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from Sleeper - Issue 92
Hotel Construction Pipeline MEA
While the full impact of Covid-19 on future hotel development remains to be seen, the latest data from Tophotelprojects shows a healthy pipeline across the Middle East and Africa. In total, the database counts 942 hotels – amounting to 264,669 rooms – in the construction pipeline; this does not include projects that are currently on hold.
Unsurprisingly, Dubai tops the list with 164 projects (52,282 rooms) in planning or under construction; that’s four times more than anywhere else in the region. Amongst them are several branded offers from Accor including a Raffles, SLS, 25hours and Mama Shelter, as well as an Aloft and Edition from Marriott International, and a number of DoubleTrees and Garden Inns from Hilton Worldwide. Locally grown operators continue to push ahead too, with new offers from Jumeirah Group, Emaar Hospitality and Rove Hotels in the works.
Outside of the UAE, Saudi Arabia has the largest pipeline thanks to Vision 2030, an ambitious strategic growth programme that aims to boost the travel and tourism industry. Among the projects in progress is Amaala, a 2,500-key ultra-luxury development on the Red Sea, and the recently announced Fairfield by Marriott Makkah Al Naseem, featuring 2,600 rooms within close proximity to the Grand Mosque.
Tophotelprojects is a data service to support the design, build, furnishing and operation of hotels worldwide. For more information visit: www.tophotelprojects.com
TOP CITIES
DUBAI Projects 164 Rooms 52,282
JEDDAH Projects 40 Rooms 10,451
DOHA Projects 36 Rooms 10,650
ISTANBUL Projects 16 Rooms 2,752
TOP COUNTRIES
Projects Rooms
Projects Rooms
1
UAE 230 70,700
6
OMAN 37 7,164
2
SAUDI ARABIA 171 76,563
7
MOROCCO 35 8,140
3
EGYPT 56 17,351
8
GEORGIA 28 5,021
4
TURKEY 48 8,862
9
NIGERIA 26 6,232
5
QATAR 47 14,925
10
ISRAEL 26 3,473
CONSTRUCTION PHASE
The majority of projects in the database are at an advanced stage – either under construction or in pre-opening – with a total of 225 projects set to open before the end of 2020. The data service counts just 4 projects in planning, signalling a possible slowdown in new development.
VISION
Projects 4 Rooms 728
PRE-PLANNING
Projects 90 Rooms 23,552
PLANNING
Projects 208 Rooms 61,475
CONSTRUCTION
Projects 531 Rooms 150,721
PRE-OPENING
Projects 109 Rooms 28,193
GROUPS AND BRANDS
Accor leads the way by number of hotels in the pipeline across the Middle East and Africa, closely followed by Marriott International and Hilton Worldwide. Radisson Hotel Group meanwhile is set to bolster its presence in the region with new signings in Bursa and Makkah.
45
Projects
125
Projects
108
Projects
107
Projects
87
Projects
BRAND
Hilton Hotels & Resorts Radisson Blu Hotels & Resorts Radisson Hotels & Resorts Movenpick Hotels & Resorts Hilton Garden Inn Doubletree by Hilton Novotel Park Inn by Radisson Millennium Hotels Marriott Hotels & Resorts
PROJECTS ROOMS
37 11,921 31 7,656 25 4,860 22 7,129 22 4,557 21 4,312 20 4,204 17 3,378 16 5,311 16 3,831
YEAR OF OPENING
The intelligence source for the hotel investment community
Staycation boost
With lockdowns easing, but international travel restrictions in place, regional hotel markets are enjoying a strong boost.
Across the UK, coastal destinations are reporting strong bookings, with occupancies ahead of 2019. In vestors, too, have shaken off their concerns, with transaction levels up and no shortage of buyers for properties coming to the market. The strength of interest is underlined by a new index launched by agent Christie & Co, which tracks website registrations by potential buyers. The index tracks activity across eight business sectors, including hotels specifically. Chri stie says it saw a surge in buyer interest from the end of April as lockdown restrictions started to ease, with enquiries up 84% over the following eight weeks. This compares with an average across all sectors of 70%, suggesting hotels remain highly attractive.
The agent also experienced an increase in inquiries around development appraisals and strategic reviews. Buyers were interested in both closed and open businesses, with a marked increase in searches for coastal and rural businesses.
“I think this stayc ation business is absolutely flying,” said Julian Troup, head of UK hotels at Colliers, “but clearly there’s huge challenges in cities in the UK.”
“As we enter the summer period, booking websites and reservation platforms are reporting unprecedented levels of enquiries as domestic guests are keen to escape for a leisure break in seaside and rural destinations,” said Carine Bonnejean, managing director of hotels at Christie. “This provides a great opportunity for some hotels to capitalise on this short-term demand boost and collect some well-needed cash liquidity.”
However, city hotels are not experiencing the same benefit. UKHospitality, in an open letter to the mayor of London, has called for more support for hospitality businesses in London, where a lack of international visitors means low occupancy levels. Likewise in Edinburgh, occupancy is estimated to be at 23% for August, after the city’s arts festival was cancelled. Neil Ellis, chair of the city’s hoteliers association, has called for Scottish government support. Edinburgh Council has promised to imminently start a new marketing campaign.
“We are still selling hotels – there’s evidence that some deals fell through and have been revived,” said Troup. “There are opportunistic buyers out there, but we’re not seeing any majorly distressed stock at the moment.” G reenslade said he is seeing a real mix of buyers, including those with cash to invest, some of whom are sector agnostic but see the hotel space as attractive, as well as small hoteliers looking to add individual properties to their portfolios.
As well as distress-driven listings, such as two former Shearings hotels in Exmouth and Bournemouth, Savills is also seeing owners go to market with the conviction that the fundamentals remain strong. Another former Shearings hotel in Bath, previously run under its Country Living brand and owned by a private consortium, has attracted strong interest, while for another of Greenslade’s listings, “the owners felt there was an opportunity now”.
Howe ver, Bonnejean warned there are still tough months ahead: “Post-summer, the market outlook is more uncertain. International travel and business demand, most particularly MICE, will take time to recover and we do not anticipate the market to return to pre-Covid-19 levels until 2022 at the earliest. Unfortunately, over-rented or over-leveraged hotels may not be able to wait that long and we have already seen a few casualties. Additionally, government support is being slowly phased out and deferred payments will start to impact cash flows. As such, we do expect to see a pick-up in distressed situations towards the later end of 2020/early 2021.” Troup agreed: “I think some people are still trying to work out if they can take the business forward.”
HA PERSPECTIVE By Chris Bown: With international travel restricted, staycations are the order of the day, and the UK’s consumers, fed up with home schooling their children for the last three months, can’t wait to get away. Hoteliers will be breathing a sigh of relief. Coastal properties are trading at levels above those of 2019, with fully booked periods and stronger room rates; and there is evidence they are holding their nerve, and keeping rates strong. And, thanks to the generosity of the chancellor with his temporary VAT cut, they are keeping more of the advertised rate, too. But the good news operationally will be patchy, as right now bookings are dominated by the family summer holiday. Tourist destinations and seaside hotels will be doing well, while city breaks feel less attractive right now.
London specialist PPHE recently said it has softened room rates in a bid to build occupancy. For investors, the taps are back on. While there may be some concerns about performance over the next few months, all are betting on the fundamentals not having shifted. Sector agnostic investors will be choosing hotels over the retail sector and offices, areas where there are signs the lockdown may have shifted behaviours fundamentally.
HA PERSPECTIVE By Andrew Sangster: There is a lot of conflicting data floating around about the impact of Covid and it is worth taking a moment to boil down the numbers to look clearly at what is happening. Back in May, the Office for National Statistics, the UK Government official data body, issued its Travel Trends 2019 document. This showed that there were 40.9 million visits to the UK by overseas residents and 93.1 million visits overseas by UK residents. With
the collapse of the air bridge to Spain on 27 th July, the non-opening of one to Portugal and the threats about closing other air bridges, overseas travel has become problematic, to say the least. The UK’s Foreign and Commonwealth Office advised against all non-essential travel to Spain, which renders most travel insurance policies void. Only the brave and / or foolhardy would set off on an international holiday in such circumstances. It is therefore a reasonable assumption to make that most overseas visitors are not coming to the UK and most UK people are unlikely to head overseas. This means that there is a net balance of 52.2 million people holidaying in the UK. While you can shave a few million from that because some hardy souls have driven overseas or chosen to fly to those countries where it is still possible to do so, or people simply choosing to stay at home, you still have a situation where there are tens of millions of people seeking to holiday in the UK above usual demand levels. Anecdotally, we can see the result with crowded beaches and booked-out holiday accommodation. It wou ld require even more naivety than somebody in the UK booking a Spanish Costa for this summer to believe that this blip bodes well for UK tourism.
While many businesses have performed well by adapting to the changed environment, huge swathes have not. Profitability remains a challenge across Europe and beyond. HotStats said that in June, GOPPAR stood at EUR-14.27 across the hotels in its sample. While lockdowns were still in place in many territories during that month (including the UK), it is still a dismal figure. This summer looks set to deliver bumper trade to some leisure and resort destinations in the UK but across the industry as a whole, profits will remain elusive.
Business travel is the biggest component for profit and the outlook here is bleak: The Global Business Travel Association published a survey in midJuly that found just 17% of European respondents planning to resume travel in the next three months. A worrying 23% said they were not planning to travel in the near future and 18% were unsure. And Europe was the most positive region globally. The level of pain is likely to endure for some time.
At the start of August just half (50.4%) of global airline capacity had been reinstated to where it was last year, according to data supplier OAG. Capacity in Western Europe was 35.6% lower. Most worrying is that OAG said that at the height of the summer season, 638 scheduled airlines are operating. A year ago, in the same week, 716 were operating. Capacity for travel is being removed permanently, or at least semi-permanently. A good example is the fate of the Airbus A380. Once hailed as the future of long-haul mass tourism, it is currently flying just 3% of the flights made in January.
And while trying not to pile on too much gloom, it needs pointing out that the economic impact of the Covid crisis is still to largely impact. The Bank of England said on 4 th August that UK GDP was, at the end of Q2, 12% below Q4 2019. While GDP grew in May, it stood 24% down from the level at the end of Q4.
Things are changing, and the economy is set to show unprecedented growth off these lows, but it is going to take time to get back to previous levels. The BoE forecast has been characterised as saying the downturn is less severe but the recovery more arduous. Unfortunately for travel and tourism, the outcome was as bleak as is possible with a near total shutdown. A longer and slower recovery is only going to exacerbate the challenges for the sector.
L&R Hotels builds Iconic
Hotel owner and manager London & Regional Hotels is taking the next steps in building an international luxury hotel collection within its expansive portfolio. The compan y has confirmed its Venetian property, the Hotel Excelsior Venice Lido Resort, will be placed under the niche collection, and will be followed by additions in Greece and the US.
The move underlines L&R’s commitment to growing a fully global portfolio under Iconic. L&R ow ns and manages an extensive range of hotels totalling around 17,000 rooms. Currently it groups its hotels under four headings: Iconic, Atlas, a city collection and a destination collection. Atlas i s L&R’s UK midmarket portfolio, all reopened following the UK’s coronavirus lockdown. The portfolio includes 49 Holiday Inn Expresses, and one Hampton by Hilton. The group works alongside a ran ge of global brands, with many of the city and destination properties operating under brand flags, including Hilton, Marriott, Hard Rock and Fairmont.
Iconic was launched in 2016, with L&R looking to manage properties under its own luxury platform, with the aim of building Iconic into a collection of destination resort and capital city properties around the world. The grouping was created by bringing together UK country house properties Cliveden House, The Lygon Arms and Chewton Glen, combined with London hotel 11 Cadogan Gardens. This autumn, it will also add The Mayfair Townhouse to the brand, bringing a further 172 rooms in the capital to the portfolio. The property, created originally by combining seven houses in the street, was until 2018 the Hilton London Green Park. The addition of the Hotel Excelsior Venice Lido Resort is the first step in creating an international portfolio, and will be followed with two further additions in 2021. The Venice hotel, with 196 rooms, has been part of the L&R portfolio since 2016. Then, L&R took an equity stake alongside Italian asset manager Coima, buying into a EUR120m restructuring of the Lido di Venezia fund.
“We have ambitious plans for international growth,” said Iconic executive director, Petra Deuter. “Over the next few years we will see our collection continue to grow worldwide as we further our reputation for sustainable hospitality, preserving the life of historic buildings. Each of our properties has its own stories, traditions and personality.”
Coming in 2021, there will be a newly completed resort on the Greek island of Mykonos, working with local partner Intrakat on a project said to cost EUR80m. A 71-room luxury hotel plus a dozen residential villas are planned on an expansive 100-acre site. The Mykonos project is one of three that L&R is involved with in Greece. In 2017, L&R bought the Amanthus hotel in Rhodes, now refreshed as the Rhodes Bay Hotel and part of L&R’s resort collection. And in mid-2019, it acquired
the Titania hotel in central Athens, in a deal reportedly worth more than EUR50m.
In Florida, Iconic is aiming to open the Palm House, a property that L&R snapped up in mid-2019 in a USD40m deal, as a standing unfinished project. Originally planned as a 79- unit condo hotel, the development had been held up with legal wrangles relating to its previous ownership. Redesign and remodelling are under way. Desmond Taljaard, managing director of L&R, told Hotel Analyst the idea behind Iconic is clear: “It’s a collection, not a brand.” The properties are united by common experiences, each having presence as a destination, with history, and “gasp-inspiring” interiors or views. And a strong part of the experience for the target guest demographic is about specifically avoiding a strong brand presence: “It’s no surprise to us that the brands branched out into collections.”
With L&R’s broad experience of brands, Taljaard said the decision to add a property to the collection – or any other brand – continues to be on an asset-by-asset basis. He pointed to the Meridien in Barcelona, which is seeing its brand agreement being renewed; other branded properties within the portfolio may move in another direction, as contracts come up for renewal. While a fan of some aspects of brand distribution machines, he is also sanguine about the sometimes oblique “system and central marketing” fees and costs they can charge. Taljaard said marketing the Iconic properties will be carried out in-house using “economically sustainable marketing, as it’s much more of a targeted audience.” The group is not averse to testing all routes to market, for example listing its Nobu Ibiza Bay with the Small Hotels of the World consortium, which Taljaard said “drives in specific leisure guests.”
For future growth of Iconic, L&R prefers to buy hotels: “We like to invest, to get the value that we add.” However, to-date, the collection includes owned, joint ventured and managed properties. “One of our great strengths is our flexibility,” said Taljaard. HA PERSPECTIVE By Chris Bown: L&R, with its breadth of hotel assets under management, is in a great position to understand how different brands work in different parts of the world. So it is interesting to see the company opting to go it alone, rather than select the convenience of a brand, when it looks to extract best value from its currently unbranded luxury properties. The big challenge is distribution. Were the Iconic properties dialled into a Tribute or Autograph collection brand, that would be taken care of. Setting out alone demands more concentration on testing and measuring routes to market. Speaking at a recent conference, Taljaard said he expects a further hollowing out of the mid-market. “I think we’ll see some polarisation, that’s where I see some repurposing.”
Creating your own luxury collection presents a great opportunity to take your own unbranded properties upmarket. He has also spoken previously about the value – or not – of brands, in a market where reputation is garnered via newer media, and experience is all. With the luxury of private ownership by the Livingstone brothers, Taljaard will have the time to work out his best route to market – and how he can outperform the branded properties in the portfolio. We’ll be interested to see how Iconic takes shape.
Ascott leads apartment momentum
The Ascott, Singaporean group Capitaland’s lodging business, has enjoyed a record start to 2020, signing 25 new properties in the first five months of the year. The growing momentum, set against the international upset of the coronavirus pandemic, represents a 139% year-on-year increase in units secured. Half of the new contracts are in China, while the additions include Jayapura, Batam and Surabaya in Indonesia; Morocco’s largest city, Casablanca; and Manila in the Philppines. The strong growth comes as consultants suggest the serviced apartment sector has proved more resilient to the downturn than hotels.
Reviewing the European serviced apartment market, researchers at Savills noted recently that “there are some indications that the sector has been weathering the storm marginally better. The reason for this marginal outperformance can be attributed to its guest profile and the typical configuration of properties.” Aside from growing the pipeline, The Ascott has also opened six new properties so far this year. Of these, two are in China, plus Singapore, Australia’s Gold Coast, Osaka and the French city of Tours. The additions take Ascott close to 118,000 units in over 700 properties globally, and put it on target to hit 160,000 units by 2023. The group continues to expand by signing a mix of management contracts, franchise agreements and, where necessary, leases.
“Des pite the challenges of Covid-19, this demonstrates that our partners recognise the resilience of our lodging products and the value Ascott brings as one of the leading international lodging owner-operators,” said Kevin Gohm, CEO of The Ascott. “We have a strong base of long-stay guests who appreciate the comfort of our spacious apartments where they can live and work. This has enabled our serviced residences globally to maintain robust average occupancy rates. We have already taken steps to ready Ascott to be the accommodation of choice in a post-Covid landscape and will continue to cement Ascott’s position as a dominant lodging player and deliver more value for our guests and business partners.”
The company managed to keep many of its locations operating as the pandemic spread, providing a safe haven for both key workers and returning nationals, many of whom needed to quarantine for a while. Its Ascott Cares regime, launched in May, has helped provide reassurance for guests and is being rolled out globally. The company has continued to double down on the Chinese market, where a first rental housing project has also been signed, providing fully furnished homes in tier one and tier two cities.
Tan Tze Shang, Ascott’s head of business development for China, said the business there is in recovery: “Since May 2020, Ascott has fully
resumed operations of our properties and we are seeing encouraging signs of recovery driven by the country’s strong domestic demand. With the implementation of green lanes between China and other countries such as Singapore and Korea, we expect demand to pick up pace as international travel gradually resumes.”
In the second quarter, Chinese properties achieved occupancy above 70%, rising to 100% during the country’s May holiday weekend.
In Europe, Savills note the continuing relative undersupply of serviced apartments, and their relative outperformance as a result. “The relative outperformance of serviced apartments over hotels during the Covid-19 crisis may be marginal, but it does reflect a trend seen over the longer term highlighting the counter-cyclical features of the sector during downturns.”
Across Europe’s key gateway cities, Savills estimate serviced apartments account for 7.9% of bed nights, a little ahead of Airbnb’s market share. The team recently analysed these markets, noting “even for those markets well represented for serviced apartments, such as Paris and London, there was still an imbalance suggesting room for further stock growth. Once demand fully recovers, we believe this will continue to be the case.”
Savills say investor levels of interest remain strong, and despite some hesitation due to the coronavirus lockdown, they expect a number of deals to complete during the second half of 2020. “Serviced apartment yields across Europe remain relatively attractive, with an average yield spread of approximately 50bps compared to hotels. This is particularly favourable considering other markets such as Asia and Australia tend to see tighter serviced apartment yields in comparison to transient hotels.” One br and expanding fast in Europe is Locke, backed by the edyn Group. The brand combines aparthotel accommodation with the feel of a boutique hotel, and currently has four properties in London, Manchester and Edinburgh. This year, Locke will launch two more London sites and in Dublin, followed next year by another Dublin site, two in Munich, Berlin, Cambridge and a further London location. Into 2022, the pipeline includes Lisbon and Copenhagen.
HA PERSPECTIVE By Andrew Sangster: This optimism thing looks contagious. After months of bad news, winners are beginning to emerge. And serviced apartments are among the most resilient of all short-let accommodation segments. The appeal is due to combining self-contained accommodation, which means few facilities are shared with other guests, with the reassurance of a big company guarantee for cleanliness and safety. The best of hotels and private accommodation.
This is not to say there has not been pain. Ascott Residence Trust’s AGM in June made plain that there has been plenty. The REIT has master leases in place in Australia, France, Germany, Japan, South Korea and Singapore, and management contracts with minimum guarantees in the UK, Belgium and Spain. The Ja panese master leaseholder, WBF Hotels & Resorts, filed for civil rehabilitation in late April and Ascott is engaged in discussions about rent relief with other operators too. It said: “We seek to find a middle ground that is sustainable for both parties”. To mitigate the decline in occupancies, Ascott and its operators have had to look to other business opportunities such as providing accommodation to people in self-isolation, healthcare personnel, workers looking for alternative work-from-home arrangements and people impacted by border shutdowns. Marketing is being focused on domestic travel. The REIT had closed 15 properties since the pandemic and has subsequently opened three of these. It expects to open all the rest. It remains confident about the sector: “Despite near-term headwinds, we remain positive on the longer-term prospects of the hospitality sector. Historically, tourism has shown an unparalleled ability to recover from a crisis and has proven to be a key driver of international recovery.”
Despite current challenges, there has not been a significant change in transaction prices. The REIT said that the pandemic would have to be “longdrawn for distressed transactions to appear”. Hotel Analyst is the news analysis service for those involved with financing hotel property or hotel operating companies.
Covid-19 Update: Global Hotel Performance
The global hotel industry continues to navigate through the early stages of performance recovery with eased Covid-19 restrictions, further reopening of economies and increased leisure and business activity around the world.
For the hospitality industry, leisure demand was the first out of the gate and will continue to drive recovery in most markets until the context for long-haul travel improves, large events are once again deemed safe in major cities, and group business returns. In the meantime, countries with stronger domestic leisure offerings have seen rising occupancy, but as July 2020 data shows, overall performance remains historically low in each world region.
No two countries are recovering exactly alike, but broad trends can be found via geography and similar Covid-19 caseloads.
Metrics reflect STR Standard methodology, which measures occupancy of all the open hotels in a market and tracks realised demand against realied supply. This methodology excludes temporarily closed rooms that could not be booked.
STR provides premium data benchmarking, analytics and marketplace insights for global hospitality sectors. For more information and to subscribe visit: www.str.com USA The absolute occupancy level was the lowest for any July on record in the USA, but all three key performance metrics were up from June levels.
BRAZIL The country’s metrics were up from the prior month, but absolute occupancy and RevPAR levels were the lowest for any July in STR’s Brazil database.
Performance Data July 2020 (year-over-year % changes and absolute values)
IRELAND Each of the three key performance metrics were up significantly from June, but occupancy and RevPAR came in lower than any other July in STR’s Ireland database.
UK While up slightly from June, each metric was the lowest for any July in STR’s UK database.
UNITED ARAB EMIRATES Each of the three key performance metrics were up from June. The occupancy level was the highest in the UAE since March.
CHINA Each of the three key performance metrics were up from June, but ADR and RevPAR remained the lowest for any July on record in the country. China’s occupancy was the lowest for a July since the global financial crisis.
Occupancy 18.5 % to 57.9 % ADR 15.5 % to CNY378.21 RevPAR 31.1 % to CNY218.81
SAUDI ARABIA Saudi Arabia’s occupancy was slightly lower than June, but ADR and RevPAR were up month-over-month. The ADR level was the country’s highest for any month this year.
AUSTRALIA While up slightly from June, the absolute occupancy and RevPAR levels were the lowest for any July in STR’s Australia database. The ADR value was the lowest for a July in Australia since 2004.
