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Rising energy costs are hurting hotel profits

08 March 2006
Rising energy costs are hurting hotel profits

Rising energy prices and labour costs continue to be the major headache for hotel operators, according to a leading hotel consultant.

Speaking in the opening session at the International Hotel Investment Forum in Berlin yesterday (7 March), Robert Barnard, partner at PKF, said oil price rises were a major cost and would affect profitability.

"A lot of costs are going up, and oil prices are a key factor. Energy is a major cost for hotels and there is little they can do to control it," said Barnard.

He said the short supply of workers was also pushing costs up and margins would be squeezed.

On the hotel investment front, Joni Smith, associate director at CBRE, said that hotel values were continuing to grow in 2006, despite €16.2b (£11.11m) worth of hotel real estate deals taking place in Europe last year.

She added that new investors, such as pension funds, were looking to invest in hotel real estate, and large volumes of cash from oil-rich Gulf States would help buoy up the hotel real estate market.

However, the sector could be in for a tough ride if the bleak economic predictions portrayed by KPMG's economic advisor Derek Scott come true.

He said the World Economy's stability could be threatened by a major correction in the US economy, which has only been postponed by the Federal Reserve's interest rate policy.

"There's a real danger of this correction happening and it will have a bigger impact on some economies, which are less resilient and unable to cope with it," said Scott.

International Hotel Investment Forum >>

By James Garner

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