Hotel conferences usually follow a pretty predictable format. First, a presentation from an analyst providing a generally optimistic message about industry performance, tinged with an obligatory note of caution. Then a panel populated by investors and financial institutions that deals heavily in percentage points and ROIs, followed by a roundtable of operational leaders liberally using terms like ‘experiential’ and ‘design-led’. Finally, there is an intimate ‘fireside chat’ with an industry leader that will, at some point in the conversation, turn to the subject of managing a ‘work-life balance’.

It has the makings of a comprehensive, if niche, new form of bingo, and pointing out these features is by no means intended as a criticism; the format generally works. For the past couple of years, however, for those of us who attend enough of these events to complete our bingo cards many times over, another B-word has threatened to make the whole undertaking a lot less fun. Since the June 2016 vote by the UK to exit the EU, it’s rare to witness any conversation take place that doesn’t soon turn to Brexit.

This year’s Hotel Investment Conference Europe (Hot.E), held in late September at London’s Hilton Bankside, was the third iteration of the event since the referendum result, and the final instalment prior to the scheduled March 2019 denouement. Having attended all three conferences, it is noticeable that, while Brexit continues to dominate the conversation – or at least loom menacingly behind all else discussed – delegates are no nearer to reaching any kind of consensus or certainty when it comes to diagnosing what it all means. The UK, particularly London, has continued to perform robustly throughout this period, in many cases posting record occupancies, but the extent to which the Brexit deal (or lack of one) might undermine such success divides opinion.

Front and centre

There was no escaping the subject during a panel discussion entitled ‘Opportunities in the UK’, featuring Peter Anscomb of Edwardian Hotels, IHG’s Jon Colley, Neeraj Handa of Cairn Group and PwC’s Samantha Ward. Growth is slowing, the panellists agreed, but this was more down to new supply than anything else. Yields are also down, and we are witnessing a change in the investor mix.

“We’re seeing longer-term capital, more of an influx from the Middle East – Israel, interestingly – and more of an interest from Europe,” Ward observed. “Less from US, with traditional private equity funds struggling to see the level of return short term that was previously available, and also a fall in the level of UK buyers.”

Developers and hoteliers were having to be more creative in the way deals were structured and properties run, all agreed, but opportunities were still there for those willing to show patience and, in Anscomb’s words, “think outside the box”. In terms of operations, one major area of uncertainty remained: staffing, with the effects of a domestic talent shortage compounded by a lack of clarity over Brexit, and access to skilled and unskilled foreign workers.

“We’re waiting for a sensible solution; which might sound a little like putting your head in the sand, but as an industry and a country we have to see where the employees are likely to come from,” said Colley. “The idea is to get people interested in hospitality and then develop them through any cycle.”

Whatever happens in March, Anscomb insisted that it had never been more important to invest in one’s existing talent. “Build the employees you have,” he said. “Value staff. Our staff facilities should not be different than public facilities, and keep ahead of legal requirements. Lower-entry jobs are the hardest ones to fill. We need to look at incentives and training.”

Anscomb also spoke at length about an intriguing project from Edwardian, currently under way in Leicester Square. The £300-million, 350-room development will include bars and restaurants, two Odeon cinemas, a banqueting suite and leisure facilities, all housed in six levels below ground – “London’s deepest hotel basement”. Special digging equipment has had to be imported into the UK. “When you find the right opportunity, especially in London, the argument for investment remains incredibly strong,” Anscomb commented.

Award winners

Intelligent investment was celebrated elsewhere through the announcement of this year’s Hot.E Deal of the Year Award winners. These came in the form of Merger & Acquisition/Portfolio of the Year and Single Asset Transaction of the Year, awarded to the Principal Hotel Company portfolio sale to Covivio by Starwood Capital Group, and the €148-million sale of Schiphol Real Estate’s Hilton Amsterdam Airport Schiphol to Host Hotels & Resorts’ European joint venture respectively.

Awards were followed by the aforementioned, obligatory fireside chat, though this year’s subject marked something of a departure from the typical chief executive. There was a time when Richard Solomons had been one of the most powerful individuals in global hospitality, but, having stepped down as CEO of InterContinental Hotels Group last summer, he is now able to take a look at the state of the industry from a more detached vantage point.

The conversation with Geller Capital Partners chairman Laurence Geller delved into Solomons’ feelings on the sector as a whole, but also took time to reflect upon his quarter century of service at IHG. Looking back, did he have any regrets? “I don’t think it’s any secret that we took a long, hard look at Starwood,” he acknowledged. “But you cannot build a strategy that’s dependent upon getting exactly what you want. I never believed in being big for the sake of being big. I wouldn’t call it a regret.”

Solomons did admit that there were times he wished he’d acted with more decisiveness at an earlier stage in proceedings. “If you are sure about something, get on with it, but I might have taken too long over some things, mainly in the people area,” he explained. “I might have got the right people in earlier, perhaps.”

If Brexit isn’t causing more of a ripple in the UK hotel investment market, it certainly should be.
– Kenneth Hatton

Now in session

Speed and clarity of purpose were themes carried into the conference’s final session: ‘View from the top: development insight’. Moderator Andreas Scriven of Deloitte was joined on stage by Hyatt Hotels Corporation global head of development Jim Chu and Kenneth Hatton, SVP for global development at Belmond. The conversation was marked by the different interpretations of development opportunity for multi and single-brand operators, though both agreed that, in such a brand-saturated landscape, clear, discernible identity was vital.

“It is about discipline for us at the top end of the tiers we compete in,” Chu said. “This is a strategy that allows us to differentiate ourselves in each segment and allows our customers to find one of our products in the cities they are travelling to. Our customers understand it, and also, importantly, our owners understand it too.”

“Historically, we’re a collection of hotels, but since the creation of the Belmond brand, it has allowed us to bring out the commonalities; not so much the brand standards,” Hatton said, going on to explain that each property must still have its own unique identity. “Then we ask, ‘how can we find other places that are that special?’ We must be comfortable in saying no, so we spend a lot of time filtering through to find something that is special.”

In terms of development, Chu was particularly bullish about Europe, citing record performance levels and the still significant proportion of unbranded stock. “Despite the things that raise an eyebrow, Europe has good performance metrics,” he said. “Yes, it’s expensive to get deals done, but there is a lot of interest. Maybe it is time that is the issue, to get things done in an expeditious, efficient time span.”

Hatton was a little more measured, insisting that, even on the continent, one needed to take things on a market-bymarket basis. “Each is so specific as to why development will grow or not grow,” he said. “There are certain markets that are absolutely critical for us, where we simply should be. To take one example, it’s obvious that there’s a need for high-quality product coming into Rome, but they just can’t get out of their way to allow developers to get on with it. [Four Seasons founder] Issy Sharp had a great line: ‘After ten years negotiating, I understood why Rome wasn’t built in a day’.”

But, inevitably, all roads now lead to Brexit. On this topic, Hatton was less circumspect than a number of his predecessors on stage. “My feeling is that, among a lot of people in our industry, when it comes to UK hotel investment there’s this sense of ‘it will be alright on the night’,” he lamented. “I don’t really see where that confidence is coming from. If Brexit isn’t causing more of a ripple in the UK hotel investment market, it certainly should be. We see a lot of non-European capital still coming in, but either they share that feeling, or they know something we don’t.”

The truth is that we still know very little. It will be interesting to see how much more informed we are when delegates reconvene in London in 12 months’ time.