As we reach the half way point in the year we discuss what the future holds for the Hotels and Accommodation sector. From the effect of Brexit on staff retention, to growing environmental pressures, we look at what’s in store for the remainder of 2019 and beyond.
Static occupancy rates hide the shift in demand
International leisure travel to the UK has continued to hold up well, supported by a weak pound. On the flip side, the macro economic and political uncertainty surrounding Brexit has reportedly reduced business travel. As a result, we predict that occupancy will remain static, as it has done for the best part of 3 years. However, with the all-important summer months still to come, everything is still to play for.
In 2018 there were several major events that positively impacted demand including the Royal Wedding, Farnborough Air show and of course the glorious weather boosting domestic tourism. With the exclusion of the ICC Cricket World Cup, there are no other large events this year to help shore up guaranteed custom for the sector.
Flood of new rooms on the market
There have been a number of exciting new openings in the second half of 2018 and in the first half of 2019 including Soho House’s hotly anticipated White City House in London, Edinburgh’s Market Street Hotel from Carlton and The Pig at Bridge Place in Kent. There have also been a number of high-profile refurbishments such as Chelsea’s Belmond Cadogan Hotel reopening after a five-year refurb at £39 million. All of this has brought a significant number of new rooms into play, with more to come in the second half of the year. Supply is expected to increase by 4 per cent in London and 3 per cent in the rest of the country. Increased supply but static demand will cause pressure on occupancy and room rates which have been holding up well in recent years.
Talent and cost pressures
Hotels rely on staff providing high-quality service to maintain those all-important customer ratings to allow them to compete in the market. A large proportion of hotel workforces are made up of EU nationals, especially in London at nearly 40 per cent of employees. Ever since the Brexit vote, the number of EU workers coming into the UK has steadily diminished. With this decline, there is a chance that Britain’s departure from the EU will create a sudden exodus of talent for hotels, or possibly even constrain the inflow of workers in the event of a no-deal.
With UK unemployment at a historic low, where will this shortfall be filled? The likely effect will be wage inflation as hotels fight for the best teams. Similar issues face the construction industry – who in turn build and refurbish hotels. Cost pressures from all sides should be anticipated for hotels as the Brexit process roles on.
With the fight against plastic and climate change constantly in the press, the hotel industry will need to move with the times as guests seek to go green. In many ways, hotels have been at the forefront of environmental initiatives, with longstanding policies around the re-use of towels and linen. But given their high use of energy and resources, it’s clear that more is expected by the environmentally conscious consumer. Recent innovations in the hotel industry to reduce waste include:
- hotel bicycles to hire;
- free coffee in communal areas rather than individual facilities in rooms;
- paperless check-in and check-out;
- large dispensers for shower gel and other products rather than miniatures;
- motion sensors in hallways to reduce lighting energy usage; and
- energy efficient air-conditioning.
As hotel margins continue to come under pressure, businesses that vary their offering by answering consumer concerns over the environment will have the competitive edge. This can be seen in the rise of ‘eco-luxury’ hotels globally such as Whitepod in Switzerland, Hotel Punta Islita in Costa Rica and Proximity Hotel in the U.S.
2020 and beyond
Looking ahead to 2020, operators will need to continue adapting their businesses to maintain the good performance seen in recent years. Hotels are already at the forefront of the hospitality industry in understanding their customer through data analysis and going forward we expect this to result in more personalisation, both in how hotels market to customers and also to improve the in-house experience. Successful brands should look to leverage their prestige and status beyond accommodation, for example with Soho House retailing their own luxury homeware products. Volume operators should work to ensure their estates have local personalities as customers tire of bland cookie cutter brands. Above all, in a competitive environment where TripAdvisor, aggregation sites and digital word of mouth drive demand, hotels should focus on getting the basics right: impeccable service, value for money and cleanliness.