The United Kingdom is a great place to be a hotelier in 2017, but concerns remain, led by disruptors such as Airbnb, and the usual challenge of finding good labor.
MANCHESTER, England—From the perspective of hotel operators in the United Kingdom, the state of the industry here is bright, but even so, the usual worries have not completely washed away, speakers said at the Annual Hotel Conference.
During the opening session, titled “State of the nation: The operator’s view,” panelists shared their companies’ good fortunes:
- Nicholas Northam, managing director of Interstate Hotels & Resorts, pointed to 5.5% revenue per available room growth, occupancy of approximately 80% and the addition of 11 hotels (totaling about 1,500 guestrooms) to the company’s portfolio this year;
- Serena von der Heyde, owner of London independent hotel Georgian House Hotel, said for her property over the last two years RevPAR has increased by nearly 20%, mostly driven by average daily rate, and occupancy has gone up from 49% to approximately 80%;
- David Taylor, COO of Principal Hotel Group, said four of the seven hotels in the company’s brand pipeline are open, with its London property in Russell Square due to debut soon. Principal’s sister brand De Vere also relaunched last month, buoyed by a Starwood Capital Group investment.
Northam said the majority of Interstate’s assets are in the regions. “We’ve seen great performance in Edinburgh and Hull (2017’s European capital of culture), string markets driven by the value of the pound,” he said. “There has been more leisure, less business, but the overall blend is very positive, and we’ve seen good growth at airports.”
Von der Heyde said the current healthy industry cycle has allowed her to better establish her five-star, 68-room property that until somewhat recently was a three-star, 23-room property.
Taylor said Principal’s “assets have been repositioned, and we’re benefiting from great market demand. RevPAR over our initial two-year period have grown by more than 30%.”
Get to work
Still, panelists warned the slope is very slippery for anyone who starts to sit on their haunches.
“We cannot afford to be complacent. London has been swamped with new supply, and we cannot overestimate the rise of Airbnb,” von der Heyde said.
She offered this example: “I had a regular booking before the Chelsea Flower Show, for seven years, but then the client said, sorry, I can put the whole team into a flat just around the corner from the show ground for half the price.”
Northam said his company also has lost conference group business to Airbnb.
“Relatively recently at a public-sector conference in Birmingham, we put a bid in, and the conference said, ‘no, no hotels. We’re going with Airbnb.’ Ten percent of (Airbnb’s) bookings now are business-related. They are marketing their ‘business-travel ready’ stock,” he said.
“All the things we said (Airbnb) cannot possibly do, they are doing, and they are marketing this to groups. They are very focused on it,” Northam added.
Also dampening the U.K. hoteliers’ good mood: The struggle to find good labor.
“(The recruitment agencies we work with) are having a hard time getting people to sign up. They are having to rent houses out to encourage people to come over, which harks back to 40 years ago,” Northam said.
Von der Heyde added: “We now have to prove to the employee why we should employ them, not the other way around.”
Taylor said Principal is investing in recruitment and retention, but barriers to success include a lack of enthusiasm within families and an education system that does not regard hotelier as a viable career.
“Chefs are at a crisis point. The only ones in our business getting rich are restaurant recruiters,” he said, “and Brexit is like rewiring a house without turning the electricity off.”
A glimmer of hope is the new apprenticeship scheme, said von der Heyde, though fewer apprentices have signed up than the program’s champions had hoped for.
According to the U.K. Department for Education, the number of apprentices starting in May, June and July of this year fell 61% compared with the same period in 2016.
On top of the problem of fewer Brits entering the market, Eastern European sources of labor also are drying up, von der Heyde also pointed out.
“Net immigration into the U.K. in 2016 was 340,000; this year, it will be 240,000, and the government wants that number to be 50,000 per year. We’re already feeling the pinch, and we have to be far more flexible in how we employ people. My staff includes two people who share their job, and we have to be open to such different ways of employment,” she said.
“If they were twins, that’d be great. No one would know,” Northam joked.
“They actually are,” Von der Heyde replied.
Northam said hotel companies need to make sure they are giving people a career, adding that Interstate plans to launch an app soon to help its employees manage their careers.
“It is not just about the rate of pay, but about what I call ‘stickiness’—certainly within the first 90 days, an emotional connection. Employees say, it is not just about the task I have been employed to do, but what am I getting back from the organization?” Taylor said.
The panelists said the current market has shown they are competing for employees not only with other brands, but also with other industries.
“In this ‘experience generation,’ we need to demonstrate the career opportunities,” von der Heyde said.
Taylor added collaboration is critical.
“It’s as though incomers are getting a seat on the board. We need to be realistic, with some roles competing with those from the supermarket down the road. What we need to do is to get (employees) hooked,” he said.
Now for some smiles
The panelists said they feel sufficiently in control in a healthy market to be able to feel optimistic for 2018.
“There is huge interest from developers now, which was slow only at the beginning of the year. Our goal is to focus on (meetings, incentives, conventions and exhibitions) and non-rooms revenue,” Northam said.
“Let’s stop moaning about Brexit as the ‘long goodbye’ and get on with it,” he added.
“With more of the chains inventing smaller, more personal brands, this is an opportunity for independents to explain and define our own character,” von der Heyde said.