Is now the time to (financially) check in to British hotels?
As the UK begins to contemplate globe-trotting again, there is still a feeling of gloom in the travel industry. For now, foreign holidays remain limited to a very few places on the ‘green list,’ including such undiscovered delights as the South Sandwich Islands. While penguin spotting in the South Atlantic may be an acquired taste, it probably doesn’t compete with our much loved habit of hopping across the channel for a weekend break in Paris or Bruges or venturing to the tropics to forget the winter blues.
Read more: There are staycations – and then there’s the Savoy
Nonetheless, countries are slowly but surely loosening their travel restrictions, and though business travel will take some time to catch up, leisure travel should see a rebound. UK households have been saving more during Covid and some of that pent up cash is making its way into UK hotels. The national hotel market is enjoying a 300 per cent boom in bookings for this summer compared with 2019, indicating collective wanderlust even within in our own rainy climes.
For hoteliers longer term, there is more than a rebound on the cards as structural truths haven’t fundamentally been changed by Covid. Over 175 million additional people are projected to earn over £53,000 per year by 2030. A meaningful portion of this income is likely to go on travel, just as it does in our own societies. In fact, this was already happening, as more and more Chinese citizens have grown well-off enough to see the world. The number of international visits made by Chinese tourists grew almost 15-fold – from a little more than 10 million to nearly 150 million – between 2000 and 2018.
Already some are anticipating this trend and seeing the opportunities of a short-term drop off in hotel valuations. Indeed, we think now is the time to buy some hotels, albeit with a conservative expectation of performance to return over the coming years.
We naturally ask some searching questions in doing so. First, when will this pent-up demand materialise? And second, whenever it does, are all hotels created equal? To answer the latter first, they are not. Some may be unexpectedly expensive to maintain through the Covid recovery, while others may benefit from an immediate post-Covid boost that doesn’t reflect longer term trends.
Hotels with fancy restaurants and spas are among the group that will cost most to maintain while demand recovers. Hotels reliant on business travellers are a tall order – since zoom meetings have proved themselves a great substitute for day trips. Even once Covid is a distant memory, 39% of UK workers surveyed say they want to scale back non-essential business trips due to environmental concerns. Meanwhile, those UK domestic hotels that have seen a surge of summer bookings may find demand drops off sharply once foreign travel opens back up.
The trick is to identify hotels that will attract that new international middle class in the long-run, while recovering sustainably in the shorter term. In Edinburgh, we at Castleforge have just acquired the Bruntsfield hotel, where we intend to upgrade the rooms and facilities and refresh its restaurant. While Edinburgh is certainly great for domestic tourism, it is also the second most visited place in the UK behind London by overseas visitors, meaning increasing numbers from China, India and Japan (to name a few) in future years.
Read more: Why the winelands of Wales are set to be a UK holiday hotspot
Sadly, some hoteliers have had such meagre income over the past 15 months that attracting external investment or selling up is the best way to avoid terminal decline for their businesses. As any viewer of The Hotel Inspector knows, a hotel quickly gets into a downward spiral when capital isn’t consistently re-invested: the place becomes less competitive, so takings reduce, so there is less to invest in more and more necessary upgrades. Our hospitality arm is coming in to work with people – without a camera crew in tow – to purchase outright or invest with them, helping revitalise their hotels into vibrant, going concerns.
For many like me, the allure of that historic hotel lounge, the excitement of the path less travelled, and the solace of a plush room at the day’s end are woven into our being. We all miss entering a welcoming reception and feeling the thrill of the new experiences that await us. The growing market of new international travellers who also want this experience make the road to leisure recovery a sure one, even it is long. We believe the journey will more than worth taking.