Rising inflation, energy and last minute breaks | Article
As we enter the first weeks of the UK summer school holidays, it looks like once again staycation could be the preference of holidaymakers this year, as operators report that last minute domestic bookings have taken back.
Airlines and airports have made it clear they are unable to cope with consumer demand due to understaffing and illness, while the UK’s busiest airport has even imposed a daily limit on their capacity, which we had never seen before.
Towards the end of last year, some submarkets were already exceeding 2019 RevPAR levels, such as the coastal towns of Bournemouth, Blackpool and Plymouth, and many other markets were achieving higher average daily rates. No one ever thought that peak 2021 rates would be maintained this year due to government-backed savings resulting in a bumper trading period, especially in resorts.
Last year, customers and operators were navigating a roadmap to increase freedom, so booking ahead was essential if you needed to secure a place to stay away from the confines of your own home. This year, with no restrictions in place, customers, especially those not restricted to the academic calendar, have more booking flexibility, reducing pent-up demand from operators last year and compressing day rates. This last-minute surge in demand could lead to another rate hike.
However, there is still plenty of pent-up demand and the UK economy’s net savings have increased by £185billion during the pandemic, which under normal circumstances would lead us to several years of economic growth. positive. While this is still true, it is largely fueling inflation, which is now approaching near-record levels, and ADR in hotels is certainly benefiting from this.
From the hotel agency’s point of view, this year has been a solid business year. At Colliers, we have completed 37 transactions to date, which is comparable to last year’s record year of activity. There does not appear to be any slackening in interest levels from buyers, both domestic and overseas.
Our busiest locations were once again the stay markets, with the Lake District, Cotswolds, South West region, Wales and parts of Scotland in the lead. We are also seeing many established or growing operators acquiring assets previously owned by private families where in some cases the added debt during COVID and the lack of capacity to invest are fundamentally changing business models and viability. These purchases are now being encouraged by the banks.
In 2020 and 2021, a notable number of individual and private buyers have also stepped into the provincial hotel market, buying small guesthouses or pubs with country rooms.
However, 2022 saw a slightly lower level of these types of buyers, which was largely due to the availability of finance.
Large hotels always attract a lot of interest, and there are examples of foreign buyers returning acquire hotels in the UK. While rural areas have been busy, London continues to be a relatively calm market for transactions, although it is now experiencing its own post-pandemic business recovery which we believe will lead to increased levels of activity the next year.
With some international travel returning, cities that rely on foreign tourists and business travelers should fare much better this year, while places to stay should also start to see the return of international travellers.
What is interesting to note regarding customer behavior is that hotel reservations are increasingly made from smartphones. Some studies even suggest that up to 80% of them are made this way, highlighting the need to ensure carriers have a mobile-friendly website.
When looking at consumer behavior online, we need to be mindful of online reviews and their impact on bookings. Observing the reviews, there are many more reviews for those who increased their rates but did not provide the expected premium service with premium prices. In my experience, it seems that those who capitalized on last year’s demand may not be doing so well in terms of occupancy this year.
Besides the above, there are a growing number of vacation options. Over the last three years there has been a 40% increase in holiday rentals available in the UK. Websites such as Airbnb.co.uk have made this short-term accommodation option much easier to market, but calls for stricter regulations are likely to dampen supply in the future.
The last-minute surge in bookings will be a welcome relief for operators, but ongoing recruiting and retention challenges have become part of everyday life. Hospitality, like many other service industries, is still struggling to replace the workforce lost during the pandemic. These shortages may impact the number of rooms made available or the amount of services possible through on-site catering or additional facilities, while facing headwinds from rising hotel costs. energy and inflation, which will obviously affect those with the most luxurious spa and pool offerings, as well as drive up food, beverage and sundries costs.
However, despite these challenges, RevPAR is expected to once again exceed pre-pandemic 2019 levels in most key locations and there is real confidence in the market as operators continue to grow. expand their portfolios across the UK.