With 2024 a matter of weeks away, forecasts for what lies ahead for the hotel industry suggest a mix of opportunities and challenges. The new norm of interest rates, the high cost of debt and a continuing cost of living crisis hitting consumers will continue to pressurise operators and investors though, balanced with a predicted high demand for travel and wider indications hotel room rates could rise, we are hopeful the sector will continue to play its key role in economic growth.
AGO Hotels takes a look at what trends it expects to see in 2024: ?
- Business rates - the Government’s decision to freeze the small business multiplier was a small win for those in the hospitality sector. However, this was a real missed opportunity, as the current system continues to severely impact the high street. Services are not offered in return, regardless of the businesses profit. We look forward to new initiatives around the tax, including the proposal for a digitised system which can feed in from real data submitted by occupiers of properties.
- Interest rates – these could continue to be an issue for investors and business owners alike. Bank of England governor Andrew Bailey says it is likely UK interest rates will need to remain high into 2024. Businesses face significant amounts of pressure as debt repayments creep to unsustainable levels, and as a consequence, insolvencies are expected.
- Deals – despite the challenges of the market this year, deals were still happening in the sector, though investors had to be patient. Larger deals from investors with specific targets have continued to do well in 2023, with the Travelodge portfolio selling at ￡210m and the ￡400m Landsec hotel portfolio sale. We are hopeful to see increased deal activity and appetite for the sector in 2024 and expect investors will continue to see new opportunities.
- Regeneration schemes – in 2024, we envisage more property and hotel investors will lean into the trend of repurposing buildings as a way of unlocking potential growth in the sector. Without the need for extensive investment and making better use of disused buildings, it provides an attractive business model for landlords, while avoiding the greater environmental impact of new construction. It is expected investors will take up these new schemes in 2024, and the concept of city resorts, which provide co-working hubs and wellbeing centres, will change the way people interact with cities. There is opportunity here for the hotel industry as it looks for practical solutions to tackle financial challenges and meet high levels of demand. As we transition into 2024, we need to embrace this and be part of the positive regeneration of UK towns and cities, boosting local economies.
- Employee retention – harvesting and fostering employees will remain key in the new year. Moreover, there is a need to implement active retention strategies to hold onto good people. Adopting formal and constructive review models to promote loyalty, work ethic, and a stronger sense of identity and belonging within teams. Many people enter hospitality and leisure and leave within the first three months, this turnover is costly and impacts morale. As well as retention schemes, in 2024 we need to continue to offer rewarding progression opportunities?and not lose sight of the world we now live in following the pandemic – offering flexible hours, job shares, as well as maintaining or increasing wages as needed. ?
As an industry, in 2024 we will continue to tackle the challenges which have put our resilience to the test in previous years, seeking new opportunities, encouraging growth, and embracing trends to carry us into the future. ?
