What Does the Future Hold for the Hospitality Industry?

devatas  -  Nov 03, 2011  -  1 Comments

The hospitality sector was one of the hardest hit by the recession. Many businesses and professional services failed and most have struggled to recover. So what lays ahead for the industry?

Most Impacted

Hotels and restaurants most affected by the recession were those that cater to business travellers. While leisure travel has generally maintained pre-recession levels, companies all over the nation have dramatically cut back on business travel spending in an effort to trim their budgets. The increased use of technology like outsourcing, video conferencing, and webinars has made it possible for international companies to do business without sending employees on the road. This means that leisure hotels have experienced only limited losses while business hotels have struggled to keep their doors open.

Future Uncertain for Business Hotels

Despite the hardships of the past several months, the hospitality sector seems to be on an upward trajectory, but hotels and restaurants that cater to business travellers have yet to see significant recovery.

According to a report from Deloitte in 2009, the Euro has boosted tourism to the UK overall. Despite the ever fluctuating economic and political activity, the UK economy emerged from the recession during 2010 with GDP growth of 1.3 per cent compared to -4.9 per cent during the previous year.

The in-depth analysis reveals a strong trend in UK hotel performance over the past five months. Though revenue per available room (revPAR) is still in the red, the pace of decline has slowed significantly and some markets are actually posting gains for the first time in more than two years. Leisure travel seems to be driving the trend, as weekend occupancy and revenues have risen sharply. In London, there has also been some growth in weekday corporate travel. This comes as good news to beleaguered hotel and restaurant owners.

In commenting on the report, Deloitte Hospitality Managing Partner Marvin Rust said, “The UK tourism industry continues to be challenged by the recession, with some companies announcing record losses and year-to-April revPAR, the hotel industry’s leading performance indicator, down 11.1%. However, our analysis shows that both weekend leisure demand in London and the Regions and corporate weekday demand in London over the past five months has shown an upward trend, signalling that the worst may be over for hoteliers.”

Weekend pleasure travel is leading the recovery and has shown much stronger performance that weekday business demand. RevPAR was down almost 4 percent on weekend travel, while weekday revPAR was down a more severe 14.6 percent by mid-2009. However, cities like Glasgow, Edinburgh and London actually saw increases in weekend demand.

Rust suggested there still may be a long road ahead for the business travel sector.

He added, “Although the results for corporate weekday demand in London look weak with a decline of 11%, the trend is definitely upwards over the last five months. Clearly one of the factors driving the upward trend across the country is the increasing number of Brits taking short breaks in the UK, where Sterling stretches further than in Europe. The strong Euro against Sterling has also made the UK less expensive than in the past, which is helping hotels perform better.”

The only areas that have not yet shown significant improvement are weekday demand in the Regions and at airport hotels. The proposed public sector cuts could continue to impact this portion of the industry for many months to come.

Devatas International provides a range of solutions to help hospitality business owners strengthen their brands even in the face of economic hardship. We also offer schemes to help protect intellectual property, which can help business owners get an edge on the competition.

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