31 January 2013 | InterContinental Hotel, Park Lane, London

EY Real Estate and Hotels Workshops

‘Setting a course for the future’

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Time for action

With little help on the horizon from an uptick in the macroeconomic environment, it is clear that the pressure is on for European hotel operators not only to do all they can to improve profitability, but also to start to invest for the future.

“For the last four years, the average room rate in Spain has been exactly the same in euros as it was over 10 years ago, while costs have increased by 30%,” says Raúl González. “We need to increase our margins.”

We expect this to translate to a marked increase in the rate of refurbishment or divestment of tired assets. The value expectations of buyers and sellers also appear to be narrowing, and the prospects of having to fund overdue Capex needs suggests that banks will be more proactive in seeking to exit from stressed positions.

At an operational level, maximizing guest loyalty and driving revenue from distribution channels that do not erode marginsshould be priority areas. Bringing in a brand is a tempting strategy, but can’t be seen as a panacea — investment in front-of-house staff through development and training is important and can bring benefits, both through better guest loyalty generated through high-quality service, and through better conversion of upselling opportunities.

Nevertheless, the market will remain difficult, and some speakers at the conference expressed the view that corporates had been cutting back on off-site training and conferences for so long that it had become engrained, and any recovery in this previously lucrative area was likely to be slow.

As Patrick Dempsey points out, “It’s going to be very tough; there’s going to have to be a lot of self-help.”

The good news is that, even in the current climate, there are areas where properly targeted investment can bring real returns.

“Ignore the economy and focus on what is in the control of the management and the brand to increase income,” advises Hugh Taylor. “There are endless opportunities to do things that will gain market share and that are still not being done in hotels across the country.”


What do you expect the 2013 change in RevPAR to be for the Eurozone, UK Regional and London areas?

What do you expect the 2013 change in RevPAR to be for the Eurozone, UK Regional and London areas?

Source: Delegate poll results from the EY Hotels Workshop 2013