Capital expenditure cuts will hamper hotels' recovery from recession

23 March 2010 by
Capital expenditure cuts will hamper hotels' recovery from recession

A lack of capital expenditure could see many hotels delay their recovery from the current economic downturn, as well as impact their long-term viability, according to property agent and advisor Christie + Co.

Andreas Scriven, head of consultancy at Christie + Co, said that capital expenditure (capex) tends to be one of the first things to be cut during a downturn, as owners focus on short-term survival over long-term strategy.

"Owners who haven't invested are likely to miss out on the initial upturn in trade when it comes," he said.

"In addition, a hotel that has not seen investment is at risk of affecting a brand's reputation, which is of significant concern to brand owners looking to protect their brand equity.

"The list of underinvested, underperforming hotels in the UK is already long, so owners seeking to avoid being added to that list need to ask themselves if they can afford to stand still.

"Similarly, lenders who refuse to release additional funding for capex programmes may find themselves with a permanently impaired asset on their books."

With customer expectation increasing all the time, hotels that are failing to update and improve could lose repeat business in the face of new hotel supply coming into the market.

Property focus - all together now? >>

Finding a property >>

Hotels, restaurants and pubs lose around one-third of their peak values >>

By Janet Harmer

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