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.
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. The bounce-back is now underway although the pace of recovery is variable depending on geographic location, economic circumstances and supply conditions. Following historic norms, the typical pattern is that 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. Trading is currently improving but development financing remains difficult. There may be some buying opportunities at present 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.