Hotel values are not expected to make a full return to pre-pandemic levels until 2023-25 with some regions across the globe showing faster recovery than others, according to a webinar held by hotel consultancy HVS and EP Business in Hospitality this week.
HVS consultants from Europe, Middle East & Africa, Asia-Pacific, India and the Americas revealed the impact of the pandemic on hotel performance across the regions and the factors impacting recovery.
While many markets faced additional issues including the rate of vaccination rollout, new hotel supply coming on stream, travel restrictions and the level of dependence on conference and event business, all named the shortage of staff as a key issue as hotel operators looked to move back into profitability.
Staff shortages are currently forcing many hotels in Europe to place limits on occupancy levels, cut service operations or downgrade service levels, the webinar heard, with the situation expected to put upward pressure on wages across the industry.
Sophie Perret, senior director at HVS London, noted stronger recoveries this summer in key cities across Europe such as Paris and London, thanks to demand from sport and fashion events, small meetings and leisure guests. Markets with high exposure to international demand sources like the US or UK are taking longer to recover, although the successful vaccine rollout and easing of travel restrictions have been very positive. She estimated hotel values fell by between 5-15% in 2020 but that decline had now bottomed out as demand was slowly returning.
“Nevertheless the pace of recovery is uneven throughout. Hotel values are showing the initial signs of recovery thanks to improving cash flows, driven by demand recovery and coupled with cost-cutting measures, although the ending of government subsidies, a rise in inflation and payroll pressures could prove challenging to many hotels’ profitability. We expect European hotel values to have recovered to 2019 levels by late 2023/early 2024 in the best cases, with others following one to two years later,” she said.
With regard to hotel transactions, she noted that there was some pick-up in the volume of hotels being sold in spite of the limited to non-existent level of distress so far shown across the sector. “Southern Europe and the UK are experiencing a proportionally higher level of deals,” she added.