BERLIN — European hoteliers are patting themselves on the back for surviving the bleakest years of the pandemic, but they also realize that the hardest work is ahead of them.

Are they cautiously optimistic? Are they sensibly looking at the long-term play? On the first day of the International Hotel Investment Forum, there were almost as many opinions as there were attendees of the conference.

"It’s about time people understand our industry is vastly different now than it was 20 years ago, and it will be vastly different in 20 years," Accor CEO Sébastien Bazin said. "Anyone in the room who wants to open a hotel: Open it, design it for the local community. Make sure you give people a reason to come. Make sure they use the bar, the restaurant. If you achieve the business from the local community, don’t you worry a minute about getting the traveler. You have to change your entire thinking of hospitality from 40 years ago. Forty years ago the only thing we cared about was trying to cater to the traveler. That was wrong. If you have 60% of your revenues from the local community, you are safe. So I’m trying to go upside down in the way we do things. It's more difficult but more fun."

“This is the paradox of globalization: We're moving from an economy based on where the raw materials are — near rivers, near manufacturing — to being where you want to be. It's a knowledge economy.”
— Ian Goldin, economist and professor at Oxford University, shared his view that dynamic cities that appeal to where people want to live, work and interact will sustain future travel and tourism growth as well. Right now, he pointed to the Persian Gulf states as knowledge economy-based hubs of the future.

"The big question mark for the entire industry, of course, is what are we going to do with all of these buildings that are no longer viable as offices. Part of it is working from home and changing how we work, but the other part is ESG energy regulations. If you look at the U.K. as an example, by 2027, 50% of existing stock can't be used as office space. That's 10 million square feet in London alone of office space."
— Kristen Kozlowski, managing director of PineBridge Benson Elliot, discussed why buying unused office space might be a fertile path for hotel development in the absence of traditional distress.

"We're almost recovered but not fully recovered," said STR Managing Director Robin Rossmann during a panel on hotel performance, pipeline and pricing. "You can see real improvement. Occupancy is getting so, so close to fully recovered, and rate growth, which had stagnated, really began to pick up again."

There is a wall of capital, to use the cliché, seeking a product with which to rest, but everyone seems to be after the same assets. Have a good track record before the pandemic? Have a great relationship with partners or a lender? Have access to potential deals off the public market? Have the capital stack in place with manageable refinancing terms? Then, yes, it might work, as the hotel industry is by far the real estate sector of choice as other sectors presently are disastrous.

Right now, hoteliers need to be hoteliers. Not just a set of employees able to offer a warm welcome but those who more than ever understand the economics and multi-layered nature of the industry. Creativity is prevalent in the industry, and that results in a far brighter picture than we could have imagined 24 months ago.

— Terence Baker, news editor, Europe, Middle East and Africa
@terencebakerhnn

In Europe, as in the rest of the world, the name of the hotel game is reconciling continued high demand for hotels with rising inflationary pressure and economic softening.

The highs are high. Hoteliers in Europe are enjoying average daily rates that are nearly recovered, and segments such as luxury are commanding rates well above past peaks. This type of performance, especially recently, is encouraging for many because they know that Chinese travelers are still yet to return to Europe in full force.

But the economic concerns facing the rest of the world are here as well. During a lull in the conference, I caught up with Tea Ros, managing director at Strategic Hotel Consulting, who said, "the mood is more realistic now," in terms of how hoteliers in Europe view the short-term future, and I couldn't agree more.

Hotel transactions volume is down, said Carine Bonnejean, managing director for hotels of Christie + Co., and year to date have focused only on single-asset transactions. Buyers are ready but not yet willing to bridge the large bid-ask gap.

So the mood is realistic, yet hopeful — probably the best we can expect.

—Stephanie Ricca, editorial director
@HNN_Steph

If there was one common theme that seemed to be coming up over and over today, it was the need and desire for more creativity — both in the types of assets hoteliers invest in and in the ways they source and close on deals.

This feels especially important in terms of deal-making. In an environment where there are so many mixed signals on whether things are actually good, like solid key performance metrics; or bad, like high inflation and interest rates, it's easy to see how there would be a lot of confusion and disagreement between potential buyers and sellers. And indeed, there seem to be continued refrains that the bid-ask gap remains a significant hurdle across Europe.

But people who can figure out different ways to find deals — and there was a lot of talk that there is more "stress than distress" in the market — will be at a significant advantage. And those who can be more entrepreneurial with a more solid vision on how to transform an asset into a business opportunity will be even more poised for success.

A lot of this boiled down to looking beyond hotels either by establishing businesses that trade in getting the most out of mixed-use projects or by thinking of creative ways to capitalize on the crash in office spaces.

—Sean McCracken, news editor
@HNN_Sean

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