Presentations at the Annual Hotels Conference in Manchester this October generally hit an optimistic note, delegates attending from Freeths’ hospitality team found.

In a busy conference over 2 days, debate covered topics ranging from disruption in the hotel industry to the role of brands, as well as taking in a market and general economic overview. In a series of focused debates matters such asset management to improve performance, digital marketing, how design decisions can improve hotel spaces and the changing face of the F & B (food and beverage) offering in hotels were covered.

Summary some of the key messages:

• Trading picture: The picture across the UK is generally good with trading strong and improving in the regions (Belfast, Birmingham and Manchester being among the stronger performers) and a growing pipeline, though there may be some issues with oversupply in certain areas.

• The impact of Brexit: It was felt that Brexit will be good news for the hotel industry as the drop in value of sterling has made the UK a cheaper destination, whilst more UK citizens are taking holidays at home. However, potential restrictions on immigration may adversely affect the labour supply and cause pressure on wages.

• Millennials and the market: There was much consideration of the impact of millennials on the market particularly when it comes to their booking habits – they are much more likely to use OTAs (online travel agents) than make direct bookings through the brands. According to research by BDRC Continental only two hotel brands (Premier Inn and Travelodge) make it into the top ten most used sites for booking rooms.

• Brand: The major hotel brands are fighting their corner. In a keynote speech Thomas Dubaere COO of Accor Hotels for UK and Ireland felt that disrupting helped improve the way Accor do things and empowered the business. Many new brands have recently been introduced to the UK market with many to be launched over the next 18 months. Wyndham Hotel Group put it that they are democratising travel through offering a wide range of brands to the customer.

• Franchise models: The continued rise of the hotel franchise model was considered although it was noted that the franchise agreement template which to varying degrees the major brands use is effectively 40 years old and has not changed with the times. Although brands are being more vocal about their flexibility with franchise arrangements particularly in the context of development deals, this is not necessarily reflected in practice. Although there was debate as to how long hoteliers can sustain franchise fees and booking fees of the OTAs, it was noted that for the time being it is business as usual, probably until a major player on the franchise side breaks the mould.

• Finance: Commercial lenders in one panel stressed they are open for business and that although the lending environment may be cautious in the light of Brexit there has not been a fundamental change. Lenders like the security of brands, although the message was they look at each case on its merits and a good business case will usually be persuasive whether a major brand is part of the package or not. It was noted there are a variety of lenders in the market now and not just the traditional lenders.

• Trends: The impact of the sharing economy (Air Bnb et al), the continued impact of brand uplift (the extent to which brands can command a price premium) and the space for new entrants operating at a boutique level were all topics discussed. In a theme that was first touched upon by Thomas Dubaere, one session stressed hotels need to be more nimble in creating and developing their F&B offer to better compete with the high street and persuade guests to take advantage of those facilities while staying at the hotel, paying particular attention to location and authenticity.

• What makes a hotel valuable: operating profit was held up as key, driven by great management. Also important is consistently great service delivery (whether driven by an independent owner or a leading brand), as well as a close alignment of investor interests and operator interest.

As active participants in the hotels sector, Nigel Gardner and Leo Skinner were interested to hear the views of operators at the conference, as they constantly strive to keep on top of the issues that face their clients. If you would like to discuss without obligation any aspect of your hotel operation, development or sale please feel free to contact either of them.

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