Hotels Restaurants Pubs Leisure Leisure Property Specialists Investments Hotel Review Issue 16/01 1 Hotel Review Issue 16/01 fleurets.com The Crown Manor House Hotel in the New Forest. One of four independent hotels operated by the Buzasi brothers A look at Corporate Activity Paul Hardwick Due to a heavy excess of demand major players, albeit supported by Director over supply and eye watering London trade buyers during recent times. & Head of Hotels pricing, transactional activity has concentrated on the regions. Whilst a In addition to those transactions reflection of the rejuvenating private listed in the table, a number of further market and individual asset sales, group deals, both small and large, are along with the continued expansion under way, providing a strong pipeline It has been an incredibly interesting and active year or of the established and emerging of activity going forward, albeit it is so, with changing market dynamics across the leisure brands through new development, it difficult to imagine that 2016 will property sectors. However, it is arguably the hotel is predominantly a result of a handful match recent record levels. sector which has dominated the headlines in terms of of very significant group deals. Private deal volumes. equity and overseas buyers have been Approx. Approx. Deal Hotels Keys Reported Price Per Buyer Price Key Jurys Inn portfolio 31 861 £680m £79k Lone Star Funds of 31 Hotels Feathers Group, 8 726 £70m £96k Topland portfolio of 8 hotels Cerberus Capital 18 UK Holiday Inns 18 2,443 £225m £92k Management Accor Sale and 7 469 £23m £49k Starboard Hotels Leaseback Malmaison Hotel Frasers Hospitality 29 2,082 £363m £175k Du Vin UK Holdings HK CTS Metropark Kew Green Hotels 54 £400m Hotels Co. Big Sleep Hotels 3 190 Undisclosed Undisclosed Compass Hospitality 50:50 JV between Thai Industrial Jupiter Mercure 26 2,883 £155m £53k and Engineering Hotels Service (TIES) 7 Fico Corporation Frasers Hospitality/ Swire Hotels 4 265 £36m £136k Malmaison Hotel Du Vin There has also been a reasonable degree of traditional investment availability of funding from traditional and alternative sources, activity at portfolio level, reflecting the growing understanding and supported by a trend of improving trading performance, we expect acceptance of leisure property as mainstream investment assets. that purchaser appetite will continue, with asset supply met through Starboard Hotels, for example, acquired 7 hotels in a sale and trade sales, group consolidation and partly through increased leaseback transaction with Accor. liquidity in the private market, as sellers cash in on improving pricing. The investment market has, however, proven to be somewhat subdued during the last few months, a combination of the stamp The market is not, however, without concern. National Living Wage duty land tax changes, which resulted in a one off adjustment to is a significant challenge, the migrant crisis continues to affect commercial property values according to IPD, alongside ongoing Europe, the UK’s continued membership of the European Union political and economic concerns. is in debate and recent terrorist attacks have impacted on travel numbers. There is of course continued uncertainty around the With interest rates continuing at historically low levels, increasing domestic, European and global economies. 2 Hotel Review Issue 16/01 fleurets.com Hard times for the industry: Best Western GB offers solutions Rob Payne We are one of only three countries in apprentice schemes. Apprenticeships can CEO of Best Western Great Britain and Europe who don’t have a lower VAT for have a positive impact on our industry; Beacon, Britain’s leading purchasing tourism; a reduction in Tourism VAT would indeed, as a result of the NLW and other organisation. bring us in line with our competition. financial pressures, more than 80% of our member hotels said they would reconsider Tourism is one of the largest contributors The Cut Tourism VAT campaign group have their recruitment strategies, including to the UK economy, a multibillion pound said this would create 120,000 new jobs employing more apprentices. performer year after year. Yet I think the and add £3.9bn into the treasury. tourism and hospitality industries are faced We know that with some key issues that will continue every one of these to affect them significantly in the future, pressures with little intervention or support from the has a personal Government. impact on our hotels, and without One of the biggest issues for our industry, more support, the and most topical is the National Living landscape of Great Wage (NLW), which has the potential British hotels could to damage the image of British tourism change dramatically worldwide. From a recent survey of the over the next 12 hotels we represent, 90% said they might months. have to increase their prices to mitigate To find out more against costs incurred by the NLW. about how you can support industry- The Office of Budget Responsibility Best Western Plus The Connaught Hotel, Bournemouth backed campaigns predicted that 60,000 jobs would be lost visit www.bha.org.uk as a result of the introduction of the NLW. Another key issue for our industry is the or contact media@ While we are all in favour of a fair wage for disruption in the online distribution space bestwestern.co.uk. everyone, I think that it will be small and and a huge worry to Best Western’s medium-sized enterprises (SMEs) that will members is that amongst this online pay the highest price for the introduction disruption and dominance is Rate Parity. of the NLW, with those job losses Rate Parity has been banned in France, disproportionately distributed amongst our Italy and Germany and it is about time it industry. was addressed here too. Best Western GB is working with the British Hospitality Our sister company, Beacon, helps our Association (BHA) to ensure that this issue members with professional procurement to is at the forefront of the Government’s relieve the pressure on margins and secure mind. global economies of scale. We have seen businesses that are heavily dependent upon The third issue I am particularly passionate people for production and distribution pass about is making the hospitality industry on the cost of the NLW in their goods to a first choice career for school leavers our customer base. My worry is for those and graduates. With more governmental smaller independent businesses that do support and industry buy in, we believe not have the security of being part of a that we can address the skills deficit collective like ours. within the hospitality industry, as well as attract and support quality employees. With that in mind we are calling on the One way of attracting more young people Government to look again at ways in which into hospitality will be through the it can help ease pressure on our industry. wider promotion and implementation of Best Western Braid Hills Hotel in Edinburgh 3 Hotel Review Issue 16/01 fleurets.com What Lies Ahead? Neil Gerrard they did more often, but spending slightly Paris terror attacks which pushed down Associate Editor, The Caterer less on each occasion than they did a year London hotel occupancy in its aftermath, before. or the flooding in Cumbria, Lancashire, and Trying to predict the future is supposedly Scotland, and the continued fall in oil prices a mug’s game, but in the increasingly But all that glistens is not gold and there are which is wreaking havoc in the Aberdeen competitive world of hospitality nor is now some notes of caution. hotel market. ignorance likely to be bliss. Restaurant trends analysts Horizons In spite of all of the above, the picture still And while we at The Caterer like to try predicted that overcapacity in the market looks positive for UK hospitality, particularly and avoid being branded mugs, we also try due to several years of rapid growth, in the regions where much of the growth to remain alive to both the opportunities particularly among the bigger groups, means is taking place, and a continuation of food and some of the obstacles that may face that growth in eating out will be constrained price deflation in 2016 should at least restaurant, hotel and foodservice business over the longer term. provide some respite for hoteliers and operators. restaurateurs alike. The industry has also recently seen the So, after a couple of years during which we introduction of the National Living Wage, We mustn’t take continued food price have enjoyed some more positive economic and there is of course still concern among deflation for granted, of course. One news, what lies ahead for the hospitality many about the effect it will have on some interesting side effect of a decision to leave sector? operators, particularly independents. the EU (and a worrying one, especially if you are a restaurateur or caterer) could be We started the year with news that eating Meanwhile, there was a flurry of deals in a marked weakening of Sterling. Obviously, out in restaurants still appears to be in good the hotel sector at the end of 2015 with the effects of a decision to leave would health, and openings continued apace in the Accor Hotels paying £2bn for the luxury only be felt over the longer term, but it run-up to Christmas, both in and outside of Fairmont, Raffles and Swissotel brands. could eventually lead to a ramping up of London and the south east. The tug of war to gain control of Starwood food inflation again, which, combined with Hotels & Resorts has resolved as the merger increasing labour costs could spell trouble There was a raft of information from of Marriott International and Starwood for operators.