Deloitte European Hotel Industry Survey 2022: Hospitality leaders anticipate rising inflation and labour shortage headwinds

2 November 2022

Key findings from Deloitte’s European Hotel Industry Survey 2022, based on the responses of senior hospitality figures: 

Inflationary pressures front of mind

  • Confidence in the UK hotel market has fallen year-on-year by ten percentage points;
  • 66% are positive about the?long-term?future of the UK hotel market and 48% agree that?investment into the UK will materially grow over the next five years;
  • Compared with a year ago, a third more respondents expect to see distress in the year ahead with 77% of respondents expecting to see some distress activity in 2023;
  • Surging inflation and labour shortages are expected to cause disruption to the hospitality industry for the next three years; and
  • With 85% mentioning ‘managing inflationary pressures’ as their top priority, hospitality professionals are shifting to a more defensive stance, with a clear focus on performance improvement (69%) and cash flow management (66%).

Andreas Scriven, head of hospitality and leisure at Deloitte:

“Emerging from a difficult period, the hotel industry is now faced with a new set of challenges as high inflation persists and the labour market remains fiercely competitive with staff shortages across the sector. On top of a very uncertain and volatile operating environment for hospitality leaders, the rising cost-of-living is restricting consumer budgets and adding further pressures on the sector. Consumers are already indicating that they are cutting back on leisure spending, including holidays.”

Albeit lower than last year, confidence in the UK hotel market remains high, with nearly three-quarters (66%) of hospitality leaders feeling optimistic about the long-term future.

Scriven continued: “With many consumers cutting back on all non-essential categories including travel and leisure, the hospitality industry will need to be looking for new ways to entice visitors by making their offering more affordable and accessible.”

Edinburgh holds top spot for UK investment

Edinburgh remains the most attractive UK city for hotel investment in 2023, up 12 percentage points year-on-year.

Scriven continued: “With tourism back on the rise post-pandemic, in particular the rise in popularity of ‘staycations’ as consumers try to manage costs, UK cities will be key destinations for tourists this year. In the eyes of investors, Edinburgh still reigns champion, given its limited space for new hotel development making it more a competitive location. Meanwhile, Manchester takes second place due to its more attractive affordability and good airport infrastructure.”

Elsewhere, London slipped from second to third place in the top ten most attractive European cities for investment, falling 13 percentage points year-on-year.

Scriven explained: “This marked decline is likely to be a reflection of an increasingly saturated market across the capital.”

Amsterdam and Lisbon top European charts

Amsterdam remains the most attractive European city for hotel investment in 2023, closely followed by Lisbon.

Scriven concluded: “Amsterdam stays top of the most attractive European cities for investment in 2023, despite a slight drop off in favourability, while Lisbon shot up the rankings to second as Portugal becomes a more enticing market for investors. Paris has also seen a strong rebound this year, following a sharp decline in 2021, as corporate and leisure travel was boosted by the ending of restrictions across Europe.”

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