Small UK chains suggest proactivity in current climate
Small UK chains suggest proactivity in current climate
06 APRIL 2020 8:40 AM

Hoteliers focused on the temporary winding up or down of operations must simultaneously pay attention to planning and strategizing what their firms and the industry will look like on the other side of COVID-19.

LONDON—Concentrate on what the business will look like at the end of the COVID-19 outbreak and work tirelessly to that end, according to peers who are advising hoteliers responsible for small hotel chains and white-label management firms.

Frank Croston, co-founder and owner of Hamilton Hotel Partners, a Pyramid Hotel Group Company, which has investment, management and advisory divisions, said certainty makes people calmer while uncertainty does the opposite.

“The inability to fix on a point on the horizon and say it will end then is something that will hold us back,” he said.

London-based Hamilton recently merged with Boston-based Pyramid Hotel Group. Croston said the partners are continuing with their previously announced capital investment program.

“It can be done in an accelerated rate with less business interruptions,” Croston said.

There is U.K. government help for hoteliers with smaller hotel counts.

Alok Sharma, the U.K.’s secretary of state for business, energy and industrial strategy, announced the latest, a series of changes to the country’s insolvency regulations, one of which is the temporary suspension of some aspects of the legal liability directors could normally face.

This is one initiative aimed at emphasizing alternatives to government intervention in the solutions hoteliers seek.

“While hospitality has received vital support from the government, the sector is collectively also playing its part in trying to mitigate the hardship that so many of our people have suffered at this time and will suffer in the weeks and months to come, and at the same time help those parts of the economy that now need extra labor to keep the country running,” said Kate Nicholls, CEO of the U.K.’s prominent hotel industry membership associations UKHospitality.

Sources said hotel firms are unlikely to hit their budgets this quarter, or indeed for the full year, but that most hotel contracts do have flexibility in regards to extraordinary situations such as COVID-19. Revenues will decline as full refunds are being offered—with cancellation penalties in many situations regarded as being less than fair play—and expenses increase.

They added that cash flow and gross operating profits will decline, too, and that it is important for operators and owners to work closely together.

“The current thinking is that that we are in for another four to six months of material disruption and 12 to 24 before the sector’s recovery,” Croston said.

Clinton Campbell, commercial director at Apex Hotels, said the company’s 10 hotels, all in the U.K., are closed at least through to the end of May, which he said is a longer period than some.

“There is a lot of talk about how to identify what recovery will look like,” he said.

Apex’s operational staff are on furlough, with a skeleton crew remaining in the head office, he added.

Croston said 80% of his properties are temporarily closed.

“A lot of our time has been spent over the last couple of weeks helping that closure process. That involves lots of complexity, including making sure nothing untoward happens to the hotel while it is empty. It is slightly traumatic and very emotional,” he said.

Hoteliers, though, have to close hotels while looking at revenues, operations and management for when they can reopen.

Croston said positivity and the ability to look through the crisis to the other side are key.

“There will be lots of opportunities to resume a growth trajectory. There will be a number of willing sellers and distressed owners looking to exit, which seems strange and difficult to imagine at this particular moment,” Croston said, noting an important first step was to reach out and reassure partners.

“We leapt on our clients first, and we have agreements going to (our lending) committee this week,” he said.

Targeting the right business also is important, Apex’s Campbell added.

He said likely there will be a change in guest behavior when COVID-19 is over.

“We’re taking the lead from our partners at companies such as Expedia and, as we think business will return there first. First, it will be individual transient corporate business,” he said.

“I worry about leisure, if you have a large part of the population, say 80%, who only have one or two months of savings,” Campbell said, adding staycations might benefit.

Helping staff, owners
Croston said a great deal of his time currently is being spent helping borrowers, clients and co-investors to seek delays in forbearance, defer amortization and interest payments, and maximize liquidity.

“A lot of it is about helping each of our individual hotels and owners maximize support from government, which can be complex,” he said.

He added that complexity appears more involved in the U.S., as now he is working closely with Pyramid.

“All have different rules and regulations, full of details and a constantly moving feast. It can be mind-bogglingly complex in the U.S. Its (CARES Act 2020) runs to 880 pages, and there are three programs running in parallel,” he said.

Croston said wage support from the government is particularly helpful in allowing hotels to furlough staff.

“There was a gap between the (announcement) and the guidance, which was difficult for companies trying to make cost cuts early but not sure how to go about it legally,” he said.

He added that in the U.K. it is illegal to impose such furloughing restrictions on employees without them being voluntarily entered into.

“Even though companies probably have done this, (staff) have to enter in, failing which you have to make them redundant,” Croston said. “The guidance allows (hotels) to reduce costs at the frontline level and to protect jobs, which is the major thing.”

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