5 things to know: 2 July 2019
5 things to know: 2 July 2019
02 JULY 2019 9:30 AM

From the desks of the Hotel News Now editorial staff:

  • Serviced apartments in Europe outpace hotel RevPAR
  • US now threatens EU with tariffs
  • Labor dominates LIIC discussion
  • UK construction sees weakest levels since April 2009
  • Nearly 49 million Americans to travel for July Fourth

Serviced apartments in Europe outpace hotel RevPAR: Serviced apartment revenue per available room outpaced that of traditional hotels in 2018 and continues to see strong momentum, now accounting for approximately 10% of the total “hotel” loan portfolio in Western Europe, according to business consultancy HVS.

According to Sophie Perret, director of HVS London, and Simon Hulten, associate, “alternative concepts—co-living, co-working, student accommodation and home-sharing and so forth—are merging with the serviced apartment concept, creating hybrids as a response to changing demand behaviors.” The report adds development in the sector is to approach 23,600 additional units by 2022. … The (United Kingdom) and Germany represent the vast majority of the total pipeline.”

U.S. now threatens EU with tariffs: The U.S. might have gone back to the negotiating table with China over tariffs, but it now has stepped up pressure in its very long-running argument with the European Union concerning what the U.S. believes are unfair subsidies paid by the EU to European airplane manufacturer Airbus. This comes, the U.S. believes, at the expense of U.S. companies such as Boeing.

According to the Wall Street Journal, the U.S. is considering a value of $4 billion in tariffs on 89 additional European imports such as cheese, pasta and Scottish whisky. The World Trade Organization is shortly to rule on whether Airbus subsidies are considered to be an unfair practice.

“The U.S. in April began the process of imposing tariffs against the EU pending the resolution of a WTO case that found the aircraft manufacturer has received unfair governmental support,” The Journal writes.

Labor dominates LIIC discussion: Reduced numbers of eligible employees and the cost of hiring dominated talk at the recent Lodging Industry Investment Council meeting at the 2019 International Hospitality Industry Investment Conference, with such costs being increasingly weighed into asset values and due diligence when underwriting deals, writes Hotel News Now’s Sean McCracken.

President and co-founder of CHMWarnick, Chad Crandell, said he gets concerned when he sees investors making overly optimistic projections about labor costs, and believes many hoteliers aren’t properly factoring in the costs of both retention and recruitment.

“I’d rather pay a little bit more (to keep people) than have constant turnover because it’s very disruptive,” he said. “With an open position, it can take months to fill for a GM, director of finance or director of sales and marketing. The time and opportunity costs of that are significant. At a certain point, you’ve got to treat people well and pay them fairly, because having a good team will pay for itself.”

U.K. construction sees weakest levels since April 2009: More bad news for the U.K., with the country’s construction sector—as measured by the IHS Markit/CIPS UK Construction Total Activity Index—falling to 43.1 from 48.6 during May, when any mark below 50 portraying a contraction. The score is the lowest figure for this metric since April 2009, according to The Guardian.

Brexit is largely to blame. Michael Hewson, chief market analyst, CMC Markets, said that “there is no sugar-coating these numbers, they are awful. … New orders also fell sharply as the Brexit limbo puts companies off any imminent plans to make long term investments. It also calls into question the Bank of England thinking that a rate rise is more likely than a rate cut.”

Nearly 49 million Americans to travel for July Fourth: Expect some gridlock. In its annual prediction of the number of Americans likely to be on the road over the Fourth of July holiday in the U.S., AAA expects 48.9 million people to be on the road this year, a 4.1% increase over 2018.

AAA predicts drivers could face journeys up to four times their usual duration, and not surprisingly traffic on 3 July probably will be the worst as “low unemployment, robust consumer spending and rising disposable incomes are all encouraging more consumers to invest their hard-earned money in travel.”

Compiled by Terence Baker.

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