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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:

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, and the impact of the ‘credit crunch’, caused a marked downturn in fortunes. Most markets are now well advanced along the recovery path although trading remains below historic highs and 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 competitive 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. Nonetheless development financing remains difficult although the transaction market has been healthy with opportunistic portfolio buyers being especially active. Buying opportunities continue to exist but in terms of development, it is worth considering that hotel projects take a significant time to materialise so now is probably the right time to plan for the next cycle.

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.