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HVS warns of "tough year ahead" for UK hoteliers

07 January 2020 by
HVS warns of "tough year ahead" for UK hoteliers

UK hoteliers face a tough year in 2020 with a growth in rooms supply increasing competition and dampening revenues despite underlying demand remaining strong, according to hotel consultancy HVS.

HVS London chairman Russell Kett said: "Hotels in the UK provinces found 2019 challenging and there seems to be little opportunity to improve this performance in 2020.

"The pipeline of new hotel openings will continue to add further pressure to many hotels which have experienced a decline in occupancy and average room rates, sometimes both. Once the current pipeline has worked its way through and post-Brexit demand levels have picked up, positive growth should be seen as we move into 2021 and 2022."

Demand for hotel rooms in London remained at a strong level throughout 2019 and hotels are likely to see a continuation of this, despite the growth in supply, especially at the luxury end of the market, which may lead to a softening of hotel occupancy levels.

"Average room rates in London should continue to grow, however, so overall revpar [rooms revenue per available room] is likely to remain flat throughout the year," added Kett.

HVS has identified five key themes likely to impact the sector moving forward into the new decade – the need for a personalised offer; the importance of developing a relationship with the guest; the issue of corporate responsibility; attracting and retaining good staff; and the need to maximise profitability.

"Whether a hotel will get a particular guest's business now depends on whether it will provide an appropriate experience beyond the minimum expectation of a comfortable bed, decent shower, fast efficient wi-fi and good value for money," said Kett.

"Gen X and Gen Y travellers seek a more personal offer – an experience to remember that they can't get elsewhere."

HVS advises hotels and hotel companies to no longer rely on loyalty schemes to build a relationship with guests as many no longer care about incentives such as free stays, especially when they are restricted from redeeming them. It is suggested that hoteliers need to find a way to develop a meaningful relationship with customers to enhance their loyalty.

HVS's third concern is that of sustainability and social responsibility, which is increasingly forming part of consumers' – and investors' – decisions. It is now essential for hotel operators to have credible policies and communicate them effectively to the guest.

There is also the need to attract and retain staff through competitive packages, training and meaningful career development, particularly post-Brexit. Also important is making staff feel part of a 'family', providing a flexible working environment and profit-sharing options.

Lastly, hoteliers need to ensure that as many areas of their hotel as possible are maximising income in order to deliver a proper return on investment. A minimum of 15%, but preferably 20% profitability should be sought from F&B operations, for example, with under-performing areas of a hotel developed to provide overnight guests and non-residents with a well-designed range of refreshment options that make money.

Kett added: "The world is changing fast and hoteliers need to adapt and incorporate these changes in a creative way in order to survive and prosper."

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