"Culture can be understood as 'how we do things around here'. Right now, the how is changing daily - and in some cases, forever." The above sentiments reflect what most business leaders and operators are currently thinking. COVID-19 has drastically altered worldwide market conditions, with many countries on the brink of recession.
Over the past years, the hotel sector had remained a hot market for investors, as hotel investment volume reached US$66 billion in 2019, with initially cautiously optimistic projections for 2020. Although the short-to-medium-term prospects of the market now remain uncertain due to COVID-19, there may be opportunities amidst these times, both for companies to innovate their models and investors with a keen eye and open mind. In an EHL webinar, EHL alumnus Min Su Sung, Head of Product Strategy, Asia-Pacific and Middle East at BlackRock Private Equity Partners, shared some insights on the private equity market.
Today's global travel sector, which many characterize as being "on the brink of collapse," is simply unprecedented. Seven months into a 100-year worldwide pandemic which caused a swift, wide, and deep economic recession has decimated key travel and leisure related industries including airlines, car rentals, cruise lines, ridesharing, and tour operators. While stock markets have rebounded to near record levels, the US lodging industry continues to experience crippling stress as travel demand, which has experienced a sharp and sustained decline, continues to significantly lag pre-pandemic levels.
HTI Consulting recently launched a new report on hotel operator selection and management contract negotiation in Africa, providing various invaluable insights into the selection process as well as important analysis on contract contents, trends, benchmarks and negotiation techniques for owners in Africa."
The hotel industry faces an extraordinary challenge today: how to operate a hotel in the "new normal." With the near future so cloudy, it is close to impossible to effectively set accurate property and company forecasts; at this time occupancies and revenue per available room numbers are at painfully inadequate levels.
The COVID-19 pandemic has forced us to question the way our economy and society have operated for centuries. Since the onset of the first Industrial Revolution more than 200 years ago, the Western economic model of hyper competition and continuous growth has achieved global dominance - this holds true even in the hotel industry.
Mixed-use development, usually a planned combination of hotels, retail, office or residential space, is a fairly widespread concept globally with several such iconic projects around the world. In the last decade or so, the concept has been gaining ground in India as well, though the combination (two or more elements) of retail, office, and residential spaces have been more popular. However, as investors look to maximize returns through efficient land usage and optimal utilization of FSI, hotels have also been added to the mix.
The shocking decrease in demand created by COVID-19 crippled balance sheets and sidelined many of the traditional hotel buyers such as hotel REITs, current owners, and Private Equity groups. As liquidity pressure mounts on current owners, quality hotel opportunities are certainly going to come on the market (or off-market) at deep discounts, but the window of opportunity is likely to be brief.
Mr. Omar Issa will be speaking on this topic on day two of the 16th edition of the Arabian Hotel Investment Conference (AHIC), taking place in a brand new format with live onsite and virtual sessions over three days from 29 September – 1 October.
With the tremendous growth of the lodging industry over the last three decades, the industry's ability to develop competent management staff has been severely strained.
When Warren Buffett's Berkshire Hathaway sold all of its airline stocks in April, it appeared as an affirmation to some investors that the future of travel was on the rocks - while for others, it reignited discussions on whether the widely respected Orcale of Omaha had 'lost his touch'. The travel and tourism sector has undoubtedly been facing tumultuous times in the wake of COVID-19, with the International Air Transport Association (IATA) itself announcing that air travel will not recover until 2024. However, it would be hasty to presume that the prospects of hospitality are all doom and gloom.
It is inevitable - many hotels will go into receivership and/or foreclosure in the coming months. Some owners cannot afford to fight any longer, some lenders cannot kick the can down the road any longer, or any number of other reasons will start them down this path.
The economic impact of COVID-19 has devastated the hotel industry in myriad ways, from sinking revenues to company restructurings. Hilton announced in June that it was laying off 2,100 employees, about 22% of its corporate staff. In March, Marriott reported it would furlough roughly two-thirds of its 4,000-person corporate workforce.
As shown in the Planning Department's site plan, Site 3 will enjoy expansive harbour views from its northern section. The Hong Kong Observation Wheel located at piers 9 and 10 is a temporary structure and will not impede the site. One major drawback from a developer's point of view is the building height restriction of 50 meters. Somewhat unusual for Hong Kong, the tender process is conducted in a two-envelope scheme with equal weighting between design proposals and price. A comprehensive list, by Hong Kong standards, of requirements is stipulated in the 33-page planning brief.
The role of a professional Asset Manager has traditionally been underplayed in India, even though the expertise brought in by a quality Asset Manager can yield great results for Investors. This is already a proven fact in several mature markets where Hotel Investors extensively use their services. The role of the Asset Manager has become even more crucial in the current times of uncharted waters.How do professional Asset Managers add value to Hotel Investors? Asset Managers work with owners to maximize the asset value and potential by optimizing operational efficiencies to deliver better ROI.
Although the Great Recession is useful in offering insights into how hotel performance might fare during a crisis, we show that the current crisis is much worse in terms of risk and the loss of relative wealth. Not surprisingly while the price of hotels in all regions continue to exhibit negative price momentum, hotels in the Middle Atlantic and New England regions were particularly hard hit. Hotels in gateway cities experienced less price decline relative to those in non-gateway cities. Both our moving average trendlines and standardized unexpected price performance metrics indicate a hemorrhaging in the price of both large and small hotels. The cost of debt financing spiked in this quarter with financing available only on refi deals in general. The relative risk premium that lenders require for hotels over and above other commercial real estate has also increased on these refi deals. Our tea leaves suggest that both large and small hotels should continue to decline in price. This is report number 35 of the index series.
The year 2020 will not be soon forgotten as the spread of COVID-19 and society's reaction to the virus have combined to devastate the global economy. U.S. GDP in the second quarter declined by 32.9 percent on an annualized basis, the most significant quarterly decline observed since the 1940's. While the stock market has rebounded considerably from its lows and seems to be reflecting an optimistic view regarding an economic recovery, base case will be a slow and very bumpy re-opening of the economy.
Hotel development is a complex and expensive process involving multiple stakeholders with unique and often conflicting objectives. Since investors, operators, lenders and consultants all use distinct criteria to evaluate a hotel's projected value, they may green-light projects that are unlikely to satisfy the other parties' financial goals. In order to minimize such subjectivity, investment in a new hotel's development is typically preceded by a feasibility study, the stated purpose of which is to provide the relevant stakeholders with the information and analysis necessary to estimate the project's financial viability.
Excerpts from our recent research paper: Das, P., Füss, R.; Hanle, B. & Russ, I. "The Cross-Over Effect of Irrational Sentiments in Housing, Commercial Property, and Stock Markets", in Journal of Banking and Finance.
Central & Eastern Europe (CEE) may have, in the past, been perceived as a relatively unstable investment region, especially for the risk averse. However, record hotel investment volumes in the last years have proven otherwise, as investors begin looking to hotel real estate in the region, drawn by the relatively higher returns of hotels and more attractive yields compared to western Europe, which are typically more compressed.