How should Hospitality face the Brexit effect?
Rob Jones - MD
The hospitality industry is one of the most important parts of the British economy, with total turnover reaching £98bn in 2017, according to data from the Office of National Statistics.
However with Brexit on the horizon, and the Great British Pound being weaker than expected, should hoteliers be worried moving forward and how is the market currently performing?
According to PwC’s Hotels Forecast 2019, the outlook for London has levelled out with a year-on-year occupancy growth of only 0.1% and a marginal fall of 0.5% forecast for 2019.
How is Brexit impacting the sector?
Tourists from key European markets and the weaker pound mean London remains affordable for many.
Z Hotels is a fast growing independent hotel chain. On the impact of the weaker pound, its founder Bev King comments:
“At this point in time, London is amazing value for money for tourists. For anyone with any other currency than the pound, London and the UK is exceptionally good value for money.
With the pound so weak it makes it very hard for Brits to travel but it makes it very cheap for tourists to come here.
The biggest challenge facing the industry is recruitment. With the impending Brexit and immigration changes, the hardest thing will be for hotels and restaurants to source efficient employees to supplement their workforces.
Immigration policy is changing toward skill-based immigration and predominantly many people in the hotel industry would be considered unskilled. I think it will be difficult to find people to work in hotels, restaurants and pubs.”
What King says about immigration changing the work dynamic in this country is put into further context when looking at a recent study…
The findings showed that 11% of workers (equivalent to around 330,000 staff nationally) in UK restaurants, catering, bars and hotels were thinking about leaving the UK as a result of Brexit.
What about Airbnb?
Another big threat to the hotel sector is Airbnb. It has revolutionised the market by keeping hotel rates in check and making additional rooms available in the country’s hottest travel spots during peak periods; when hotel rooms often sell out and rates skyrocket.
It’s very bad news for hotels who have traditionally garnered their biggest earnings when rooms are scarce = customers pay higher rates.
A report by Morgan Stanley found that 42% of Airbnb users have replaced a traditional hotel stay with a property from this platform.
Airbnb was founded in 2008 and has grown rapidly at a time when plenty of other industry-disrupting platforms have flourished, including Uber, Craigslist, and Spotify. Black cab drivers have the same problem with Uber that the hotel industry has with Airbnb, in the fact that they’re unregulated and therefore they don’t offer the same quality and security.
Airbnb’s flexibility and convenience should be weighed against the fact that there is no regulatory safety measures...they don’t have any, you could be sleeping in a death trap, with no fire risk assessment, you have no idea! Properties fly in under the radar. How many Airbnb owners declare their earnings on their tax return every year and pay income tax?
The issue on rates is something that the head of the Bristol Hoteliers Association (BHA) Imran Ali agrees with.
“We’re happy for competition however it has to be on a level playing field. If nothing is done, hotels and B&Bs will suffer in the long term.
It goes without saying that the local job market will also see a decline due to fewer services being needed. And finally, let’s not forget that the council will then start to lose income from the tax they currently receive from these legitimate businesses.”
So what should hoteliers be doing?
Whenever brands face a challenging market with disruptive competition, the strength of own brand can be a source of strength..
Having a well defined value proposition, a clear brand system of values, attributes, personality and messaging can help a Hotel brand clear itself from the noisy competitor field and challenging marketplace. Clear, clever creative campaign delivery can capture fragmented audience attentions and help to pull customers into the Brands world.
Sweat the brand and get it working harder when times are tough and that added effort will only reap rewards, not only during the tough market times, but on into smoother waters once the Brexit effect and other disruptive elements settle.
With extensive brand experience in the Hospitality sector, working with brands such as Harbour Hotel Group, The Montagu Arms and Englefield Estate, we will continue to keep our eyes on the Hospitality sector as 2019 rolls on.