Hotel Operators Must Be Flexible, Be Lean and React Quickly to Change, says HVS Webinar Panellists
By Russell Kett, Chairman at HVS - London Office
The issue of financing the cost of reopening the hotel sector was the hot topic tackled in the second hotel webinar organised by global hotel consultancy HVS, legal firm Bird & Bird, EP Hospitality and AlixPartners, which was held yesterday [8th July].
AlixPartners' managing director Graeme Smith tackled the crucial issue of financial planning during the reopening and advised hotel operators to develop three scenarios - a worst case, medium and best case. 'Scenario planning and coping with uncertainty is key,' he said, urging that hotels develop a 13-week and mid-term cash-flow to assess cash impact, keep support teams lean by considering the minimum central team required, and be operationally agile as recovery was likely to be volatile.
'Implementing a baseline 13-week cash-flow forecast is critical to managing and tracking all cash outflows and inflows,' he said. 'With scenarios assessed and funding needs understood, operators can then engage with existing financial stakeholders.' He outlined the wide range of funding options available for hoteliers, including Government-back schemes, bank and credit funds, and private equity.
A discussion on contract negotiations and obtaining debt by Bird & Bird partners Karen Friebe and James Salford concluded that the overall impact on the sector was likely to be much lower gearing over the next two to three years, an increase in mezzanine finance [a combination of debt and equity], and a greater level of joint-venture finance.
HVS chairman Russell Kett chaired a lively discussion between five panellists with the importance of managing uncertainty being key, as the speed of recovery is unknown.
Panellists, including Asli Kutlucan of Cycas Hospitality, Neil Kirk of L&R Hotels, Ben Barbanel of OakNorth Bank, and Eva Bachmann of Ennismore, pointed out that continuing uncertainty is down to the threat of further disruptors such as a second wave of COVID-19 cases and regional lockdowns; changing Government guidelines; shattered consumer confidence; and not least, the ongoing issue of Brexit and the impact it will have.
Eva Bachmann of Ennismore said: 'It's important to remain flexible and agile - it's difficult to anticipate what will happen next. As soon as the government makes further announcements you must think about how that's going to impact the business, brand standards and staff. We must be alert and keep on top of what is going on and react quickly.'
Russell Kett highlighted a concern for many when he raised the issue of companies deciding when, and if, to bring staff back from furlough, or whether to let them go. 'It's a tough decision, but some hotels are going to have to rethink how many staff they really need and must be prepared to set new operational standards.'
Looking at the longer-term changes on the hotel business the majority of panellists said that changes had already been made within their companies, including reorganising head office structures, clustering hotels, more flexible staff contracts and more support in various ways for hotels from head office. Technology was another development that was being accelerated with Wayne Arthur, CFO of Staycity Aparthotels, identifying online check-in, keyless room access, and cashless payment systems being just some changes his company had made.
'Overall, we are all going to have to deal with a life of constant uncertainty and we are all going to have to adapt,' concluded Russell Kett.
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