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Is the Hotel Sector Entering a Period of Major Change?

Following a decade of growth, the hotel, food and beverage sector has been one of the hardest hit by the pandemic, with the U.K. Economic output down 90% in April 2020 compared to February 2020 — a trend which was replicated across the globe.

The expected recovery of the sector in the U.K. and Europe will be gradual, but exactly how quickly, to what level, and whether customers’ expectations will have changed, remains up for debate.

Quick Recovery or a Pandemic Hangover?

A recent report from the British Chambers of Commerce suggests that while the economy as a whole will return to its pre-pandemic level in Quarter 1 2022, “output from catering and hospitality, some of the sectors hardest hit by the pandemic, are forecast to only return to pre-pandemics levels in Q2 2023.”

This disproportionate predicted recovery will no doubt have hotel developers and owners thinking about how they can best utilise their existing assets, where they can be more innovative and efficient, and what their future projects may look like.

While some predictions are reserved, others are more optimistic. According to the TOPHOTEL PROJECTS construction database there are over 1,700 development projects planned across Europe, with 414 openings in the U.K. alone.

With restrictions on overseas travel, there has been a rise in U.K. domestic tourism and staycations. While 2021 occupancy is predicted to be lower when compared to 2019 levels, in some areas it is not as low as could be expected. According to PWC, “The forecast for occupancy in 2021 is predicted to be 52.4% for London and 59.2% for the regions. This represents a decline of 31% and 16% respectively when compared to 2019. This shows the scale of the challenge for hotels planning for the year ahead: the only significant market now, and into 2021, will be U.K. domestic tourism.”

Looking towards 2022, with people having been confined to their homes and restricted from travelling for most of the last year and a half, there is a possibility that this could lead to a surge in demand once restrictions are fully lifted with ‘revenge travel’ helping the industry recover quicker than predicted. In this scenario, we could see ramped up demand — and the income it may generate — in turn drive investment in refurbishment and the development of new hotels, food and beverage outlets.

A Shift in Behaviour

The way in which guests interact has significantly changed in the past 18 months, moving away from the trend of a more communal environment that was prevalent pre-pandemic. As the industry emerges from the chaos of 2020 it will be great to see this trend of more social spaces return and continue to evolve. Within the hotel sector, there is a real focus on returning to normal but doing so in a more efficient way. Guests continue to demand the same great experience they enjoyed previously but behind the opulence of the hotel lobby, systems are being fine-tuned to improve efficiency, save money and increase profits in a bid to help recover lost revenue. Health and wellness was already a key trend pre-pandemic and creating sustainable facilities that exceed guest expectations, improve well-being and enhance their experience is imperative.

Opportunities for Hotel Developers, Owners and Operators

Owners and operators have had to adjust to significant changes during the pandemic, with the key focus in the short-term on making guests feel safe enough to return to their establishments. However, there is a broad mix of short, medium and longer-term opportunities that can be maximised upon:

  • Expanding the food and beverage offering:
    The U.K. Food & Beverage sector is worth GB£100 billion, according to a report by the U.K. Food and Drink Federation and Santander, so adapting spaces within a hotel that were previously under-utilised into a Food & Beverage offering is a possible way to increase revenue per square foot. Refurbishing existing space to provide a better ROI can be a way of recouping revenue lost due to the pandemic. With innovative design solutions, hotels can reinvent previously under-utilised space into an exciting destination for both guests and non-guests.
  • Improved safety to reassure guests and reduce risk:
    With building safety under more of a microscope since the pandemic, it is key for owner/operators to demonstrate a commitment to guests. Having an up to date record of building information can be used in many ways, but to know if your building is constructed and working as designed is one of the most important as it could compromise safety. Assessing systems such as HVAC in refurbishments and integrating innovative design solutions in new builds can go a long way in improving building safety. The “Golden Thread” of information is a trending topic at the moment, how will the industry embrace this and use it to their advantage.
  • Reduced running costs through improved efficiency:
    Climate change and the drive to net zero were already key areas of consideration before the pandemic, but there is now a real opportunity to solve two challenges with one solution when it comes to implementing sustainable building solutions. Achieving net zero is particularly challenging in a hotel setting compared to other sectors due to high water usage and energy consumption, and we are seeing an increasing appetite among our clients for our services in this area. While sustainability solutions can help achieve a low carbon, more environmentally friendly operation, they can also improve efficiency and ultimately reduce the running costs of a hotel.
  • Enhancing the guest experience through a combination of human interaction and Smart technology:
    The use of Smart technology within hotels was accelerated in 2020 with keyless entry, virtual concierge and minimum human interaction becoming the normality. However, while this face-less approach has its place in a pandemic world, it is unclear whether all elements of this will continue. People check in to a luxury hotel to be “looked after” and there are limitations to achieving this from a virtual check in or talking to a screen. There is a huge opportunity to leverage a perfectly balanced hybrid of personal service and technology.

Innovative Design and Technology Are the Way Forward

It remains to be seen what impact the pandemic will have on investment in the hotel sector and whether the financial capital will be available to investors, owners and operators to continue with new developments as well as the operational expense of maintaining their existing property portfolio. While the predicted path to recovery in the sector may be slower than in other industries, there are lots of opportunities to save costs and maximise profit through improved building safety and efficiency achieved by innovative design and Smart technology. Equally important is knowing that the solutions you put in place work as they were designed to and that you have documentation to prove this.

Some trends and behaviours we have seen in the last year and a half may be fleeting while others could be here to stay, and so it is important for hotel design to be flexible and adaptable to the changing environment. We are excited to see the evolution of the industry and be a part of creating unique designs and solutions for those operating in the hospitality sector.

Sources

Hotel, Leisure & Entertainment Director
Markets