Hotel Industry Newsletter - September 2023

Greetings everyone, I trust you've been enjoying a pleasant summer (while we continue to savour some late summer warmth here in the UK).

As we gather the threads of industry news and trends, we invite you to embark on this informative journey with us.

Whether you are an industry veteran steering your ship through uncharted waters or an aspiring entrepreneur seeking new horizons, we have tailored this edition to offer you a deeper understanding of our industries.

So, hoist your sails and join us as we explore, including some tips to generate more sales for your hotel during Autumn season.

Key Stories

Around the World:

Resilient Beach Destinations in Travel and Tourism

According to the insightful folks at Hotel News Resource, let's dive into the enchanting world of classic beach destinations and their incredible resilience in the travel and tourism industry.

Costa Rica takes the lead, outshining its 2019 numbers by a staggering 19% and even surpassing 2022 by 15%. But it's not alone in this triumph – other top performers include the Dominican Republic, Colombia, Jamaica, Puerto Rico, Argentina, Greece, Tanzania, the Bahamas, and Mexico.

Leisure travel to these sun-soaked destinations proved to be a beacon of hope during the pandemic. Many Caribbean and Gulf of Mexico economies fought hard to keep their borders open, and their tenacity paid off. Greece, Portugal, and the UAE share similar success stories.

Even heatwaves couldn't dampen the spirits of travellers, as most bookings were already in the bag. Northern Europe and the Nordic region, while lagging behind 2019 by 16% and 17% in bookings, made a remarkable comeback with last-minute bookings, probably inspired by the sizzling heatwave.

Looking ahead, our optimism knows no bounds. Global flight bookings for the last quarter of 2023 are just 4% behind 2019, and the first quarter of 2024 is soaring ahead by 3%. The Middle East leads the charge with a spectacular 37% increase in Q4 bookings, followed closely by Central America at 33% and the Caribbean at 24%.

UK RevPAR Soars by 14% in Summer 2023

Hold onto your teacups because there's exciting news from across the pond! Revenue per available room (RevPAR) had an exhilarating 14% increase during the summer of 2023 compared to the same period in 2022. This surge is a testament to the resurging travel demand.

What's the secret sauce? Well, it's a winning combo of higher occupancy rates and increased average daily rates (ADRs). In July 2023, occupancy rates reached a whopping 85%, up from 65% in July 2022. Meanwhile, ADRs danced their way up to ￡140 in July 2023, compared to ￡120 in the same month the previous year.

This robust summer demand signals a promising future for the UK hotel sector, which has faced its fair share of challenges during the COVID-19 pandemic.

Innovation in the Hotel Industry - AI

Buckle up, because we're about to embark on a journey through the cutting-edge realm of the hotel industry, where artificial intelligence (AI) is steering the ship of transformation. Let's delve into the discussions that are shaping the future.

Experts like Tom Ray from IDeaS are shedding light on the challenge posed by the vast ocean of disconnected data and the ever-growing importance of AI in data analysis and decision-making. Shane O’Flaherty from Microsoft emphasizes the need for revenue managers to embrace experimentation and innovation, with AI playing a pivotal role in day-to-day operations and guest experiences. With the internet churning out a staggering 410 billion units of information, AI is becoming indispensable. Andrew Rubinacci from Aimbridge Hospitality underlines the necessity of adopting AI, a move that will make silos disappear, personalized guest experiences the new norm, and comprehensive answers readily available.

Innovations in the Hotel Industry: The Metaverse

Hold onto your virtual hats because the hotel industry is diving headfirst into new frontiers, including the fascinating world of the metaverse. Hilton Hotels is at the forefront, with plans to launch a metaverse hotel soon. Imagine booking rooms, checking in and out, and mingling with staff and other guests—all in a virtual realm. But it doesn't stop there; Hilton also plans to offer virtual experiences like tours of famous destinations and concerts, as they strive to attract customers with novel and immersive experiences.

Persistent Labor Shortage Challenges the Hotel Industry

Ahoy there! Despite the rebound in travel demand, the hotel industry continues to grapple with a serious labour shortage. A recent survey by the American Hotel & Lodging Association revealed that a whopping 90% of hotel operators are currently understaffed. This scarcity of labour has led to several challenges, including reduced service quality, longer wait times and higher prices. Furthermore, recruiting and training new employees has become increasingly challenging. Various factors contribute to this labour shortage, including the ageing population, the rise of the gig economy, the lingering impact of the COVID-19 pandemic, and the aftermath of Brexit in the UK. In response to this crisis, the hotel industry is taking various measures, such as raising wages and benefits, offering flexible scheduling options, providing enhanced training and development opportunities, and collaborating with local schools and job training programs.

UK Government Housing Migrants in Three-Star Hotels

Breaking news from the United Kingdom: The government has decided to accommodate migrants in a minimum of three-star hotels while their asylum claims are being processed. However, this move has faced criticism from some charities, who label it as a wasteful use of funds and advocate for more suitable housing options. In defence of this decision, the government argues that it is essential to provide migrants with safe and comfortable accommodations during the processing of their claims.

Appeal for Resolution in the UK

In the UK, hoteliers are raising their voices against ongoing rail strikes, which have been causing travel disruptions, and impacting the hospitality sector. These strikes, initiated in June 2022, often disrupt travel for two or three non-consecutive days each month, impacting the days in between as well. Upcoming strike days are scheduled for Sept. 30, Oct. 4, and Oct. 6. Recognizing the significant role of train travel in transporting guests to UK hotels, UK Hospitality highlights the staggering economic toll, with estimated losses of "￡3.5 billion ($4.33 billion)" due to these rail strikes. Parliament's cross-party Transport Committee recommends safeguarding business sectors unable to adopt flexible or remote work arrangements during strikes through minimum rail-company service levels.

Worrying Ratings on Leisure, Recession in 2024?

As we navigate the complex waters of the hotel industry, there are signs of a storm on the horizon. Fitch Ratings' latest assessment anticipates a decline in revenue growth due to slowing leisure demand and reduced rates. Furthermore, Fitch predicts a mild recession in the first half of 2024, which could further dampen leisure travel. But there's hope on the horizon—asset-light hotel companies, such as hotel brands, are better positioned to weather this sluggish period compared to real estate investment trusts (REITs) with larger hotel portfolios. Willy Walker, CEO of commercial real estate lender Walker & Dunlop, discusses the potential drop in consumer travel spending if a recession materializes, highlighting that "hospitality is the first-in and the first-out of any downward trend." Reuters also reports an increased likelihood of loan challenges for hotel owners, as nine out of 19 CMBS loans liquidated in the second quarter pertained to hotels that initially defaulted in 2020, according to Moody's.

Are Vacation Rentals Really a Budget-Friendly Choice? A Global Comparison Reveals Surprising Results

When it comes to vacation rental services like Airbnb and Vrbo, many travellers see them as a wallet-friendly option for accommodations. But just how accurate is that perception?

The U.K. consumer site Which? conducted a comprehensive analysis spanning the globe and uncovered a surprising revelation: hotels turned out to be more cost-effective than Airbnb or Vrbo rentals in 38 out of 50 international destinations, including iconic cities like New York and San Francisco. In a report authored by Claire Webb, the senior researcher and writer at the consumer site, it was stated, "While private holiday rentals from platforms such as Airbnb and Vrbo initially presented a cheaper alternative to hotels, our research indicates that this is no longer the case in most countries."

This eye-opening study revealed that hotels offered better value in 24 of the 30 major cities examined. On average, the price of a one-bedroom vacation rental per night was approximately $82 (￡60) higher than that of a hotel, and this was without factoring in any additional service fees. To compile this data, the consumer site relied on information from AirDNA and Kayak for rental rates (including cleaning fees) and hotel prices (excluding five-star hotels), respectively.

Notable M&A and Acquisitions

Our voyage takes us to Amsterdam as the Ireland-based Dalata Hotel Group acquires the iconic Hard Rock Hotel Amsterdam American from Amsterdam's Zien Group. The transaction's price remains undisclosed, but historical data from CoStar reveals that the hotel was last sold in 2012 for $77.4 million. Dalata announced its plans to rebrand the 173-room hotel, located in a building originally inaugurated in 1902, as the Clayton Hotel Amsterdam American in early October. This marks Dalata's inaugural venture into the Dutch market and its second hotel in mainland Europe, reflecting the company's aspirations for an expanded European hotel portfolio.

Private Equity in Hospitality

The world of private equity is buzzing as KSL Capital Partners, a private equity firm, recently agreed to acquire Hersha Hospitality Trust, a publicly traded hotel REIT, for a staggering $7.2 billion. This acquisition underscores KSL's confidence in the long-term potential of the hotel industry and reflects the increasing interest of private equity investors in hotel assets. The deal is expected to be finalized in the fourth quarter of 2023.

Strategies for Sustaining Hotel Bookings in Autumn

As autumn's golden leaves begin to fall in 2023, hotels face the delightful challenge of maintaining bookings after a successful summer season. While July and August have traditionally been peak months, there is tremendous potential to attract travellers for autumn getaways. Hotels can paint the picture of an 'autumn escape,' highlighting vibrant nature, pleasant weather, and unique experiences. Events like Oktoberfest in Munich demonstrate how seasonal activities can draw tourists during unconventional times. Catering to the 86% of young travellers seeking new experiences, hotels can offer autumn-themed activities, from Bonfire Night to cooking classes, and provide limited-time deals and packages to attract guests seeking value and the charm of an autumn break.

On the other side of the continent, India is gearing up for a surge in autumn bookings. Inbound travel to India is poised for robust growth until November this year, with a significant year-on-year upswing in travel anticipated during the festive season compared to 2022. These insights come from a recent report by RateGain Travel Technologies Limited, a leading SaaS solutions provider catering to travel and hospitality firms. Drawing upon data from its Adara division, the report identifies Australia, the US, Singapore, Canada, and the UK as the top five source markets for inbound travel to India during this period.

Other trending travel News:

Booking's €1.6 Billion Etraveli deal blocked by EU

Covid flight cancellations are back as thousands grounded after virus hits Gatwick air-traffic controllers

I trust you've found this newsletter insightful and engaging. Your feedback is invaluable to us as we strive to bring you the most relevant and informative content in the realms of travel, hospitality, and hotel investments.

If you could spare a moment, we would greatly appreciate your input here on the challenges hoteliers face in enhancing their sales, revenue, and marketing management. Your responses can be completely anonymous if you prefer

Thank you for being a part of our community, and we look forward to continuing this journey of exploration and discovery with you. Until next time, safe travels and prosperous ventures!

Warm Regards,

Keba Vinod

Source and reference: STR, COSTAR, Hotels News resource, Fitch ratings, Hotel owner, LBC news, Forwardkeys, Hospitalitynet, Which.co.uk, Bloomberg news and more...