RBH Hospitality Management shares top trends and predictions for the hotel industry in 2024
RBH Hospitality Management’s Executive Committee each share their top trends and outlooks for the UK hotel industry as we look ahead to 2024. From cost efficiencies to decarbonisation practices and keeping on top of regulations, hear what the experts have to say.
Increased consolidation to maximise efficiencies in service provision - Dave Hart, CEO
We continue to see an increase in the number of smaller companies offering a third-party management service to hotel investors, including some owner-operators seeking to bolt on such a service to their own internal operations. Where smaller companies have only a few hotels under management, or the conflicting requirement to maximise the bottom line of their owned hotels, then we believe they will struggle to afford the appropriate infrastructure to offer the all-encompassing service that experienced hotel investors look for today and therefore their ability to drive sustainable profitability will be under pressure. As a result, we expect that we will start to see some consolidation in the industry and streamlining of management teams to maximise efficiencies and ensure hotel investors are able to access the range of services they require with their chosen management company.
Cost efficiencies and operational scrutiny paramount - Louisa Green, Incoming Managing Director (January 2024)
The hospitality industry will continue to prove its resilience in 2024. The focus on cost efficiency will be paramount – particularly following the Autumn Statement and increased National Living Wage (a 9.8% increase on 2022, and 39% increase on 2019’s NLW). This puts a lot of pressure on all other salaries to maintain pay differentials. We need to continually evaluate the ways to reduce the level of working hours required, for example the opening hours in our restaurants and bars, or the level of housekeeping services a hotel offers. This, of course, cannot be at the detriment of the guest experience as consumer expectations will continue to rise. Receiving both value for money and a memorable experience will remain key and personalizing the experience is now expected, such as room preferences.
An opportunity for investors and developers amidst refinancing difficulties - Andrew Robb, Chief Financial Officer
We have had an unusual year with, generally, very positive trading performance and a stabilisation of some costs. But, with specific areas such as Food and Beverage remaining challenging in terms of profit margin, which is being driven by continued high inflation in the price of food, the forthcoming rises in the National Living Wage will not help this. Despite the headwinds in the industry, the like-for-like RBH portfolio of hotels has a Gross Operating Profit which is 13% ahead this year than 2019, and we are very confident of continued trading growth in 2024.
We have added eight hotels to the RBH portfolio in 2023 and have a further three hotels scheduled to open in 2024 already. We continue to generate a number of leads seeking a change of operating solution, but new build developments will continue to be tough in the short term due to increased cost of construction and debt financing costs. The transaction landscape has also been challenging with 2023 UK transaction volumes in hotels significantly behind historical norms. I predict that we will see a material increase in transactions in 2024, which will generate additional opportunities for growth in RBH, and I also believe we will see additional signs of distress caused by the high interest rate environment and reduced levels of debt being offered upon refinancing. Whilst challenging for those directly impacted by such debt servicing scenarios, this in itself will generate opportunities for investors and developers to target the higher returns they have been seeking for several years.
Enhancing existing assets a priority over new transactions - Gregor MacNaughton, Chief Technical Officer
Despite the reduced number of hotel transactions in 2023, it will be positive to see hotel owners looking to refurbish existing assets and potentially look to buildings with a different purpose, such as commercial office spaces, with the intention to repurpose and refurbish to become hotel accommodation.
As ESG continues to be a growing focus for hotel owners, we expect to see further investment in energy-reducing technologies to help decarbonise their properties. ESG will likely be a key point of consideration for owners when investing in new build hotels, extensions, and refurbs, particularly in regard to green technologies, such as refrigerant gas in AC systems, recycled products and FF&E, etc.
Furthermore, we will continue to address all fire life safety concerns with cladding and render insulated buildings on existing hotels, but more and more focus will be directed to fire compartmentation which is now becoming critical in all sales processes.
AI to help fuel evolution of business decision-making - Vibhu Gaind, Chief Information Officer
The world is evolving at a pace that is unprecedented; with AI coming truly of age, we will see a move towards private AI environments coming to the market wherein organisations will have the ability to feed their entire data set for AI-based instant analysis and outputs. The data analytics and management world will take a massive stride towards instant and ready access – making business decision-making a more evolved process.
For the hospitality industry, a key difference will be more Opex-based spending with capital spend and financing being under pressure. Most portfolios will require investment in door locking solutions, phone system refreshes as analogue networks across the UK are decommissioned by 2025, and a constant increase in guest data demands will force necessary upgrades to WIFI and connectivity networks.
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