25 November 2020

Hotels of the Future Webinar

With severe and ever-changing restrictions on our ability to travel, 2020 has proved to be an unprecedented year of crisis for the hotel sector. Some segments of the market have fared better than others, but all hoteliers have been forced to make difficult decisions to support their business now, and to protect against uncertainty in the coming months. We would like to thank our brilliant panel of experts, which can be contacted.

Our webinar explores:

  • The impact of Covid-19 on the hotel sector generally;
  • How the pandemic has impacted operations;
  • Valuations and funding in the market and the consequences for development; and
  • How hotels can adapt and thrive in the face of a changed society.

Key takeaways

  • Covid 19 has unsurprisingly proved to be the cause of the biggest downturn in the hotel sector since benchmarking began. While regional hotels have managed to capitalise on UK staycation demand during the summer months, London hotels have been severely hit by the lack of corporate travel and a sharp drop in RevPAR levels is expected across the sector in 2020. The degree to which RevPAR levels recover, and the demographics of future guests, will be influenced by the delivery of a vaccine and its impact on travel. Beach and city locations reliant on international travel are likely to be the slowest businesses to recover, and valuers are paying close attention to the mix of UK, European and international guests a hotel attracts.
  • The industry has seen a large wave of redundancies and a heavy reliance on the furlough scheme for those staff who have been retained. Many European staff have returned home to Europe, and the sector may face a challenge in attracting international talent back to the UK after Brexit.
  • The advent of a second lockdown and a lack of Christmas events are causing many hoteliers to consider closing through December, January and February. Those hotels that have remained open during the outbreak are relying on a small team to run day-to-day operations, and this may have a permanent impact on staffing and services in the future.
  • Valuations have been affected by three key factors: the lack of transactions above £10 million; difficulties in forecasting trading projections in light of general uncertainty; and a lack of funding. Some limited funding is available to investors with existing banking relationships, but a general lack of debt is restricting acquisitions and may push the market towards opportunistic cash buyers.
  • In prime locations, particularly London, development continues apace in the expectation that KPIs will recover in the 2-3 year cycle between conception and PC. However, developers in non-prime locations in the regions are taking a step back. Structural changes in the market, particularly a growing interest in ground rent, are also helping to prop up development. Construction projects have managed to continue through the pandemic period, with contractors commonly being given an extension of time but no extra money for Covid-related delays.
  • Many hoteliers have looked to diversify by providing alternative services such as takeaway food, temporary working space and virtual conferencing. Serviced apartments have fared particularly well in comparison to the rest of the sector. However, any permanent redeployment of space would need to be considered carefully in light of planning restrictions and the possibility of a vaccine coming in the new year.

The pandemic is speeding up changes already in motion in the industry and branding is becoming ever more important to survival, with increasing numbers of freestanding hotels looking to brands to represent them.

Forsters' multi-disciplinary Hotels practice is well placed to advise and support you and the needs of your hotel asset or investment. View the full range of services and details of our team.

Our Insights

I wanted to train at a firm that had a good culture and variety of and responsibility in work. I have found both to be true at Forsters.
Annalisa Gardner, Trainee Solicitor