Thursday, June 13, 2024
Thursday, June 13, 2024
HomeNewsBusiness NewsNew report finds that hotel sector recovered faster than expected

New report finds that hotel sector recovered faster than expected

New report finds that hotel sector recovers faster than expected

A new report from Christie & Co. has found that hotel occupancy levels have recovered at a much quicker rate than anticipated since January, nearing 2019 levels in most markets since May 2022.

The review also found that operators have focused on maintaining high ADRs to absorb some of the increasing cost pressures which has positively impacted RevPAR in both city-centre and regional UK hotel markets and the summer season is looking positive as a result.

Off the back of this uptick in operational performance, the transactional market remained active, notably during Q1 2022. However, the war in Ukraine and growing economic uncertainty started to impact transactional volume during Q2, meaning the total volume transacted in H1 2022 is slightly behind the same period in 2021. Regional UK transactions dominated with almost three quarters of total volume. The wall of capital is still available and awaiting opportunities in the hotel sector; however, a cautious approach is being adopted due to the economic backdrop and additional cost of servicing debt.

Christie & Co, which is currently instructed on over £1 billion pounds worth of hotel assets across the UK and has sold almost 50 hotel businesses in the UK in H1 2022,  demonstrates the continued buoyancy of the market particularly in the regions. They say that new instructions have also picked up, suggesting that owners are now willing to capitalise on the record performance of 2021.

The review notes that hoteliers have been faced with a challenging trading environment so far in 2022, with headwinds such as inflation, staff shortages and wage increases, supply chain disruptions, spiralling energy costs and the cost-of-living crisis all having intensified significantly over the last six months.

Looking ahead for the rest of the year, the report suggests 2022 might end up being a story of two halves. Consumer sentiment remained generally positive until spring, and the sector has been recovering more rapidly than first thought so operators are anticipating a good summer season, albeit below the record highs of 2021.

However, as uncertainty continues to creep in during the second half of 2022 due to inflation and the effects of the cost-of-living crisis on disposable income, this is likely to have an effect on trading performance and businesses may start to feel the pinch as a result from Q4 2022, into Q1 2023. We might therefore see an uptick in distressed activity which remains at an all-time low.

Carine Bonnejean, Managing Director of Hotels comments, “Whilst we are now firmly past the covid crisis, the hotel industry and the wider real estate market are likely to experience further turbulent times in the months to come. The pace of the recovery was completely unexpected with performance ahead of 2019 already, a far cry from the 2 to 3 years originally anticipated; however, we may be entering another phase of the cycle by the end of 2022.”

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