It’s easy to summarize my predictions for this year, it will be mixed once again. Fortunately the hotel market is pretty resilient, we’ve been through storms like this in the past such as foot-and-mouth disease, the global financial crisis and September 11, but the common thread with hotels is that people always have need to break away from their norm. to recharge their batteries. It might just be a weekend or a two-week stay by the sea, but when we all experience extended periods of isolation in our homes, a getaway tops the order books.
So it’s no surprise that I’m going to suggest that the UK stay will still be strong this year. In fact, many believe it will last until beyond 2023, and that’s not unrealistic as we are currently battling the latest variant of COVID-19. Many are still uncertain about the prospect of traveling abroad, coupled with the fact that many have had an enjoyable experience of places they have never visited in the UK before: the outlook for leisure hotel businesses in 2022 are solid. Hoseasons parent Awaze UK says 2022 bookings are 62% ahead of 2020 levels.
While it is likely that overseas travel will return to some extent; an American Express survey found that 44 percent of those surveyed are considering both a UK holiday and an international break.
Return business trip
Likewise, we expect domestic and international business travel to return to business destinations, London in particular. Business travel is expected to increase in 2022, according to the GBTA, after a slower-than-expected return in 2021 and a full recovery to 2019 levels will be reached around 2024, all is well on the COVID front. Spending on business travel increased by 14% in 2021 and is expected to increase by 38% in 2022. However, the pandemic and inflation are all risk factors threatening a smooth recovery in the commercial market. As well as the fact that a number of companies have announced their intention to cut back on business travel even after the restrictions are lifted, in line with a trend to become more carbon neutral.
Hotel cash flow
Significant challenges remain, however, undoubtedly for hotel operators. The removal of most government support initiatives will continue to put pressure on cash flow, especially with corporate rates and VAT expected to return to “normal” levels. Staffing difficulties will continue due to rising labor costs and the fact that many people who have left the industry are expected to not return as they move into new industries. , which offer a better work-life balance or more conviviality. hours.
While many hoteliers have seen occupancy and rates return to higher than expected, many of these businesses operate on short-term debt provided by backing banks. Lenders are likely to take a more stringent approach in the coming year as the government eases the pressure on them to support these companies. This can cause distressed assets to enter the market providing opportunities for investors and reducing the scarcity of equities, which helps to support asset value today, especially on well-located quality assets. .
On the market
There remains a significant level of interest from domestic and international investors, with pent-up demand to place their money in non-traditional business assets, meaning the bed industry has become extremely attractive in times of COVID.
We predict that after waiting for better times, this waiting period will reach a crescendo in 2022 and patience will run out for hoteliers keen to pursue other life and business plans or to retire. With expectations of environmental sustainability starting to come from customers and government, this could also push more people to divest their assets in 2022.
By Julian Troup, Head of Colliers Hotels