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Travel Daily
HospitalityUKHotels

Global hotel values fall due to pandemic, recovery anticipated by 2025

By Megha Paul On Nov 1, 2021
Guest Contributor

Contributors are not employed, compensated or governed by TD, opinions and statements are from the contributor directly

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Hotel values are not expected to make a full return to pre-pandemic levels until 2023-25 with some regions across the globe showing faster recovery than others, according to a webinar held by hotel consultancy HVS and EP Business in Hospitality.

HVS consultants from Europe, Middle East & Africa, Asia-Pacific, India and the Americas revealed the impact of the pandemic on hotel performance across the regions and the factors impacting recovery. While many markets faced additional issues including the rate of vaccination rollout, new hotel supply coming on stream, travel restrictions and the level of dependence on conference and event business, all named the shortage of staff as a key issue as hotel operators looked to move back into profitability.

Staff shortages are currently forcing many hotels in Europe to place limits on occupancy levels, cut service operations or downgrade service levels, the webinar heard, with the situation expected to put upward pressure on wages across the industry. Sophie Perret, senior director at HVS London, noted stronger recoveries this summer in key cities across Europe such as Paris and London, thanks to demand from sport and fashion events, small meetings and leisure guests. Markets with high exposure to international demand sources like the US or UK are taking longer to recover, although the successful vaccine rollout and easing of travel restrictions have been very positive. She estimated hotel values fell by between 5-15% in 2020 but that decline had now bottomed out as demand was slowly returning.

“Nevertheless the pace of recovery is uneven throughout. Hotel values are showing the initial signs of recovery thanks to improving cash flows, driven by demand recovery and coupled with cost-cutting measures, although the ending of government subsidies, a rise in inflation and payroll pressures could prove challenging to many hotels’ profitability.  We expect European hotel values to have recovered to 2019 levels by late 2023/early 2024 in the best cases, with others following one to two years later,” she said.

With regard to hotel transactions, she noted that there was some pick-up in the volume of hotels being sold in spite of the limited to non-existent level of distress so far shown across the sector.  “Southern Europe and the UK are experiencing a proportionally higher level of deals,” she added.

Hotels across the Middle East and Africa were seeing various speeds of recovery. In 2021 hotels in Makkah, Saudia Arabia, for example, had seen RevPAR rise 127.5% on 2020 levels, said Hala Matar Choufany, HVS president – Middle East & Africa, while a sluggish recovery in many parts of Africa was due to the slow rollout of the Covid vaccine. Across Asia Pacific hotel RevPAR had seen a 50% fall in 2020, said Chee Hok Yean, HVS president – Asia Pacific. However, recovery in this region was anticipated by 2023.

A panel, chaired by HVS London chairman Russell Kett, tackled the impact of the staff shortage on values, the importance of giving guests a hotel-experience, and the role of sustainability on hotel values, as well as maximising revenues from available space and re-establishing the relationship with the customer.

HVSEP Business in Hospitality
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