Business management & development
Left: Andreas Scriven, head of hospitality and leisure at Deloitte UK.
Opening page: Deloitte spoke to leading hospitality experts for its European Hotel Industry Survey 2024.
Financing the European hotel market Private equity remains the main source of equity capital for hotel acquisitions in Europe in 2024, with a four percentage point increase compared with last year (from 27% to 31% this year), while sovereign wealth funds have surged by ten percentage points to become the third-largest source of equity capital for hotel acquisitions (from 3% to 13% this year). According to the respondents, alternative lenders
from 38% last year. However, the pressures that high inflation, labour shortages and greater energy prices are putting on profits has led to more than one in four respondents (28%) expecting 0% or negative GOPPAR growth in London in 2024. It’s reassuring to see London climb back up the rankings, and it is perhaps not surprising to see new hotels opening given the UK’s capital is a centre for tourism and business, as well as being a gateway city for international travel. For London to continue to remain attractive to hotel investors, the industry will need to address concerns around the ability to drive pricing in light of inflationary pressures. Across the UK regions, investors once again cited Edinburgh as the most attractive city for UK regional hotel investment for the third consecutive year. Oxford gained two places to become the second most attractive city in the UK, ahead of Manchester.
Tech adoption less of a priority Hospitality leaders cited rising costs (89%), higher interest rates (87%), a shortage of skilled labour (85%) and increased staff costs (81%) as key concerns that will hinder growth in the year ahead. Demand fluctuations (48%), the inability to raise prices (45%), generative AI (41%) and technology disruptions (39%) are all perceived as medium-term risks facing the industry. The proportion of hospitality executives prioritising digital transformation projects in the year ahead saw a significant decrease year-on- year, with only 22% of respondents saying it is a key strategic priority compared with 48% in 2022. Only one in four respondents (25%) see generative
AI as something that can help improve operational efficiency tasks, such as detecting fraudulent activities or generate new financial models. Concerningly, the current macroeconomic climate
is forcing leaders to think about short-term solutions to stay in the black. To remain competitive, hospitality executives need to think about the parts of their business that can benefit from implementing the latest technologies, which will in turn benefit the bottom line.
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remain the most common source of debt financing in the European hotel market in 2024, also gaining a significant 12 percentage points from 43% to 55% this year. By contrast, all other sources have lost momentum compared with the same period a year ago, except for sovereign wealth funds and vendor loans. More than half of respondents (56%) expect hotel
investment to be sourced from Europe, with funding from the UK (20%) and North America (39%) declining in significance this year due to slowing economic activity. The Middle East and North Africa’s importance as sources of investment has grown consistently in the past two years, with nearly 40% expecting investment to come from the region, a 22 percentage point increase compared with 2021. The APAC region (excluding India and China)
and India are both expected to increase by exactly four percentage points in 2024, to 20% and 7% respectively. Meanwhile, China as a source of investment for 2024, is expected to decline by 11 percentage points to 4%.
European investment opportunities Hotels continue to be the most attractive European asset class for investment in 2024 for 52% of respondents, a significant 15 percentage points increase on last year (37%). However, as the sector returns to normalcy following the pandemic, serviced apartments still represents the second most attractive asset class for close to one in five respondents (19%) but continue to attract less interest. Student housing, a more value-driven asset class, is expected to see increasing investment interest in 2024. With the exception of the Netherlands where the
investment cycle seems clearly on the upturn, the rest of northern Europe investment cycle is more negative, with Germany and Ireland experiencing a downturn, whereas the UK and France are undergoing a trough period, according to respondents in our survey. There is more certainty in the southern European investment cycle with most Mediterranean markets proving to be on the upturn following more consolidation in the region. Portugal, particularly, emerges as the country where close to one in two respondents (47%) feel the investment cycle is on the rise. ● To see the full survey results, go to
www.deloitte.co.uk/ hotelindustryconference.
Hotel Management International /
www.hmi-online.com
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