Flexible franchise agreements to be a necessity for hotels

We expect that the coming year and beyond will see a shift in hospitality investors looking for more bespoke solutions, unique problem solving and flexibility from their partners as those investors look to the specifics of their own investments, stakeholder requirements and expectations. This flexibility will be baked into agreements at the start of a partnership rather than looking at standard leases, standard management contracts and so on, and dealing with problems later on.

A key change that must surely be coming in this regard is in franchise agreements with major global franchisors, as it can no longer realistically expect to have 15 and 20-year long contracts with expensive 5-year termination rights. This is probably the last key area of the hotel industry to remain contractually inflexible compared to what hospitality investors want. Brands that embrace this and actively seek to find solutions to the problems always held out as being the justifiable reasons for it (such as inflexible brand standards and expensive PIPs) will surely be the ones that thrive into the future.

Dave Hart, CEO

Closing in on the road to net zero

The increasing focus on Environmental, Social and Governance (ESG) criteria and the ability for companies to evidence they are socially responsible in each of these areas will continue into 2022. On the back of COP26 and the heightened awareness of the importance of creating a sustainable future for the next generations, the hospitality industry, among many others, is needing to take fast action. From those who understand the importance of limiting global warming and achieving net zero as quickly as possible, to those who clearly see the commercial damage of not taking this focus seriously, everyone is driving towards action instead of ‘blah blah blah’ to use the words of Greta Thunberg. There will be a race for companies to be creating net zero products, including buildings and travel solutions, and the building pressure will continue to drive results. Hotels that are accredited and shout about their achievements in ESG will become the consumers’ choice and those not focusing on this vital subject, or even those perceived to be ‘greenwashing’, will be left behind.

Susan Bland, Managing Director

Good relationships key to help rebuild the industry

For the past two years, the pressure which the hospitality industry has been under has been immense, including hotel closures, use of furlough, re-opening, supplier challenges and recruitment gaps. As we enter 2022, I truly believe that those companies who looked after their people and treated them fairly and with integrity will have this repaid with success and loyalty. As an industry I also hope, following the learnings of the past two years, that we will finally come together with a collaborative approach to address the misperception of our sector to encourage more young people that they can build a successful career.

We continue to face cost pressures in hotels with rising payroll and utility costs being the main drivers. However, as has happened in the past, I believe we will continue to drive forward commercially to compensate for these increases and, across the country, I believe that hotel RevPAR will significantly outperform current forecasts. I expect to see a significant uplift in transaction volumes across the UK with a high number of new investors making their moves into the hotel sector as well as institutional investors moving their investments from more traditional leases into businesses with more operational exposure to maximise their overall returns.

Andrew Robb, Chief Financial Officer

Staffless technology on the rise

In 2022, we’ll see a far higher adoption of staffless technology in hospitality, with staffing challenges in the UK driving the industry to adopt solutions that are light touch and cost effective. Guest interaction will therefore become more meaningful as the transactional detail (check in/out) will be completed without any staff interaction. Travellers, more than ever, will want a unique experience and connectivity will be essential across all sectors.

Furthermore, virtual reality will come of age with hotel and venue show-rounds being done remotely, and the availability of 5G and Wi-Fi 6 will make virtual and augmented reality solutions seamless and near reality. Systems that have high capital costs for adoption will start to be offered on a pay as you use basis – this will allow quicker adoption and change as needed.

Vibhu Gaind, Chief Information Officer

Increases in hotel rebrands and upgrade projects

New build construction has seen the highest price increases (close to 10% year on year, so I anticipate that rather than entirely new development projects being undertaken, there will be a higher demand for existing hotels to be purchased and upgraded, modernised and rebranded. The cost of furniture fittings and equipment (FF&E) has also increased significantly from Europe and Asia. Where import duties, tariffs and delays through customs has made the process of procurement quite complex and frustrating for many involved, I believe there will therefore be a higher demand for UK based suppliers and manufacturers to make project delivery more efficient.

Gregor MacNaughton, Chief Technical Officer