Last year, HPG Advisory Services looked at the Global Hotel Investment Landscape as international travel was beginning to re-emerge after Covid-19. We explored some of the key considerations for investors and owners and looked at which geographic regions and styles of properties were most likely to see an immediate uplift post-pandemic.
Since then, consumer confidence towards travel has increased, and as restrictions are being lifted in numerous countries, and many hospitality businesses are reporting a promising return to growth.
Here, we review the emerging trends and what opportunities the hospitality sector presents in the future. Whilst we’ve taken various insights into consideration, we must acknowledge the ongoing conflict and humanitarian crisis in Ukraine which continues to threaten stability throughout Europe and events there could quickly shift any current trends in unpredictable directions.
What happened in 2021?
Firstly, let’s recap on some of the hotel investment highlights from 2021. The Caterer has reported that hotel investment in the UK grew by 84% on 2020 levels and at £4.14 billion, was just shy of the 15-year average. Private equity was particularly interested in regional hotel investment which was particularly buoyant, and it was clear that international investors still see great value in the UK market with investments relatively split between investment from within and from outside the UK.
“The hotel sector has had a resilient year with strong momentum in the final quarter showcasing the appetite for UK hotel assets. While there remains operational challenges in the short-term, investors continue to be positive on the long-term outlook of the sector and we anticipate another strong year in 2022 for the UK hotel investment market.” – Tim Stoyle, Head of UK Hotels at Savills.
Investor trust also returned to Spain as the €3.19 billion (as noted by Christie & Co.) where investments exceeded pre-pandemic figures. 2020 had seen a strong pull away from urban hotel investment, a trend reinforced by one of HPG’s clients that completed two transactions in the Iberian Peninsula during the pandemic.
Continuing Trends into 2022
Recruitment and Retention
One of the biggest challenges in hospitality, since the start of the pandemic and closure of so many businesses, has been recruiting and retaining employees. Furlough, redundancies and the continuing effects of Brexit forced many front-line employees to either join new industries or return to their home countries, precipitating a perfect storm for the decline in available talent in the hospitality industry.
As with every challenge, there is an opportunity and any hospitality organisation that can make their business more attractive in what is currently a candidate-driven marketplace will have a huge advantage. Working from home, digital nomads, flexible working and reimagined office space all became the norm during the pandemic. New working trends are condensing the space between business and leisure and the portmanteau Bleisure has re-emerged.
Hospitality, especially at the luxury end, has always given employees an insight into a luxury lifestyle and the opportunity to travel or live abroad. Company benefits that replicate this can still be very appealing to potential candidates while also giving them a valuable insight into customer expectations and a road to building empathy and genuine connections with the guests they take care of.
Hospitality’s Digital Transformation
Investors will be keeping a keen eye on the increased digital transformation of hospitality service and how they may be able to leverage these digital innovations to drive customer experiences, revenues and return on investment.
The pandemic was a catalyst for the hospitality industry to accelerate processes for everything from contactless payments to online ordering and mobile hotel check-in. The expectations of digital-savvy customers are very high, but the concept of creating completely new digital experiences to complement the more traditional in-person experiences doesn’t seem quite as far away as it did two years ago. While taking on too much could harm the existing customer experience, successfully integrating innovative, creative and exciting digital experiences could be very tempting to investors, eager to catch the next big wave of this transformation.
ESG and Property Investment
We recently explored how the Environmental, Social and Governance strategy of businesses is a key consideration for potential employees when choosing a new organisation to work for. Unsurprisingly, ESG is now playing a large part in how property investors are thinking about their investments. Since property is usually a longer-term investment, ensuring that all new buildings have sustainable credentials and retro-fitting existing buildings with environmentally friendly features will help future-proof their investment.
ESG Investment Funds are also increasingly popular and have rewarded investors with solid returns over the last few years. Larger Hospitality chains, who form part of these funds are often keen to ensure that the hospitality operations are aligned to the expectations of these funds manager and investors. As a result, the role of Hotel Asset Management has become increasingly popular as owners look to listen to the market in order to protect their assets and drive growth.
General Investor Trends
The recent 2022 Knight Frank Wealth Report looked at investment trends for popular luxury items such as art, whisky, classic cars, diamonds, wine and watches. While these investors had different experiences through the pandemic, they all seem to be predicting some sort of future that embraces digital transformations with Cryptocurrency, NFTs and the Metaverse featuring heavily. Many investors appear to be dipping their toes into this area so as to not be left behind, but the majority seem to have little understanding of how this digital future might actually play out. In many ways, the future is unwritten and it will be the innovators that best capture their moment that will ultimately succeed.
HPG Advisory Services have exceptional industry relationships and proven successes with operators, developers and investors in the hotel, and hospitality sectors across Europe, Middle East, Africa, Asia and the Caribbean. Our services include executive search, human capital architecture, talent management consultancy, behavioural profiling and a range of human capital services tailored to meet the specific challenges of each of our clients.
We are proud to have delivered some of the industry’s most talented leaders into key appointments. If you’re looking to build, strengthen or diversify a role, a team or your entire business, please contact us today.
Dan Akhtar, Managing Director of HPG Advisory Services +44 20 8600 1166 / +44 7808 157796 / dan@hpgsearch.com
