Hotels Revenues rise, as does peer-to-peer threat
T
he hospitality sector displays numerous trends – impossible to do justice in brief. All-inclusive resorts and, in the case of
Tui Travel, ‘unique products’ increasingly dominate the outbound leisure market,
with Thomas Cook running to catch up with its rival by expanding its ‘concept hotels’. Four and five-star hotels proliferate as
major hospitality groups segment their offerings with ‘boutique’ and other brands in an effort to escape the feel of chain properties and appeal to different market segments. Hilton Worldwide became the latest to launch a series of “rare, statement hotels” with its Curio brand in June and promised a ‘lifestyle’ brand for the tech-savvy to follow. Most groups pursue asset-light models,
managing or franchising rather than owning properties. All contemplate ways to drive bookings direct while seeking the best- possible deals with OTAs – assuming repeat customers book direct anyway. The latter does not suit corporate clients, of course, with the UK travel managers’ group the ITM complaining to Marriott Hotels in November about an offer of free Wi-Fi to direct bookers
The Deloitte view
The UK regional hotel market enjoyed a spectacular recovery this year and looked set to achieve double-digit revpar growth and end five years of lacklustre performance. The regional market also looked set
to remain strong due to limited supply growth and the recovering UK economy, suggesting it would finally make headway in recovering profit levels that remain on average 20% below 2007’s peak levels. In recent years, the UK regional hotel
M&A market has been characterised by distressed sales and the arrival of new
investors in the sector. US private equity (PE) funds such as Starwood Capital and KSL picked up large portfolios at what now seems to have been the bottom of the cycle. The transaction market is entering a new era with most distressed hotel portfolios now worked out. The past year also saw the hotel
sector return to favour in the UK’s public markets. Action Hotels, Dalata and easyHotel all made successful debuts on AIM, with investor appetite underpinned by their asset backing, promised yields and growth strategies.
Looking to the future, we expect:
PE funds to shape their portfolios for exit by bolting on additions and pruning less-profitable hotels. Expect some to exit early, taking advantage of significant improvements in valuation. Growth of independent third-party operators such as Interstate and Redefine BDL, capitalising on the perception they can manage hotels more efficiently than the large global brands. Further hotel IPOs as investors are attracted by high dividend yields and owners by high valuation multiples.
Hospitality enjoyed a strong year, including in its most-established and perhaps most-threatened market, the US
– despite Wi-Fi charges topping the gripes of most travellers. But the big question is the impact of the
‘sharing economy’, epitomised by online accommodation provider Airbnb. It surpassed InterContinental Hotels in valuation in March (at least in the view of private investors) and boasted 800,000 listings by October, leading Accor chief executive Sebastien Bazin to note: “We need to pay attention. We need to understand the business model. Airbnb will get bigger just as Expedia did.” That said, global hospitality revenues per
available room (revpar) rose 6% year on year in the first quarter of 2014 and revpar in the US, heartland of Airbnb, was up 9% year on year in the third.
–18% OCCUPANCY DOWN 17% Year-on-year
DECLINE in average daily rate in
MOSCOW August 2014
46 | Travel Weekly Insight Annual Report 2014
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