#IHS2014: Hotels need to prepare for next downturn

By Melodie Michel

- Last updated on GMT

Another downward dip is inevitable but experts hope the next one won't be as severe as the 2008-9 financial crisis
Another downward dip is inevitable but experts hope the next one won't be as severe as the 2008-9 financial crisis

Related tags: Recession

The UK’s recovery hasn’t yet reached its peak, but another dip is to be expected, and hotels should think of ways to avoid being too affected, according to speakers at the Independent Hotel Show.

Though the current boom experienced by the sector is expected to last another two or three years, it is no secret that the economy is cyclical and another downturn will follow. However, the next one shouldn’t be as dramatic as the one prompted by the 2008-09 financial crisis, which bodes well for hotels that did recover.

“If you’re a realist, we see growth as cyclical. Every few years we get a dip, then recover and go further. Hopefully the next dip won’t be as severe as the previous one and those who rode it out will continue to survive and get stronger,” said Lionel Benjamin, director of hotels at Topland.

In his view though, the London boom is here to stay as the city can’t grow much more while demand will keep going from strength to strength.

Technology and visibility

Beth Bailey, marketing director of Premier Cottages, pointed to questions over the strength of the recovery, particularly as Germany is growing less quickly than anticipated.

“The critical thing is to make yourself as visible as possible. Googling independent hotels last night I was surprised to see that 90 per cent of the ones I looked at didn’t have mobile-responsive websites, which is massively significant for bookings. If people can’t see you, they won’t buy your product, no matter how fantastic it is,” she explained.

For Nik Gupta, director of hotels and car hires at metasearch site Skyscanner, the recovery has created growth opportunities, but it’s 'very fragile'.

“With what’s happening in the Middle East and Caucasus, all it takes is one little push to slide back into recession. You’ve got to start protecting assets, look at technology and ensure that you control it and do what you can do best. Your website is your window to the world,” he advised, pointing out that by ensuring daily changing content, adding reviews to hotel websites is an important SEO driver.

Recovery time

Although the mid-market is most at risk during recessions, the luxury segment has shown particular resilience.

“Every time we’ve had recessions or geopolitical issues, hotels in the luxury market have recovered within only 18 months,” said Paul Kerr, chief executive of Small Luxury Hotels of the World.

And in London, recovery time is even shorter, as Benjamin remembered. “London recovered in less than 18 months after 9/11 and 7/07. We took a blip but recovered very quickly.”

Pricing

According to Benjamin, pricing still has room for growth. Across Topland’s mid-market portfolio in the provinces, average daily rate (ADR) stands at around £65, which he believes can be improved with revenue management systems, web exposure and marketing, but also by factoring in secondary revenue such as food and beverages or spa treatments.

Gupta explained that though rates are almost at the same level they were in 2006, costs have gone up, creating a drop in profitability.

“Distribution is going to be key, and that’s where independents will have a challenge compared to brands. They also need to embrace technology and go mobile. 89 per cent of users start their search on one platform and complete their booking on another platform, so you need to ensure that your users get the same experience across all platforms,” he said.

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