Wednesday, 19 May 2021 – London UK / Spokane WA
Already, many see 2019 as the good old days. But the UK shows signs of a maturing hotel industry, especially supply growing faster than demand:
- In 2010, 80% of UK hotels were family run independents. Today it’s 49/51.
- While total UK hotel stock grew 12.5% in the past 10 years, Travelodge and Premier Inn increased by 80%.
- Airbnb has entered the UK supply landscape of 45,000 hotels with more than 225,000.
- Provincial RevPAR peaked in 2018 and declined before 2020.
- As London is event led, 2019 may be the best we will see for some time.
Hotel owners need to go far beyond yearning for past numbers, and need to align with a platform that is agile, affordable and owner focussed. How flexible has your 20 year agreement been lately with your franchise brand? How can PIPs be economically justified in the current economic landscape? Especially when over 50% of first time Airbnb guests will never stay in a standardised hotel again.
Your new EBITDA will be driven by 50% cost reduction, and 50% from new demand/pricing:
- Nearly 1 Million UK workers with non-British passports have left the UK. In many London hotels, these constituencies represent over 90% of pre-Covid staffing.
- To operate, hotels will need to hire a small core multi-skilled team and outsource every job possible to move a fixed cost structure to a variable cost structure.
- These areas can include brand, marketing, PMS system, distribution, revenue management, PR, digital, reservations, housekeeping, property maintenance, operations management. For every function that can be outsourced, the hotel can operate at a smaller break even. Then these roles can become variable costs, as a percent of the room rate.
- Every hotel in every market will need to rebuild its core business segments from the local market. Local government, medical, public safety, construction, long term corporate. With a 52 week sustainable base, you then yield up the special events and leisure. UK leisure looks to become more domestic and road trip, less city centres, major destinations.
The future of pricing and revenue:
- Dynamic pricing has gone into 24/7 hyper mode, which is why hotels need distribution platforms with pricing automations and outsourced revenue management
- Every market now sees less consumer planning, more short term bookings.
- Oversupply in your market leads to more supply/demand commodity market pricing. But you can command a rate premium always by leveraging your good reviews and the uniqueness of your hotel/services.
The time is now. In England, hotels are now open. From June 21, restrictions on how many people can stay in hotels are expected to be lifted. Hotels wanting to regain their business base will need to move quickly to capitalise upon pent-up travel demand.
For more information: https://magnusonhotelsworldwide.co.uk [email protected] UK +44 07593 596941
