 2022.
1. Reliance on technology
The use of smart rooms, digital reception, keyless rooms entry, smart payment, smart check-in/-out – with some hotels eliminating the need for a front-of-house reception team entirely – is now becoming commonplace. The pandemic has prompted technology to play a greater part in our day-to-day lives and hotels must now reflect this, and even lead the way in the use of smart technology as many customers will now demand this in all areas of their lives. Hoteliers have historically been painfully slow to address technological improvements but now need to invest in the future to keep up with guests’ expectations.
2. A new dawn in business travel
While face-to-face meetings remain the gold standard, on-line communication provides a cheaper, more time-efficient alternative way of meeting. Travellers will need to find ways to make business trips more efficient, perhaps combining them with a leisure element, as companies continue to impose greater financial scrutiny over travel costs.
Hotels with heavy exposure to MICE business must look to offer facilities that support and enhance this whether it be spaces for smaller meetings, encouraging local people into work hubs or offering areas for on-line meetings with suitable background, lighting, seating and food and drink.
3. Greater diversity in financial lenders
As the market proceeds along a recovery phase there’s likely to be an increase in refinancing, restructuring and disposals. Debt funds are tipped to become the most active lenders, although traditional lenders are likely to return once hotels’ cash flows improve. Financing is, however, expected to become more diverse as credit funds and other alternative lenders tolerate a greater degree of risk, albeit at a higher cost to the borrower.
4. Transactions falter before recovery
There’s still a huge weight of capital looking to invest in hotels and while the availability of distressed acquisition opportunities is likely to be significantly less than anticipated when the pandemic began, this will support recovery in asset values along with the fact that owners looking to sell will hold on to benefit from a recovery in pricing. Improving prospects and a growing number of distressed sales as loans come up for refinancing should ensure that hotel transactions become significantly busier as 2022 progresses.
5. Shrinking payroll
Data from the Office for National Statistics puts the staff shortage in the hospitality sector in the UK at around 10% of capacity. This is largely due to furloughed staff finding work elsewhere and changes in visa requirements, which has prompted over 90,000 European workers to leave the industry since Brexit.
Some hotels have reduced their trading hours or days, cut out lunch service or afternoon tea, closed gyms or health spas, or are trading with a percentage of rooms shut or with reduced service levels. Finding staff to service large functions and events has proved particularly challenging. In the longer term hotels must operate with fewer staff, aided by a greater use of technology. Some of the hotel company brand standards which were scaled back during the pandemic may need to remain in place for the longer term, and further changes may need to be considered to reflect the new normal.
6. More outsourcing
Hotels have often outsourced services such as cleaning, housekeeping, maintenance and security, but staff shortages are now prompting new areas, such as food preparation and room service, to be outsourced too. Restricted menus and easier-to-assemble dishes as well as improvements in deliveries now enable this to work more efficiently and economically. This isn’t possible for high-end restaurants, but where food provision is an add-on, and the menus are suitable, a degree of food preparation can easily be completed off-site by a number of new ‘dark’ kitchens starting up easing both food supply issues and staffing shortages. Some hoteliers who have space available could consider leasing some of these areas to the operators of such kitchens.
7. Sustainability cannot be ignored
There is no doubt that corporate sustainability has become an urgent matter. Lenders and investors are now looking at a company’s environmental credentials and are increasingly limiting their exposure to or declining to become involved with those that don’t have an active or convincing ESG policy. This issue can no longer be ignored or paid lip-service to, it’s become both real and very urgent. The hotel sector in general is very late to this party and needs to act responsibly, decisively and fast.
About the author
Russell Kett is chairman HVS London. HVS, the world’s leading consulting and services organisation focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries, was established in 1980. The company performs 4,500+ assignments each year for hotel and real estate owners, operators, investors, banks and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of some 60 offices and more than 300 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry.
