In an exclusive interview, Bespoke Hotels’ president and co-founder Robin Sheppard asks Mike Rothwell, director of the independent hotel company’s Management and Advisory service to gaze into his crystal ball as the British hospitality industry unlocks its doors. How will the pandemic impact the sector in the coming years and what lessons can we learn?
Robin Sheppard: So, first of all Mike. Any silver linings at all?
Mike Rothwell: I guess at lot of people in the industry have had more time to think over the last 15 months than they will have had in a normal lifetime in hospitality. Normally they barely have time to take stock of the bar, let alone their life, the universe and everything else.
We’ve seen a lot of change-resistant hospitality outlets forced to embrace technology. It’s going to be hard to persuade people who have got used to ordering a round of drinks from their table with an app to go back to standing at the bar waving a ten-pound note in the hope of attracting the bar staff’s attention!
I’m hopeful that we’re going to see a lot of innovation, enterprise and determination shining through now. But obviously, I wouldn’t wish what has happened this year on our bitterest rivals, let alone our partners and friends.
RS: And what is your crystal ball telling you?
MR: The general UK hotel market can look forward to a bumper few months of trading and cashflow from May this year, and that could well continue right through the autumn to Christmas, because a lot of summer holiday budgets aren’t going to be spent on the big foreign trip.
Outdoor dining is going to be big – and there are a few products out there now which aren’t quite so environmentally unfriendly.
Assuming restrictions on indoor event numbers are lifted on 21 June, hotels with capacity for weddings will have an incredible 2021 and 2022.
Increased debt from 2020/21 will need to be repaid from ‘normal’ trading income over 2022 and beyond.
Maybe we’ll come back to what ‘normal’ is actually going to look like, later?
RS: Where are the mines buried?
MR: Well, the wind-down of current government support measures towards the end of 2021 and into 2022 could bring a bit of an icy blast of reality. And of course further lockdowns can’t be ruled out if overseas travel brings back new variants of the virus.
Restrictions on forfeiture of commercial leases or eviction of tenants is now extended to 30 June. Beyond then it may start to prove challenging for many hotels.
Owners and managers need to be mindful of increasing prices now, as they may need to do so in October when VAT goes back up to 12.5%. Competition will remain fierce, and nobody wants to price themselves out of the market at this point.
RS: Which sectors are going to drag?
MR: Recovery of city centre and airport hotels will inevitably take much longer than hotels in purely leisure-driven destinations.
RS: Will life ever be the same again?
MR: Do we want it to be the same? There’s been a need for a re-set in lots of aspects of hospitality. I’m hopeful we can take some of the silver linings from this and move forward from there.
And I always say, ‘You don’t fatten a pig by constantly weighing it’. In other words, look forward, not backwards.
It’s all about doing something proactive today that will improve tomorrow.
RS: Landlord and tenant deals. New rules?
MR: Owners need to go back to basics and undertake a wholesale review of every aspect of their operating model.
RS: Is cash still king?
MR: If stories of the cash that has piled up in bank accounts during lockdown are true, then it sure will be. For operators, of course, liquidity remains key for their credit profile.
RS: Any tips?
MR: My advice? Be expense-minded and profit-driven. I would always encourage operators to ask themselves if all available space is being fully optimised and generating a return… Is profitability of all hotel functions being measured? If it doesn’t generate a profit then why are you doing it?
But I would be amazed if people haven’t been asking themselves these questions during lockdown!
RS: Will owners seek help, or will pride get in the way?
MR: Owners and stakeholders should not be afraid to seek independent support. It’s not a sign of failure – more a sign of genuine commitment to get things right.
RS: Are the Online Travel Agencies still our friends?
MR: A lot of businesses have had the opportunity to get to grips with their own websites and booking systems, and with the need to look after every penny of margin from here on, there’s bound to be an adjustment in where bookings come from. Savings on commission can be spent on marketing and improvements.
RS: Customers’ deposits. Don’t be tempted to use it as cashflow … am I right?
MR: Hotels need to be careful how they manage deposits this year, and particularly for Christmas. In the event of another winter lockdown, all those deposits may need to be refunded and should not be swallowed into cashflow.
RS: What are some of the benefits your clients are seeing from their Bespoke involvement?
MR: Well we feature on the Bespoke platform producing additional distribution, significant procurement opportunities, wide breadth of sector specialists to call upon if required in certain situations, operational guidance.