The hotel sector: a land of opportunity
The hotel industry, and tourism generally, is one of the world’s main growth industries. Recent global events have shown that the
industry is still cyclical and can be hard hit by economic and political events. However the industry has also demonstrated its
resilience and has bounced back after every setback.
The 21st century hotel industry is facing up to a number of issues including the following:
•
A changing capital structure which has led to the increasing separation of hotel owners, operators and debt financing
arrangements;
•
The internet and its impact on consumers and operators along with the advent of new intermediaries;
•
Globalisation, consolidation and branding, including the rapid growth of branded budget hotels;
•
Planning and regulation, including the frequent request to include a hotel as part of a multi-component development. This
necessitates careful consideration of suitable hotel sites;
•
Alternative uses for property, and the opportunities to brand existing hotels.
The market situation
In recent decades the hotel industry has experienced a resurgent and strong trading environment in most countries. The global
economic downturn, which amounted to recession in most countries, had previously caused a marked downturn in fortunes. Most
markets are now well advanced back towards their cyclical peak in revenue terms although costs remain stubbornly high constraining
profit conversion to some extent. Of course the circumstances of each market are variable depending on geographic location,
economic circumstances and supply conditions.
According to industry norms the typical growth pattern has been followed: first hoteliers seek to rebuild occupancy to a ‘normal’ and
sustainable level, often using pricing as a tool, and ultimately RevPar growth will resume. Growth in average room rate tends to
provide further upside once occupancy optimisation is achieved and that is the phase that most markets are now in. The transaction
market has been healthy with some significant portfolios having changed hands. Development financing is more difficult but still
possible for well conceived schemes. However hotel projects take a significant time to materialise and need careful planning and
detailed consideration.
Well equipped to help you
This sector is a land of opportunity and if this is a journey which you are keen to take, whatever your level of past experience in the
sector, Melvin Gold Consulting Ltd is well equipped to assist you on your exciting next steps in the hotel sector.