Joe Stather of Questex examines the impact of interest rate rises on the hospitality industry
Rapidly rising interest rates are currently the biggest challenge for the UK’s hospitality industry as they impact top and bottom-line growth, says Joe Stather, VP market lead, operational real estate at Questex.
Earlier this month, the Bank of England raised interest rates for the 14th time in a row to 5.25% - the highest they have been in 15 years.
Stather said “high interest rates impact all areas of the industry – from the supply of capital available to investors, to the amount of disposable income guests have available to spend in hotels.”
Meanwhile, higher mortgage and rent costs caused by the climbing interest rates, will also have an impact at the operational end of the chain with squeezed staff seeking higher rates of pay.
Stather said: “Mortgage payments and rents are going up at such a level, staff are going back to management and requesting additional pay increases to meet the rising cost of living.”
“Just when we thought we were over the payroll inflation in hotels, which has been impacting hoteliers, it looks like it’s rearing its head again.”
Conversely, the mortgage and rent payment rises that are impacting staff could also hit hotel profits as guests affected by these cost challenges cut spend on hotel stays in the short term.
Joe Stather, VP market lead, operational real estate at Questex, said: “Just three months ago, there was a level of optimism. People felt that they would make their mortgage payments and it wouldn’t have too much of an impact on discretionary spend, but interest rates have now gone up to the highest they’ve been in 15 years and the market is more volatile than we thought.
“It shows how quickly the market is evolving and underlines the industry’s need to be agile, to have the ability to change their business and re-evaluate their strategy to survive.“
Despite the current macro-economic climate having immediate and short-term ripple effects across the industry Joe maintains that the long-term viability of travel is strong.
“The long-term fundamentals of the sector are incredibly strong, there’s no expectation that the demand and the desire to travel will fall away. As we navigate the current volatile backdrop, it's all about how investors can de risk their entry and make the most out of the current market because there are some great opportunities.”
Speaking ahead of The Annual Hotel Conference (AHC) which returns to Manchester’s Central Convention Complex on 11-12 September, Stather urged all areas of the sector – investors, owners, operators and suppliers, to come together to face these challenges together for a better outcome for all.
“The AHC’s programme of speakers celebrate strategies that are succeeding through these volatile times, and anyone attending will gain insight on how to position their business into the best possible place to maximise revenue, maximise profit, mitigate any downside risk and therefore continue to drive the value of their asset.”
The two-day event – under the theme adapt to thrive – will see a range of topics discussed and debated, including the rise of revenge travel and the opportunities it presents for inbound tourism; The evolution of hospitality to meet changing guest demand and how the industry can drive positive social change.
For more information and to register for AHC (11-12 September 2023) visit www.theahc.co.uk
Standard – available until 8 September 2023 £1,200
Onsite – available until 12 September 2023 £1,330
Follow AHC 2023 on Twitter @AnnualHotelConf and use #AHC2023 to stay up to date with the latest news.